When he first came to China in 2007 Angelo Cecchini only envisioned being here for a few months. Six years on he is still here and says the experience has been an amazing, sometimes puzzling, journey in a society full of intelligent entrepreneurs, business-ready people and fabulous negotiators.
Cecchini is General Manager of CAH, a joint venture (JV) between Jiangxi Changhe Aviation Industries andAgustaWestland, an Anglo-Italian helicopter manufacturer owned by Finmeccanica. He says that the normal attributes required for business, such as professional skills, commercial and industrial strategies are simply not enough in China. Below he discusses the situation of general aviation (GA) in China, and introduces some of the essential soft skills that are required to ensure JVs avoid unnecessary turbulence.
The term GA refers to flight operations for civil applications, either for private or commercial purposes, such as civil utilities, oil and gas, passenger transport and emergency services. In the fixed-wing sector the term normally excludes scheduled operations such as those carried out by airlines.
In China, GA is developing fast and players in the market are set to benefit from the changes this development will bring. It is expected that within the next year improved regulations for the GA industry should be introduced.
The rapid growth of China’s economy combined with the country’s geographical features —vast land with an extremely varied orography, high urbanisation flow and concentrations and low infrastructure coverage for terrestrial mobility — is the ideal environment for creating increased demand for GA aircraft. Demand is expected to increase 15 per cent year on year.
To put the growth potential into perspective we need to consider that there are currently only around 1,200 registered GA aircraft in China, for a population of 1.3 billion people. In the United States the figure is around 250,000 registered GA aircraft for a population of around 300 million. It is a stark contrast.
The current situation in China displays fundamental constraints though, with a lack of an effective regulatory system, limitations on airspace, inadequate air traffic control (ATC) management and a lack of pilots.
Focussing specifically on the GA helicopter sector it is reasonable to expect that a substantial stake of the market potential will be acquired by domestic manufacturers, nevertheless, Western players should be in a privileged position due to their technology advantage. It allows a superior response to customers’ requirements in terms of travelling longer distances, greater fuel efficiency and improved payload.
European and American manufacturers are intensifying collaborations with Chinese commercial and public players in order to expand their regional networks, and are proposing partnerships to overcome the lack of skilled pilots and scarcity of engineers. However, Western players will likely have to deal with restrictive investment policies, the imposition of local content integration and increased pressure to share know-how.
Running a JV
Beyond the sector-specific elements required to run a Chinese JV successfully and guarantee a thriving business, it is important to carefully consider how to manage your relationships in China. These relationships should be supported by cultural understanding, and an acceptance of local habits is vital. An inability to embrace this philosophy is a common cause of problems in Sino-European JVs.
Competition is a key incentive for companies to collaborate and establish strategic partnerships.They can help Western companies to gain industrial, commercial and technological advantages, all major factors when looking to gain a foothold in the Chinese market. These are also major factors for Chinese companies looking to open the door to international cooperation.
In the helicopter field, a booming sector in China, before setting up assembly lines, service and training centres, a great deal of thought needs to be paid to selecting the right business model, partners and location. This is by no means an easy task, and it is just the beginning of the process. Once these decisions have been taken many other problems can arise, but most of these can be solved by adopting the right soft skills.
For many foreigners working side by side with locals, the varied approaches to business,the occasional political interference as well as the experience ofdifferent working styles, hours, calendars, long-lasting ceremonies, baijiu lunches and dinners can all have a deep impact on the functioning of the ‘marriage’.
So how to make it work and ensure the partnership has a future? My experience running a Sino-Italian JV has taught me the need to return to the basics of organisation management before even considering business development.
It is crucial, in fact, to define clear roles and responsibilities within the organisation, detailing the tasks for most of the resources. Moreover, it is a combination ofputting in place a clear, external relationship management model, an internal reporting management system and then a continuous personal effortto ensure compliancy with procedures and processes and to keep focussed on the goals. Some may say that this approach is important anywhere, which is true, but for a JV in China it is of paramount importance.
Why is it of such importance? It is firstessential to understand the complexity of a JV. It is a company with its own mission and rules, but it is made up of different entities sharing a working life together. In an ideal world, both parties share the same goals and overall vision. In reality these can diverge. If the JV does not have a clearly defined structure and organisation business continuity can be jeopardised. In this situation it is common for the different parties to revert to the approaches and rules of operation laid down in their previously separate entities.
The picture gets even more complicated when you throw deep cultural differences into the mix. Generally speaking, Western people have good experience with lean business management concepts, are well used to working with effective and efficient processesand can adapt to new management and problem solving ideas. However, once taken out of our usual environment we actually tend to reduce our flexibility — perhaps as a form of self defence — often forcing our rules and ideas onto the other party. This knowledge of how ‘we’ do business often makes us hyper-critical, yet it should not be forgotten that our ability to quickly act, and react, can rarely match the Chinese in business.
Change management is still a long-term concept in China. In my opinion this is due to the rapid pace of economic growth that has been experienced by Chinese society over the last 20 years. The working environment has gradually become less rigid and more business orientated, yet most Chinese are still not really used to working towards goals the way we are.
From what I have witnessed, and also through anecdotal conversations with other expats in China working in similar roles to mine, local staff are still less inclined to invest today in order to achieve a better position tomorrow.
The ‘natural’ turnover of resources is dramatically worsened by the opportunities offered in the Chinese market today. A side effect of economic growth is that that everyone can find fresh employment relatively quickly. This is a good sign for business generally, but it results in a less stable company structure, and places a constant strain on resources.
In my opinion a JV in China represents not just an alternative way to conductbusiness; it is itself an opportunity as it allows a foreign company to be inside the market through the presence and the experience of the local partner.
However, although assessing the ‘adventure’ through the results a business plan analysis (i.e. the evaluation of the market opportunity, investment needed, the return expected plus the choice of partner) is essential homework to be done, it might provideonly a partial indicator of the potential success of a given business. The ‘soft’ issues discussed above are crucial elements to consider: understanding the right approach is extremely useful when evaluating who should be part of the JV and, ultimately, who can best contribute to improving the pay-back time of the business enterprise.
AgustaWestland is a worldwide leader in the helicopter industry, offering a wide commercial/military product range encompassing all main weight categories with a full variety of missions. AgustaWestland offers solutions for offshore, passenger and VIP transport, air ambulance, law enforcement, SAR or utility missions, with the unique advantage of a family of helicopters that share a common design approach, common parts, common training and the same maintenance philosophy. Providing unmatched capabilities rather than mere platforms is a distinctive characteristic of the company. In the military sector AgustaWestland has the most capable helicopters in production today for naval, attack, utility and combat SAR missions.