Dairy Business: Danone-China. Infiltration in Foreign Markets.

Implications: Even before the term "GLOCAL" was created and diffused, the THINKING GLOBAL(LY)- ACT LOCAL(LY) approach was understood and implemented by long-term sighted CEOs in the MNC world. Those who have pursued such methodology have tackled problems deriving from what is - like or not - an "invasion" with generally positive results. Great attention in meticulous planning, recruitment of a mix of internal and locally hired and trained human resources and, although with great investments available, a certain humble approach to other Countries, people, traditions, has always paid back in industrial history, more than loud attacks with huge armies and drums. As we are referring to China, but this can be interpreted extensively, it might have some meaning recalling SunTzu's proverb about "winning certain battles by being so strategically-minded and long-term sighted to avoid even engaging into them"

Analysis:  

My experience in starting up dairy businesses in foreign Countries records a mix of stand alone ventures and Joint Ventures.

Any analysis should be conducted on a case by case approach.

One of the most common mistakes I’ve encountered during my career abroad, not only looking at other companies, but also within the MNC I’ve served for more than a decade, being the typical repetition of a business-model, maybe replicated by the same executives, who have been successful in a certain Country, at a certain point in time, in a neighbouring Country, considered similar…

Successful managers, the strategy makers and top executives, shall sometimes know more of psychology and history, rather than only economics, finance, marketing whatsoever.

There might be hundreds of case history to prove how a humble and silent approach to a different market may turn in a great market victory, as well as huge number of disasters provoked by the arrogance of certain top executives more interested in their cons & perks as expatriates, rather than in their Companies success and flourishing.

This analysis is focused on China, and I’ll try to argument why I do fully agree with Danone’s spokesman about the strategy they’ve adopted.

We have been looking at their approach as competitors.

Few are aware that other players like Kraft Foods or Foremost (Friesland Coberco) have recently industrially pulled-out from China, reserving the rights to exploit trademarks (!!!) in terms of royalties due by their former JV Partners whom they had tied up industrial and corporate activities.

Same Parmalat, despite the Mother Company bankruptcy, had never made one RMB of profit, neither in Tianjin, nor in Nanjing. Zhao Dong, being the most unprofitable dairy plant I’ve ever seen in my life.

Danone has invested consistently, not only in the Dairy business, but also in their other strategic Business Units, primarily in water.

To my opinion, they (Danone) couldn’t have reached the size and brand awareness they score now, without a local partner and a JV. Nor they would probably have kept a small presence, as there’s no sense for a MNC to be irrelevant in such a huge and diversified market.

However, to my understanding, in China, like in other developing Countries, specifically in Eastern Europe the “One Country ,two systems” rule which identifies the Mainland China approach to Hong Kong, seems to apply in other forms of economical life. And it must be understood and accounted for during the early stages of strategy making process.

The above doesn’t mean that stand-alone would be, generally speaking, a better approach than Join Venture set up with local partner. Not at all. Nor means that might be better not even to engage in such “Battle”. On the contrary, it underscores the necessity of what previously stated with reference to a deep understanding of (i) Country, (ii) people, (iii) traditions, before (iv) the market itself.

And with good human resources it shall be easier to assess and account for the unavoidable risks that such a Venture will have in terms of local impact on the Company’s overall strategy and P&L.