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back to index backGLOBALtalk November,  2015


How China country heads are coping

As multinational companies face stronger headwinds, how are local leaders dealing with the situation, and what would help them move faster?

Signs of weaker growth in China during 2015, including its stock market’s tumble, have commanded widespread attention from economic policy makers, businesspeople, and investors. Not surprisingly, the leaders of local operations of multinational companies are feeling the pressure.

Earlier this year, we surveyed more than 70 such country heads, who, for simplicity’s sake, we call China CEOs. The companies they lead cover a wide range of B2B and B2C businesses, generate more than $200 billion in China-based revenue, and in many cases are among the top five global players in their industries. Fifty-five percent tell us that their companies are growing faster than the corresponding market segments in China. Nearly 40 percent of the China CEOs were Chinese nationals; a similar proportion came from Europe or North America, the rest primarily from other countries in Asia. Roughly 90 percent work for companies based in the United States or Europe. Nearly half had more than ten years of experience in China before taking on their current roles, but roughly 30 percent had less than two years’ experience there or were new to the region.

Regardless of background, these China CEOs are under severe time constraints. Forty percent said they don’t have time to respond quickly enough to the rapid changes in the China market, and another 40 percent admit that they are hard pressed to do so. Two challenges that China CEOs say demand large amounts of their time are hitting the numbers while they cope with the downturn in demand, as well as building their local teams. Another major issue is managing headquarters, including explaining the unique Chinese context to senior management there. That’s particularly true for the subset of the sample that can be characterized as headquarters focused, who spend nearly 40 percent of their time at or dealing with headquarters. Even locally focused China CEOs spend about 20 percent of their time at or speaking with the global HQ.

Most China CEOs have direct line control over go-to-market and support functions, such as branding and corporate affairs, but limited direct line reporting in upstream areas like product development, operations, and supply-chain management. Less than 50 percent can make decisions about pricing and product strategy independently of headquarters (Exhibit 1). Among those with integrated control over country operations and commercial results, most must still involve HQ in overall China strategy, long-term multiyear plans, and annual budgeting.

To read entire article, please click here.

Source: McKinsey & Company - GAI





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