Published November 19, 1997
Reuters reports that Vietnam will reluctantly allow full Internet access by December, 1997. Lao Dong newspaper reports that the Communist government fears that the twelve thousand initial Internet users would bring subversive material into the country.
The Nhan Dan Communist Party daily newspaper blasted Voice of America radio for encouraging Vietnamese living abroad, and opposed to communism, to use the Internet.
In Japan, American Web search-engine company, Excite, will link with Itochu and Dainippon. Excite joins Yahoo and Infoseek who have each partnered with Japanese companies. Gradually American business is edging into Japan’s “tight vertical links between companies” market.
Excite’s president and CEO, George Bell, wrote, “Japan is one of the key markets outside the U.S.”
Strong partners were chosen: Itochu is the world’s fourth largest business as measured by sales. Their affiliates are in satellite broadcasting, phone systems, Internet service providers, and many manufacturing industries. Dainippon is among Japan’s leading printing companies.
“We decided to work with the Japanese for reasons of linguistic, cultural, and market access,” said Yahoo’s Maury Zeff. “It’s not like going into Canada or Australia. Japan has proven itself to be with it in terms of understanding advertising online.”
Internet connections in the island nation are expected to increase 750% to 39.6M by 2001. Japanese Internet users are estimated to number 11M by the end of 1997 (source, IDC Research).
Japan’s Internet advertising is projected to explode 2500% ($233M) by the year 2000, becoming the largest online market outside the United States, (source, New York’s consultancy, Jupiter Communications).
In China, Compaq Computer learned the hard lesson. Compaq shipped $32M worth of products, to the largest Chinese distributor, Cheflink, under very loose credit terms. Cheflink never paid.
Distributors in China are mostly financially insolvent and would be considered bankrupt if operating in any Western country. The Compaq fiasco has become legendary. “They made a poor deal,” said Rick Miller, an International Data Corporation analyst. “A lot of times, companies don’t know with whom they are dealing.”
In China, “guanxi,” or connections, are everything! Compaq soured its relationship with local partners by pursuing payment. “Without connections, no business can successfully link into the existing network of people that the Chinese trust,” said Bryan Larsen, Commerce Department trade specialist. “Without the proper relationships, you do not sell, distribute or advertise.”
“The Bank of China’s infrastructure is very unsophisticated. China must invest in the technologies used by other countries. But doing business with Beijing is a two-way street, and right now China has the right of way,” says Brad Whitworth, Hewlett-Packard’s international public relations director.
Off the record, U.S. companies characterize the Chinese market as “bare-knuckled.” The government will negate a signed agreement with one company if something better comes along. The Chinese don’t have friends, they have interests.
High-technology firms are confounding by the art of business dealings directly in China. Contrastingly, Chinese officials are dismayed by foreign firms windfall profiting at their expense. So, Beijing demands foreign firms bring their manufacturing operations to China, joint venture with Chinese companies, and transfer valuable technology.
China still operates from national imperative, and so the global goal clashes with their national economic development.
China’s desire is to become the world economic power of the 21st century. For the first time, China is building an information superhighway, creating a nationwide banking and credit card system, and simplifying tax collection.
U.S. government believes the risky push into China is worthwhile. The U.S. House upheld China’s Most Favored Nation status, despite concerns about human rights, religious freedom, and armaments. The business potential across Asia is exceptionally large, especially in computers.
Sales to China are expected to increase 305% to $6.4M by year 2000 (source, International Data Corporation). China’s one-child per family policy has influenced many parents to give their youngster every affordable advantage. Last year 20% of computers purchased there were by households.
Difficulties notwithstanding, U.S. companies like IBM are wiser to the complexities of business dealings, and now well-connected throughout key government ministries, universities, and industry sectors in China.
“Competition cures any sort of culture,” said Commerce Department’s Larsen. “American companies are really flexible. Those that don’t adapt will not succeed.”