“Go Global” Goes Pear-Shaped Again

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The “go global” policy makes great sense in theory, but it is patchy in practice, to say the least. While resources are being successfully bought up in some interesting places (see here), and Lenovo’s successful purchase of IBM PCs is still fresh, problems continue to emerge. The latest is China Mobile’s failed US$3.5 billion bid for Millicom International Cellular. The deal would have been the largest foreign acquisition by a Chinese firm had it gone through, according to a report in the FT. The report notes:

    “Shares in Millicom plunged by 26 per cent in New York on Monday, after the group said it had concluded that the state-owned Chinese operator ‘[would] not be in a position within an acceptable timeframe to make a binding offer that is suitably attractive . . . or sufficiently certain of closing’.”

Apparently the deal fell at the last hurdle, as “negotiations dragged on”. Whatever the actual reasons, last-minute negotiations are a favorite tactic in China, where it is often assumed that a late goal may be scored when foreign parties start to wonder whether they will make the deal in time for the flight home / quarterly report / cup final etc. Sometimes, however the other party will just walk away with no deal done – or, as with CNOOC’s Unocal bid, protectionist politics may get in the way.

But political, cultural and commercial fit are not the only challenges, as reported in Shanghai Daily (via China Digital Times):

    “’It is a dream that you can succeed in overseas markets through the acquired company’s brand’, Meng Fanchen, Siemens Shanghai’s general manager, said. ‘It is a tough way with few successful cases in the world’.”

Despite the difficulties, China Mobile is not the only company looking out. The report adds going-global investors and brands include:

    • Lenovo: US$1.25 billion deal for IBM’s PC business
    • TCL: The TV leader set up a joint venture with Thompson in 2003
    • Huawei and ZTE: These telecoms companies are exporting strongly, based on price competition.
    • Ningbo Bird: The leading mobile phone vendor exported 2.8 million phones in the first five months of this year.

More on Chinese brands going global can be see at: “Branded in China (Sold Everywhere)”, and the scale of the investments was reported in an earlier post, “M&A: Up & Out”:

    “[China’s] overseas direct investment was reported to be US$7 billion in 2005, up 25 percent on 2004, and it is thought that Chinese companies could invest US$60 billion overseas in the next 5 years – largely through mergers and acquisition.”

Such high-profile failures as that suffered by China Mobile are unfortunate, but hopefully the leaders of big state firms will become better at operating outside their comfort zones. China will only be able to produce globally competitive companies when they have globally competitive managers, answerable to stakeholders, who have commercial skills that are as strong as their political ones (see also: “China’s Latest Import: Senior Management“).

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3 Responses to ““Go Global” Goes Pear-Shaped Again”

  1. Archive » London Calling for China Telecom. But Others Go Elsewhere.| China Business Blog Says:

    […] nt”. Meanwhile, the newly-crowned China Mobile (having apparently recovered from their failed attempt at taking over Luxembourg-based Millicom), also has its eyes on foreign prizes. […]

  2. Archive » MG = Modern Gentleman| China Business Blog Says:

    […] ernational markets – along with its Chinese peers such as SAIC, Geely and Chery. Is “going global” shifting up a gear? Perhaps, but please bring in the brand consultants! See new […]

  3. Archive » China ODI Continues To Expand| China Business Blog Says:

    […] ng time, and there have been a few growing pains along the way (including CNOOC/Unocal and China Mobile/Millicom), but there can be little doubt that China has truly arrived on the overs […]

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