Amid China’s rapid economic growth and the increasing trend toward globalization, more and more Chinese companies are eyeing overseas acquisitions. But mergers and acquisitions represent a complicated process, and post-acquisition integration often proves difficult. Along the way, many Chinese companies — from electric appliances giant TCL to automaker Shanghai Auto — have learned important lessons about how to map out a global strategy, adjust to the international legal environment, overcome obstacles to reform, bridge cultural differences and allocate resources.

Shanghai Electric Group (SEG) is the largest industrial equipment manufacturing group in China, with more than 60 core firms, net assets of 152 billion RMB and more than 40,000 employees worldwide. Printing Machinery is one of its six business units. Faced with heated competition home and abroad, SEG identified advanced technology and international market experience as part of its acquisition strategy. In 2001, SEG’s $9 million acquisition of the Tokyo-based Japan Akiyama Printing Machinery Company received significant attention, largely because of its successful integration of the acquired entity.


Hu Xiongqing, a Chinese native and CEO of the printing machinery business unit of SEG, was heavily involved in the deal and was appointed president of the new company, which was renamed Akiyama International Co., Ltd. after the acquisition and remains based in Tokyo.

In the five years since the deal, the new Akiyama International has booked $500,000 in sales per person, up from $250,000; profit margins have exceeded 20%; and, most importantly, morale among the Japanese employees at Akiyama has risen to what it had been before the acquisition. Hu Xiongqing is a well-known turnaround expert in the domestic printing industry. Akiyama International was the fourth printing enterprise he has helped during the last 20 years, following one in the city of Wuhu and two in Shanghai. Hu now spends his time between Shanghai and Tokyo. In an interview with Knowledge at Wharton, Hu talked about his experience in managing a multinational enterprise.

Knowledge at Wharton: Why was Akiyama picked as the acquisition target?

Hu: Founded in 1948 as a family business, Japan Akiyama evolved into the No. 6 manufacturer of printing machinery in the world and No. 3 in Japan. At its peak, it employed 460 people and generated 18 billion yen in sales. Although its scale was still small-to-mid-size, its technology was among the best in the world. It had more than 50 patents. In 1995, Japan Akiyama invented a double-page, color printer and that printer has had a stable market share ever since. The technology and markets enjoyed by Japan Akiyama can complement what Shanghai Electricity Group has, and that’s why it makes it an ideal target for us.

Knowledge at Wharton: Had Shanghai Electricity Group already thought about becoming global?

Hu: Our plan is to build in Shanghai an internationally recognized manufacturing base for printing machinery and to build in Japan a R&D center and a global sales center. To realize these goals, the company needs to invest a lot in R&D and to hire top management talent. Going forward, Akiyama International’s strategy is this: The Japanese and the Chinese will gradually move toward producing mid-level printing machines together, while the Japanese headquarters will retain its leading position in R&D. Continued investment in R&D and the advantage associated with “made in Japan” will guarantee Akiyama International’s global strategy.

The goals set by Akiyama International are, first, to continue expanding its market share in Japan; second, to develop China’s and other markets, and third, to develop products that are high quality but low cost. If the combination of “China’s low-cost advantage” and “Japan’s high-quality advantage” can prove very competitive, Akiyama International is right on track to establish an international standard. In addition, the continued inflow of talent will constitute the core of its sustainable development.

Knowledge at Wharton: What kind of changes did you make after taking over Akiyama International?

Hu: We reformed the way employees get paid. Instead of looking at how long they have been with the company, we advocate looking at how big of a contribution they make to the company. After the reform, though some employees have seen their salaries decrease, overall their salaries have gone up. Those measures have greatly motivated employees to improve their efficiency and competency levels.

We then reformed the personnel function. We made some adjustments to Japan’s traditional “life-long employment” system and reviewed the performance of all the employees at Akiyama International. Some of them were let go due to their poor performance. For instance, we fired a manager responsible for procurement. At the same time, we promoted some young people to key posts. The average age of the managers at Akiyama International used to be 60 years old. Post-acquisition, through internal training, promotion and hiring, [we now have] a group of managers in their 30s.

We also took measures to reduce production costs. Akiyama International had long pursued technological advancement at the expense of costs, thereby leading to persistently high production costs pre-acquisition. At that time, the company didn’t shop around for materials and never did comparison shopping. After the acquisition, lowered production costs helped drive up profit margins from a negative number to 20%.

Knowledge at Wharton: Have you encountered any obstacles while making those changes? And how did you deal with those obstacles?

Hu: Initially, there was some resistance on the part of the Japanese employees. The most effective way to overcome that is “communication.” We made it clear to them that their own opportunities lie with Akiyama International and that they are not only employees of the company but also its owners.

At the same time, we made sure that everything we do is fair and objective, which helped us establish management’s credibility. Lastly, the very fact that Akiyama International turned profitable proves the strongest evidence of our reforms’ effectiveness.

Knowledge at Wharton: What do you think are the key cultural differences between Japanese companies and Chinese companies? Have those differences in any way affected your ability to run the company? And how do you deal with it?

Hu: Key to us is to pay enough attention to the cultural differences and to understand the Japanese culture, which centers on perfection and excellence. The biggest difference between the two cultures lies in the way we go about doing businesses and the degree of seriousness.

Of the 170 employees at Akiyama International, only three are Chinese, with the rest Japanese. So the Chinese managers have to do their best to respect and recognize their culture without appearing weak or too compromising. We stick to our principles, as evidenced by the measures we took to reform the personnel system. At the same time, we emphasize communication as a way to reduce any resistance to our reform efforts.

Knowledge at Wharton: How did you manage to retain and motivate the Japanese employees?

Hu: Shanghai Electricity managed to both retain existing employees and encourage those who had already left to come back. There were only 53 employees remaining at Akiyama International under the acquisition contract. But on the first day of operation, the number of employees exceeded 70 and the company has been hiring employees back ever since. The number of employees has reached about 160 so far. To expand further, Akiyama International plans to hire more locally, including both Japanese and the Chinese who are studying here.

Knowledge at Wharton: How have you allocated resources to achieve efficiency?

Hu: The efficiency is first reflected through costs. After Akiyama International was bought by Shanghai Electricity, it naturally adopted China’s low-cost advantage. The reduction in supply costs has helped its profit margin. In the meantime, the combination of Shanghai Electricity’s cost advantage and Akiyama International’s technology advantage positioned the company to compete better in China’s printing business.

A second measure of efficiency is human resources. Post-acquisition, there has been greater cooperation between Shanghai Electricity’s own printing unit and Akiyama International. With its relatively advanced core technology, Akiyama International periodically sends its engineers to the Chinese unit to share their technological know-how. The Chinese unit also periodically sends people to Akiyama International to be trained there. The parent company also organizes frequent communication between the two, with the Japanese appointed as chief technology officers and the younger Chinese working with them.

A third measure of efficiency is production management. While we thoroughly reduced the production costs at Akiyama International, we also improved our management skills by learning from the [employees there]. For instance, the Japanese employees have demonstrated a greater level of professionalism than the Chinese. So we enhanced our evaluation of Chinese employees’ performance and better motivated them to improve their efficiency.

Knowledge at Wharton: How do you define success?

Hu: As a professional manager, career for me tops everything and I’m very loyal to my career. My success will be reflected in the company’s position in the industry, its recognition by customers, its return to shareholders and its contribution to employees’ lives.

Knowledge at Wharton: What kind of advice would you give other Chinese managers of foreign enterprises?

Hu: They must be willing to learn and work hard. There are enormous things for a Chinese manager to learn when he or she faces managing a multinational company, but the time for learning is also very limited. Meanwhile, a company’s success depends on teamwork, and it’s especially true when it comes to a multinational company. So the manager must have the ability to bring everybody together. It’s management, and art, too. Lastly, I want to repeat my own management philosophy: There is no lackluster employee, only a lackluster manager.