China: A beacon of market opportunity
Defying the most turbulent global economic conditions of the past several decades, China continues to represent unprecedented market opportunity in key industries
It’s a fascinating story whose scale is without precedent. At the dawn of the 21st century, the world’s most populous nation is shedding key elements of its traditional central-planning philosophy to embrace private enterprise and take a central place on the global economic stage. And as it does so, China is having an enormous impact on global trade and finance.
With remarkable swiftness, China is transitioning from its traditional, agrarian roots to build one of the world’s great economic engines that, even in the face of today’s worldwide recession, is poised to continue to sustain exceptional growth. In just a few decades, China has risen to become the world’s third-largest economy (US$4.33 trillion GDP in 2008) while growing at a breathtaking 9 percent annualized rate.
Adapting to a world of new opportunity
That’s not to say that China doesn’t face recession-driven challenges to its high growth. China is the world’s largest exporter of goods, and those exports are under great pressure as markets around the world continue to retreat. As a result, China is trying to refocus many of its production capabilities on domestic consumption – but that shift will take time and the demand for those goods is by no means certain. Forty-three percent of China’s labor force works in agriculture, which yields only 11.3 percent of the country’s GDP.
From SAS’ perspective, we see various industries in which we can extend our presence or gain entry with solutions that are ideally suited to helping organizations better understand and improve their operations. Owing to both the country’s culture and its history of centrally planned, state-run enterprises, China’s industry has long prized the judgment of executive managers who often have decades of experience in their fields.
However, as the pace of business accelerates, there’s a greater level of competitiveness. The new generation of managers rising up through the ranks increasingly recognizes that, while hunches and experience remain valuable,
businesses need facts and analyses to support their strategic and operational decisions. We’re seeing tremendous demand for decision-making tools and systems – and business analytics has emerged as one of the fastest-growing items within enterprise IT budgets as companies strive to create the new levels of transparency and regulatory compliance that global trade is increasingly demanding. For instance, as a newer member of the World Trade Organization, China must document its businesses’ compliance with a host of fair-practice, corporate governance and
World-class financial services
Financial regulatory compliance is a key market for SAS solutions. China’s three major banks are among the largest in the world, in terms of market capitalization and assets under management. Two of those institutions – Industrial and Commercial Bank of China and China Construction Bank – rely on SAS for achieving regulatory compliance as well as auditing and customer intelligence.
SAS solutions also help provide risk management along with scoring and performance management systems to help these firms better manage their capital reserves. SAS is so well-established in Chinese financial services that it was recently selected by the China Banking Regulatory Commission (the Chinese equivalent of the US Federal Reserve System) for an auditing system. The Shanghai Stock Exchange and the Shenzhen Stock Exchange are also SAS customers.
Emerging strength in the public sector
The new openness in the Chinese economy has filtered into government institutions as well, which increasingly appreciate the value that SAS solutions can provide. We’re rapidly building up our public sector practice and have several successful customers, including China Customs and the National Bureau of Statistics.
Similarly, in education, SAS offers its academic suites to more than 100 Chinese universities and professional institutions. Students can use our statistical packages for a nominal charge, and we also train university administration and faculty on how to use our software. We attach great importance to this strategy because it seeds the future with tens of thousands of graduates who are familiar with the power and sophistication of SAS. We also hope to extend our foothold by partnering with universities to use our products to manage their operations.
Competitive and lucrative telecom market
With an astonishing 400 million subscribers, China Mobile is the leading player in the world’s largest telecommunications market, and China Telecom is right on its heels. Not surprisingly, business analytics plays a critical role in this highly competitive market, and both companies have turned to SAS for tools that give them important insights. China Telecom has implemented activity-based costing management (ABM) systems at three provincial sites to better view and monitor its business operations from multiple perspectives, market segments and cost centers.
ABM enables China Telecom to perform stricter allocations to more accurately reflect its costs along different business dimensions. As these telecom giants undertake multibillion-dollar investments in 3G networks, next-generation handsets and other infrastructure, ABM will pave the way for optimized performance management.
Heavy presence in heavy manufacturing
In China’s manufacturing industry, SAS has chosen to focus on two of the largest sectors: automotive manufacturing and steel production. Shanghai Baosteel Group Corp. – a state-run enterprise – is China’s largest iron and steel conglomerate and is the sixth-largest steel producer in the world, with 112,000 employees and revenues of US$21.5 billion. With an unbeatable combination of very strong exports as well as domestic demand in a country that continues to invest hundreds of billions in its own infrastructure, Shanghai Baosteel has been a key driver of China’s growth.
It’s a similar story with Shanghai General Motors Co. Ltd., which has been an indispensable component of global GM revenue for many years. Shanghai GM relies on SAS to support its crucial quality-control efforts and manage its warranty management operations. The system enables the company to ensure that there are sufficient quantities of spare-parts inventories at the right locations – as well as a sufficient number of trained engineers available for different models of vehicles. This helps them achieve a faster ROI.
Managing human capital
From an internal SAS perspective, we’re very proud of the elite team we have assembled in China. Our 250 people – 90 in sales and services and 160 in research and development working in Beijing, Shanghai and Guangzhou, as well as Hong Kong and Taiwan – are a highly productive team. Our engineers are responsible for localization and internationalization of software for the Asia Pacific region and perform extensive testing. We’ve also added a customer
competency division to get closer to our customers and learn more about their evolving needs.
As we’ve learned, if you don’t have solid human-capital management, it’s very easy to fall into operational traps. We highly value transparency and clear communication with our people. That’s perhaps best reflected by Hewitt Associates naming SAS Greater China No. 1 (out of 200 companies evaluated) in its “2009 Hewitt Best Employers in China” study. That followed our selection for a “China’s Top Employers” award for 2009 by CRF, an international research-based organization specializing in identifying the world’s top performers in human resources, leadership and strategy.
From its strong position, we believe that China is poised to be one of the first countries to recover from the global recession – perhaps as soon as the end of 2009. And as that recovery takes hold, we’re very excited about the opportunities facing our country and our company.
Alex Wong is the General Manager for the Greater China Region at SAS.