Years of Poems and Spirits

Chinese perspective of why “going out”:
大形势促成走出去
一般而言，企业开展海外直接投资的目标主要是获取海外销售渠道、规避贸易壁垒、获取发达国家企业的研究开发能力、获取重要原料、降低生产成本等等。
Comparing outbound FDI with Trade:
不少中国企业希望通过收购发达国家知名企业，而在短时间内获取上述无形资产，突破企业进一步发展的瓶颈。但事实证明，从TCL收购阿尔卡特移动电话，到联想收购IBM个人电脑部门，任何企业的核心竞争力都不是可以用钱买来的。TCL的阿尔卡特项目迄今相当失败，联想经营原IBM个人电脑部门的现状也并不乐观。
Tempering the optimism: 在塑造核心竞争力方面，最费力的自主开发道路才是最有效的道路，
1. 地缘政治和历史文化因素。
2. 2.经济技术发展水平和经济发展战略因素。
3. http://www.studa.net/qiye/060811/1634288.html

增加企业综合竞争能力。投资于自然资源丰富、劳动力廉价、市场广阔的东道国，扩大生产规模，提高效益，培育企业与世界跨国公司抗衡的能力。（2）带动出口。我国是一个贸易大国，今后出口对国民经济增长的作用将会继续增大，对外投资应选择能带动本国设备、半成品出口的国家，并绕过贸易壁垒，减少贸易摩擦。（3）促进产业结构优化。遵循“投旧引新”的原理，把轻纺、传统化工、机械等“边际产业”投向一些发展中国家，重新获得发展优势；同时，立足长远，向发达国家投资，学习、引进先进技术，突破各种限制获得资金和市场，发展高新技术产业，促进经济结构优化。（4）增加可持续发展能力。
http://www.studa.net/qiye/060811/1634288-2.html

Extra cash, private equity, financial investment:
real estate, asset appreciation: and Taiwanese investments and developments have flowed into the Northwest in recent years. Taiwanese investors, for example, own and are developing the Eaglemont Golf Course near Mount Vernon, Skagit County. http://www.uscc.gov/hearings/2005hearings/transcripts/05_01_13.pdf

Political show off:
本地区在一年里有多少企业大步走向国外多少个国内品牌!不断向国际挺进”%都成为用来显示政府工作成绩的!参数”’ 由此一些政府就给!走出去”的企业下达!硬指标”(企业_走出去_战略的海尔TCL和格兰仕经验.pdf)

Technology acquisition:
Glanz model (企业_走出去_战略的海尔TCL和格兰仕经验.pdf)

It is a fair global game, foreign competition, monopoly, industrial competitiveness:
2005年度_中国十大并购事件.pdf

Trade barrier:
中国国际投资贸易洽谈会.pdf
http://www.chinafair.org.cn/chinafair2004/website/china/paper/2005-8-8/p4.htm
Even Haier: 海尔的国际化.pdf

WanXiang (Universal Joints)
在美国、英国、德国、加拿大等7个发达国家，兼并、收购或直接投资建立24家公司, 总资产超过100亿元，员工13000名
2001年8月28日，万向集团成功收购美国上市企业UAI公司，开中国乡镇企业收购海外上市公司之先河
http://news.xinhuanet.com/employment/2003-04/16/content_835690.htm

“has been buying stakes in small Midwestern companies for several years and now is setting his sights on several other targets, including the distressed assets of auto-parts giant Delphi Corp., ”
Consider the case of Rockford Powertrain Inc., a company that was on the edge of extinction several years ago when Ni and Tom Corcoran, the company’s CEO, decided to join forces.
“We were like a microcosm of the auto industry,” Corcoran said.
(Randy Whelchel, president of UAW Local 803, feels) this was probably the best solution. “The only alternative was to close the doors, and it came close to that,” Whelchel said. “The one good thing is that the 100 who are left have good jobs.”
Powertrain’s Corcoran sums it up this way: “If they weren’t here, there might be no jobs at all.”
http://www.chicagotribune.com/business/chi-0601290433jan29,0,1044842.story?coll=chi-business-utl

Industry already being integrated
Industry figures show world automobile trade volume is expected to hit 1.2 trillion U.S.dollars in 2010, and up to 35 billion U.S. dollars will flow into China for auto part procurement.
http://english.peopledaily.com.cn/200612/27/eng20061227_336072.html

Wanxiang’s U.S. sales are expected to grow 60% to about $400 million in 2004
“Wanxiang has been growing like a weed,” says Gary Wetzel, chief operating officer for Wanxiang America Corp.
His single workshop spawned more than 30 factories and 31,000 employees in China.
Wanxiang’s investments brought close to 1,000 new employees under its umbrella.
Nodding to the machinists behind him, he says: “There are 50 jobs out there that wouldn’t be there otherwise.”
Powertrain is now expecting a 30% increase in 2004 sales — its best result in years.
A 1998 Wanxiang deal in the U.S., to buy a cash-strapped engine-parts maker in Muskegon, Mich., fell apart when its union balked at Wanxiang’s lifeline. The engine-parts company, Guidion Manufacturing Co., went bankrupt, dealing a blow to the Muskegon economy.
http://www.wanxiang.com/wallstreet.html, PETER WONACOTT, WSJ, 11/26/04

Its investment banker: http://www.amherstpartners.com/China.html

Knowledge acquisition: business operation and management.
Sharpening competitiveness: 海尔在美国.pdf

Haier:
Haier’s own reason why setting up factories in the U.S.: http://www.haier.com/cn/haier/view.asp?newsid=1559
Haier’s scale and government help compared with WanXiang: see PDF.

Market acquisition and expansion: 联想+IBM传言背后的真实.pdf, 联想收购IBM的四大联想.pdf,CNET article:
Meanwhile, it will give Lenovo the opportunity it has always craved to expand beyond China. In 2002, the company began to slightly expand into Spain and regional European markets but retreated due to market share losses at home.
联想重金收购IBM全球PC业务.pdf
slowing sales and miniscue oversea income: 联想并购IBM PC看_蛇吞象_的五大风险.pdf

8. Cheap asset: TCL/Thompson (联想_IBM PC并购关键词.pdf)?
9. Alternative to outsourcing: 联想重金收购IBM全球PC业务.pdf

*** Government and business:
Lenovo: 联想收购IBM的四大联想.pdf

***. Risk:
1. political objection from US: Committee on Foreign Investment in the United States re: Richard Perle’s comments

Lenovo case:
Financial terms: 中国企业跨国并购的分析.pdf
Concerns Mount Over Lenovo’s IBM Deal:
“That may not be enough to avoid an extended review of the deal by the U.S. Treasury Department’s Committee on Foreign Investment in the United States (CFIUS).”
“Without IBM’s R&D support, it is hard for Lenovo to compete against Dell,”
They should also be prepared to switch vendors if IBM’s responsiveness to their concerns dropped, it said.
“Most customers [in Japan] received the news with anxiety,”
“My nervousness is that the vision of the ThinkPad will get lost in transition,”

2. execution risk: gap in operations: profit gap (联想_IBM PC并购关键词.pdf) 联想重金收购IBM全球PC业务.pdf

March 2006 : Chinese-owned computer plant Lenovo in Greenock announces 400 to 500 job losses. Work goes to eastern Europe and China.http://www.tmcnet.com/usubmit/2007/01/12/2242059.htm

According to computer security experts, however, the State Department’s decision shows a lack of understanding about the global nature of PC manufacturing. Most U.S. computer makers use overseas manufacturing plants, notes James Mulvenon, a Chinese computer warfare expert with the Center for Intelligence Research and Analysis. It’s nearly impossible to make a computer without using foreign-made parts.

http://www.cio.com/archive/071506/tl_lenovo.html

The agreement was quickly approved by the U.S Federal Trade Commission. But in January, the CFIUS–which is made up of 11 government agencies, including the departments of Justice and the Treasury–decided to conduct an extended review.
http://news.com.com/Lenovo+buy+gets+green+light+from+Washington/2100-1003_3-5605657.html

The tech bellwether said it plans to add an additional 8,800 workers to its previous forecast of 10,000 new jobs. The majority of the jobs will be in Linux services, grid computing and business transformation services, according to IBM spokesperson Clint Roswell, who added that about two-thirds of the jobs would be in business consulting.
http://www.internetnews.com/bus-news/article.php/3394241

The PC maker Lenovo, which bought IBM’s personal computer business, “is majority- owned by the Chinese Academy of Sciences.” 3 Most of the other companies making global headlines are also part of the decision made by the government some years ago that “30–50 of its best state firms should be built into ‘national champions’ of ‘globally competitive multinationals’ by 2010.” 4
http://www.cato.org/pubs/edb/edb3.html#_edn3

Data/Quant:
1. Market acquisition:
Summarize Yao Yang: 在投资的驱动因素方面，得票率最高的三个选项分别为寻求市场(85%)、寻求战略性资产(51%)和实施企业的全球竞争战略(50%)，其次才是寻求资源和提高效率，分别占39%，规避国内竞争则为最低目标。http://www.bimba.org/ips/article.asp?articleid=1367

Sometimes imagination is a bad thing.

While chatting with Ben Peters online moments ago, pleasantry about “how-is-your-Thanksgiving” turned to Turducken, a supposedly Southern delicacy. Then I remembered the popular stuffed camel meal in Arabia and the very real ones (pig/chicken/pigeon) in China, etc.

Somehow my mind darkened and thought about how cannibals would have celebrated Thanksgiving had they so been inspired. Would they created something akin to nested Russian Dolls (except using real Russians perhaps)?

Anyway, then this old New Yorker story popped into my head and I couldn’t get rid of it until I write this blog down. The story is about archaeologists studying the cannibalism among native Americans in the Southwest B.C. (before Columbus that is). It read like a detective/suspense novel. Particularly the part about how the lawyer for the Indians challenged archaeologist to find fossilized human shit with bones in it–and lost! Totally fascinating.

In all fairness, as the archaeologists suspected, the natives performed cannibalism not so much because they found human flesh tastier than turkey (stop it Bing!), but because it is first an instrument of intimidation (to the rest of the enemies) and ultimately a symbol of domination.

In this regard, the same ritual was performed in China centuries later: after 袁崇焕 (Yuan Chong Huan) was executed in 1630 (or 200 years A.C.), the Ming emporer encouraged Beijing residents to eat his flesh Sushi style (I said stop it!) to show their loyalty to the court and hatred towards traitors.

Of course, if we look things structurally, the sacrifice-n-eat ritual is still live and well. Except we now find turkey as a scape goat—there you go.

Coming out the microecon class, just had a thought about monopoly:
1. Can we predict when monoply is going to happen?
2. What is the life cycle of monopoly?

My guess is monopoly will happen given the following:
1. The condition of monopoly only exist in long term;
2. There is a large gap between supply and demand;
3. There is a significant barrier to entry (measured in fixed cost over capital cost–including socio-political)

What I learned from microecon is the uncommon phenomenon of declining variable cost over time (e.g. volumn advantage over supplier) It is a misnomer to think barrier to entry as only the setup/fixed/sank cost. In fact, BoE should also include past capital accumulation reflected in declining variable cost. For example, retail should have relatively low barrier to entry in terms of fixed cost. But how many can compete against Wal-Mart now? Wal-Mart’s past capital accumulation has helped it to achieve certain level of pricing power over its suppliers. This pricing power is the real BoE in retail.