On the morning of March 22, 2006 — the one-year anniversary of the Chinese edition of Knowledge at Wharton — David Schmittlein, deputy dean of Wharton, visited the headquarters of the Beijing-based QQ website (www.qq.com.cn) to offer his insights on a variety of topics: the impact of the Internet and other new media on marketing strategies; U.S. consumers’ perception of Chinese manufacturing; the globalization strategy of Chinese enterprises; the role of business education in China, and the growing Wharton involvement in China. Below are excerpts from that interview.
QQ: Many Chinese enterprises, especially those in the IT industry, have listed their shares in Hong Kong or on the Nasdaq in the U.S. As a professor of marketing, how do you see the leadership styles of China’s new enterprises? Have you done any studies in this regard?
Schmittlein: My studies of Chinese companies primarily focus on the challenges they face. For instance, how do they build their own brands and expand their global reach? As many Chinese companies go overseas, they have to face the challenge of not only making their brands better known, but also the need to establish a good corporate image. That image will help them create other new products and services and demonstrate their corporate value. Building a global brand will be a key issue facing many Chinese companies.
QQ: With the rise of the Internet and many specialized websites and portals, what should companies pay attention to as they advertise their products and services?
Schmittlein: The Internet has changed many ways of doing business and brought two challenges to business marketing. Companies need to figure out how to maintain their relationships with existing customers and ensure customer loyalty. They also need to come up with ways to attract new customers. Some companies use both traditional media and the Internet to lure new shoppers. Other companies experiment with using the Internet as a marketing tool to tell corporate stories and entice new shoppers. The results vary. While some test models prove to be successful, others that may have been a winning strategy two years earlier are no longer effective. Many companies are trying their best to use the Internet to help expand their market share.
QQ: Do you think the development of Internet media may take over traditional media such as newspapers, magazines and television? What’s the next growth phase of new media? Will we rely on Internet media going forward?
Schmittlein: People are more and more dependent on the Internet because they desire information and communication. The Internet attracts more attention than traditional media because it allows people to learn about new products and new services in ways that traditional media may not be able to.
I’m not sure, however, if the rise of Internet media means the disappearance of traditional media. The role of traditional media has also changed. For instance, some magazines and newspapers segment their markets and target specific readers to compete with new media. Others seek to expand their readership and coverage. Different countries and regions demonstrate different ways of traditional media competing against new media.
QQ: Do you use the Internet often? Are you a blogger?
Schmittlein: I haven’t tried blogging yet, although I use the Internet often to find new information and ideas. As someone specialized in marketing, I think blogging presents a new marketing challenge. Some companies want to market to those bloggers who are interested in their companies or products. They hope to penetrate the market not only through traditional mass media, but also through niche and segmented marketing, such as blogging.
QQ: What advice would you give to Chinese enterprises that want to take their brands globally? How should they improve their business management, team building and product development?
Schmittlein: We have many training programs at Wharton to help business leaders enhance their abilities in this regard. As far as building a global brand is concerned, Chinese companies should understand more specifically what kind of value their brands represent globally. Chinese businesses often equate building a global brand with broadcasting Chinese tradition. Creating a company’s own brand image is more important than making that association. Chinese businesses should also avoid creating an idea or image that’s abstract. For instance, some companies describe their brand as great, innovative or the best in the industry. They will be better served by being more specific in what they have to offer. For example, they can identify concretely the areas in which their businesses are innovative or identify their competitive advantages over their rivals.
QQ: How does business management differ by countries such as the U.S, Japan and China? What are the similarities?
Schmittlein: It goes without saying that different countries have different management models. What’s universal is the emphasis companies place on human connections and relationships. Countries vary greatly in how they build those internal corporate human relationships as well as those outside relationships with consumers.
QQ: While a developing country, China is experiencing rapid economic growth. What do U.S. consumers think of Chinese products?
Schmittlein: The U.S., like China, is a big market with a variety of consumers. Some of them may be rich, others may be poor. Some live in rural areas, others live in the cities. They make up a complicated shopper pool. Most American consumers basically think of China as a big supplier of well-made products.
U.S. shoppers care more about the quality of a product than where that product is made. They care about the value represented by a company. Chinese companies should spend more time telling U.S. shoppers about their brand value to help them expand in the U.S. market.
QQ: What kind of Chinese products or industries do you think are more attractive to the U.S. market and have more expansion potential? Your insight will be very valuable to many of our users who are in business.
Schmittlein: Chinese companies need to realize they have many business opportunities, not only in the U.S., but in the rest of the world. We have already discussed extensively how to seize those opportunities. High value-added industrial products, certain consumer items, merchandise for business use or easy export are among products that can be introduced to the U.S. market easily. America has always demonstrated a high level of interest in Chinese products, and that interest will continue.
Chinese businesses are facing competition, such as that from other Asian countries. The level of competition extends to competition for consumers. Chinese companies can pay more attention to other types of products such as luxury, higher-priced, more sophisticated or trendier products that set them apart. Chinese businesses should open themselves more to the experiences of other countries. For instance, Japan can be a good example to China when it comes to developing China’s trendy luxury products. Several Japanese companies develop products with a Japanese flair to attract Western clientele. They also create their own brands that are closely tied to their corporate image. Chinese companies can mirror Japanese experience and create a Chinese luxury brand that’s distinctly Chinese. I think there’s a huge appetite in North America for this type of product from China.
QQ: Many U.S. companies, including Yahoo, Microsoft’s MSN and Google, are expanding into China’s Internet market. What do you think of local Chinese Internet companies such as Sina, QQ and Sohu? Do they also have opportunities to enter the U.S. or other international markets?
Schmittlein: There definitely are many opportunities for Chinese Internet companies. Local Internet companies, for instance, can learn valuable lessons as they seek innovations in products and services and expand within the domestic market. They should not limit themselves to providing the same level of product service as their former rivals. Consumers care more about what the next hot product or service is. They seek new technology and innovation. Those companies that have the innovative spirit will be able to enter the overseas market. The loyalty of a consumer changes by day, and not by year, in today’s Internet age. Shoppers will easily divert their attention to those new products or services that offer them a different value.
For example, not long ago, many people thought there was no room for other search engines after one was introduced. In reality, that wasn’t the case. There are always opportunities for those companies that develop new and interesting products.
QQ: Most private enterprises in China are still small. What do you think they should do to speed their growth? What kind of support do they need?
Schmittlein: Wharton cares a lot about the development of private and small enterprise and offers assistance to those seeking expansion. These businesses start in smaller markets and with smaller consumer groups. They have to be willing to take some risks to expand. Often they face the challenge of funding for growth. Because of China’s promising economic environment and macroeconomic plan, this type of Chinese business should have easy access to capital, a basic condition to the success of a business. On top of that, small private companies need to select a new product that’s appropriate for their expansion and find the right new business partner. Wharton hopes to delve into this topic further so it can offer more support and help to those small businesses.
QQ: Let’s move on to business education, where the U.S. is ahead of most other countries. What can China’s many business schools, like the one at Tsinghua University, learn from the business education system and in the U.S.? How do you evaluate business education in America?
Schmittlein: Business schools in China should focus mostly on developing knowledge and ideas that can really change business practice and behaviors. That’s true not only in China, but also in the U.S., Europe or Asia. Business schools shouldn’t be limited to just writing case studies and other descriptive functions. They need to actively develop ideas that can help change corporate practice. The development of this type of knowledge is very important to business schools around the world.
QQ: Do you think it’s better for one to go to business school straight out of an undergraduate program or should one wait until he or she has several years of work experience or has become a business leader?
Schmittlein: Most of our MBA students come with some job experience, mostly three to five years. The key is to identify what kind of experiences they need. For instance, some people already have their own businesses when they are 18 or 20. They are fully prepared for a business school education. A small percentage of our students come straight out of college because they have demonstrated strong leadership abilities.
QQ: Wharton has consistently maintained its position as a leader in business education. How has the school done that?
Schmittlein: There are two reasons. The first is our dedication to research and the development of new knowledge and ideas. We are also willing to take risks as we seek innovative ways of offering business management and education.
QQ: What do you think qualifies one as a business leader?
Schmittlein: A leader first has to know himself or herself and understand both his strengths and weaknesses. He also has to have the confidence to change his surroundings, not only for the benefit of himself, but also for the good of the people around him. The students at Wharton are future leaders who make contributions, not only to themselves, but also to their colleagues and their living environment.
QQ: The number of registered users for Knowledge at Wharton has reached 500,000, far outnumbering the number of Wharton students and alumni. Does the school seek to use the Internet to broadcast its knowledge to other people?
Schmittlein: Indeed. We can provide knowledge and ways of obtaining it to those who can’t attend Wharton. The site is one such means. The school also has a publishing house that offers valuable thoughts on different topics. In addition, we host seminars to engage in discussions with business leaders and share with them our research findings. Not only are we a provider of knowledge, we also want to learn from those corporate leaders about the difficulties and challenges facing their businesses.
QQ: Wharton accepts applicants who have both a good educational level and business leadership qualities. But how can you identify students who have leadership potential?
Schmittlein: I want to emphasize that we look at many different aspects of applicants’ backgrounds. For instance, we want to see whether they can prove that their personal growth and development have been successful, whether they are making contributions to their company or society, or whether they can create opportunities for themselves and for other people. There are many facets to our evaluation of someone’s potential. We interview candidates and hear their experiences to help us make a better judgment about them.
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