China vs. US Management: Focus on the Fundamental Differences

Sinoblivion or Death by Tort. International management is getting harder.

Chinese view markets as exclusive territory, but IP as universal and free to all. Americans see markets as open but IP as private property. This is a pretty fundamental difference in orientation, and it’s not getting better. If anything, the trends are pointing towards further divergence. International managers need a strategy to deal with the legal and commercial differences in the way Chinese and Western administrations approach basic business practices.

China: Our Territory, Your IP

Turnstiles - enter and Do Not Enter signs
Price of Admission is Rising

Among Chinese decision makers, IP theft, cloning, and hacking all have a common philosophical root — that the virtual can’t be claimed. Ideas are ephemeral and communal. Territory, on the other hand, is distinct, discrete and sovereign. It is completely fitting and proper for the Chinese government to turn away Google – but for the anointed domestic successor to copy their services and clone their products.

Territory – and the right to market within it – can’t or shouldn’t be shared. China is touchy about its territory and sovereignty – to put it mildly. There are whole categories of products and services – finance, energy, transport, and media to name a few – that are simply closed off (or so heavily regulated that only a handful of giant MNCs could consider getting access).

US: Our IP, Everyone’s Market

On the American side, however, the trend is moving the other way. Extreme patenting is the new normal. Monsanto has claimed genetics as its own corporate property, and Apple has found a way ring-fence the vague appearance of things. Corporations are people – and get Bill of Rights protections to spend and market unfettered. Americans hate it when other nationalities point this out, but we have waged war and undermined governments for access to markets and natural resources. We believe that markets are supposed to be open (at least to us). Wall St valuations are based on the notion that market expansion should be continuous and eternal – they’ve already added an S to the BRIC acronym to include (South) Africa.

Managing this is YOUR problem

Apple’s Tim Cook has already seen the writing on the wall and in a bid to keep iTunes from following Google into Sinoblivion has issued the iPology.  Managers from the US operating in China will have to accept the fact that the Mainland market is available to them at Beijing’s whim – and that their IP may be the price of admission from now on. No happily ever after for you.

But Chinese managers’ dreams of expanding globally will also be rocked into the waking US nightmare of patent litigation, infringement cases and defending the “look and feel” of their branded gizmos and gadgets.

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