China International Marine Containers (Group) Co., Ltd. (CIMC), a listed company based in Shenzhen in Southern China is a global leader with over 50% market share in the international container business. Its main products range from container to trailers and airport equipments. With total assets of RMB 16.9 Billion ($2.08billion), it has more than 30 subsidiaries and 28,000 employees all over the world.
Started in 1980, CIMC is one of the first container manufacturers and sino-foreign joint ventures in China. In 1987, CIMC’s largest customer, the state company China Ocean Shipping (Group) Company (COSCO) joined in, making it a tri-party joint venture. In 1994, CIMC went public on the Shenzhen exchange.
Apart from its leading position in a global market, CIMC’s ability to make acquisitions across different geographic areas of China, its balanced shareholder structure and the fact that the whole group went public (which is against the normal practice in China of one subsidiary going public) all make CIMC a unique example among Chinese companies.
Mai Boliang, who started working in the company from the very beginning, has been president of CIMC since 1992. Aided by a tight group of well-educated executives, he orchestrated strategic mergers and acquisitions to achieve his early vision of running a global powerhouse in the container industry. He has also been able to create an efficient industrial corporation relatively free from state interference. In a recent interview with Wharton management professor Marshall Meyer, Mai talked about his management style and other issues.
Meyer: How would you describe your management style? Do consumer product companies and non-consumer product companies demand different management skills? Also, does running European and American companies require different approaches than running Chinese companies?
Mai: I would rather leave it to others to comment on my style. If you ask me to evaluate myself, it would be: straightforward, decisive and ambitious. The skills needed to run Chinese companies are different from those required to run European and U.S. companies. Europe and the U.S. have relatively complete legal systems, which results in relatively stable management styles. But it takes more ambition to run a Chinese company. Here’s an analogy: If you manage a company in Europe or the U.S., the line between the red light area and the green light area is relatively clear, while there is only a narrow grey area in between. But in China, the grey area is too broad to ignore, and it takes ambition, wisdom and skill to deal with it.
Meyer: Could you give an example of how to use your wisdom while in the grey area?
Mai: For example, CIMC is currently developing its trailer business. Because it’s a new business in China, rules and regulations have yet to be completed. There are now a lot of irrational, unclear and contradicting rules. Customers also lack understanding of the related rules. In other words, we have to meet customers’ needs on the one hand, and on the other hand, we have to [obey] the rules and regulations, however unclear they are. To do so, we must have a good understanding of reality. We definitely won’t do anything that would cause great harm to society and is clearly banned under rules and regulations. But if the rules are vague, and there are demands from customers, we may choose to meet customers’ needs.
Meyer: What’s your biggest challenge as a manager?
Mai: It’s not difficult for a manager to make decisions when most people agree with you. It’s most challenging to make decisions when you face a lot of opposition. I’ll give you a few examples. In 1995, we were about to start the reefer container business. At that time, 95% of the reefer containers worldwide were made of aluminum. A lot of industry experts and people within the company all agreed that aluminum was the best, and customers preferred aluminum products, too. Back then, Germany and Japan led the world in the field. The Japanese chose aluminum, while the Germans told me the future was stainless steel. After a careful analysis, I believed that the future belonged to steel equipment. Amid a lot of opposition, I decided to use stainless steel. That decision turns out to have been the right one, given that nowadays 95% of ISO reefer containers are made of stainless steel. But it was a big challenge for me to make that decision.
Here is another example. CIMC started entering the Japanese market in 1998, but it met big setbacks over the next three years. In 2000, we needed to decide whether to pull out of the Japanese market or continue. At that time, support for pulling out was growing because, first of all, the Japanese demand very high quality products and are very picky; second, the Japanese are not used to foreign products; and third, we hadn’t succeeded in entering the market during the previous three years. A lot of people thought we should pull out because even the Americans had not been able to make it. My final decision was to continue. CIMC has had huge successes in the Japanese market. But back then, it was very difficult to make that decision.
Meyer: People say you read a lot. Where do you get your new business ideas from?
Mai: I get my business ideas from work and life. For example, I get ideas from reading books, chatting with friends and colleagues, consulting with experts, interacting with politicians, and traveling. Of course, when it comes to big events such as the changing environment after 9/11, it’s not a matter of instincts, but a matter of judgment and decisiveness.
Meyer: Sales at CIMC grew to $3 billion in 2004 from $1 billion in 2002. Part of the growth was due to acquisitions and expansion into ground transportation. During such a rapid growth period, what kinds of challenges do you see when it comes to management? And how do you meet those challenges?
Mai: My life philosophy is to do what you believe in. In practice, you won’t go wrong as long as you are in the right direction; you have to have priorities, be calm, and progress steadily. During an era of rapid development, the whole management team must have a consensus about reform in order for the company to adapt to the changes. But the consensus-forming process can be painful sometimes.
Meyer: How should a company be reformed to adapt to the era of rapid development?
Mai: From the company’s perspective, the institution needs to make changes and the people need to change, too. Unlike European and U.S. companies, in a Chinese company, such changes could give rise to many conflicts. For example, the purchasing we did in the past was pretty random, with each enterprise having purchasing power. Now we need to centralize purchasing, and there is a lot of opposition to that. In addition, we need to centralize cash management. Again, there is a lot of opposition to that as well because people don’t want to give up the power. Tomorrow I’m going on an 11-day business trip with my management team, and what’s the purpose? Why does the whole team have to go together? Our purpose is to test out the idea of centralization. Now, each subsidiary has its own ideas, its own money and does things its own way. Nobody wants to give that up.
Meyer: Do you think it’s more difficult to reform a Chinese company than to reform a European or a U.S. company?
Mai: I think it’s more difficult in China because a lot of people in the state-owned enterprises only care about their own interests. Of course in Europe and America there is also a problem of individualism, but at least the individuals have more understanding about organizations. It’s relatively easy to make people at European and U.S. companies understand the importance of reform, but here, it’s very difficult to convince people of that.
Meyer: So do you mean individualism is more of a problem in China than in the West? That’s very interesting. Do some studies show that individuals in China are more sensitive to competition?
Mai: In certain conditions, such as when there is a lot of pressure from the outside, it’s easier for the Chinese to get united. But in an era of peace, Chinese people are different. It’s like the traffic here, with every driver driving his own way.
Meyer: CIMC stands out among Chinese companies because of its leading position in the global container business. What kinds of challenges do you face while running such a leading company? And how do you deal with those challenges?
Mai: Our biggest challenge right now is how to create value for our customers, to pursue a healthy growth in the business, to make more valuable contributions, and to become a leader respected by both our peers and our customers. It’s very common for new competitors to enter the business while it is growing. We’ll continue to establish, reinforce and enhance our leading position in the industry.
Meyer: The ownership structure at CIMC is also quite unique for a Chinese company. You have two shareholders that are controlled by the state and have equal stakes at the company. How does such a structure benefit CIMC? Will it also benefit other Chinese companies?
Mai: The biggest benefit is that the system guarantees sound decision-making. A shareholder can’t make decisions on its own. It has to be agreed upon by the majority. It’s crucial for a company to have a sound decision-making process and a motivating system.
Meyer: Is this model suitable for other companies?
Mai: I think it can inspire other companies. But is it that only this structure can guarantee sound decision-making? Are there other structures? I haven’t done my research yet. What’s crucial is the system.
Meyer: Is the ownership structure at CIMC a model for other Chinese companies?
Mai: It seems that a lot of people, including those in the central government and state-owned enterprises, are all considering our structure. The central government, after having studied our model, now is encouraging Chinese companies to [adopt] a diversified ownership structure. Of course, I don’t have proof that they formed their opinion based on our model. But I feel our model is very valuable for them in terms of being a reference. It’s possible that they made the decision only after they studied CIMC.
Recently, they also brought up the idea of having outside directors on companies’ boards. Such a structure can at least lead to sound decision-making because in the past, there was only one big shareholder and only one dominating director. Such a director can do whatever he wants to do. Now that half of the directors come from outside, it’s easier to guarantee sound decisions.
Meyer: The global economy goes in cycles and so does the shipping industry. What kinds of measures is CIMC taking to maintain its rapid growth in the next five to 10 years?
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