Business Books: Management in the land of the dragon

"Per Ardua ad Astra" -- "Through Struggle to the Stars" -- is the motto of Britain's Royal Air Force, but it could have been coined for Jack Perkowski's car-parts company.

In "Managing the Dragon: How I'm Building a Billion-Dollar Business in China" (Crown Business, $27.50), Perkowski recounts his many setbacks as he developed his firm, ASIMCO Technologies, into a major player in China's cut-throat automotive industry.

That the former Yale football scholar succeeded in the face of rampant fraud, obstructionism and incompetence entitles him to be heard.

His message? China remains one of the most difficult places on Earth to do business.

His strategy? Train local managers, trust them and empower them. If you can find them.

"China's management gap is going to be the biggest problem with doing business in China for many, many years to come -- for both foreign-invested and local companies alike," he writes.

Looking for a new challenge after 20 years on Wall Street, Perkowski had a vague idea to bring a combination of capital, management and technology to Asia, a continent that he could barely locate on a map.

Scouring China for potential investments, Perkowski visited 100 factories in 40 cities in the space of six months, eating duck's tongue and deep-fried scorpion along the way.

If some of the anecdotes sound vaguely familiar, it's because they are: Perkowski is thinly disguised as "Pat" in the racy 2004 book "Mr China" by his business associate Tim Clissold.

NO EASY ANSWERS

"Mr Jack" or "Chairman Jack", as his Chinese staff call him, draws some simple lessons from the mistakes he made: Get the strategy right; timing is all; no one has all the answers.

Besides these homsepun homilies are some deeper insights that any budding businesman in China should note.

-- Don't get hung up on senior-level meetings. In most cases, decisions are made at much lower and more local levels.

-- Send your best managers even if they have no experience of China or don't speak the language. As a non-Mandarin speaker who hired old China hands at the outset, Perkowski knows whereof he speaks.

"It was one of the biggest mistakes I made in putting the company together, and it cost us several years in our development and a lot of money," he writes.

-- Insist on majority control, if possible. The general manager of one ASIMCO joint venture had subcontracted machining to local factories, many of which turned out to be partially owned by employees and managers at the joint venture.

"As these factories developed, they began to compete with our joint venture to undercut our prices with customers. Result: sales down at that joint venture by 26 percent in 1997."

The story finds an eerie echo today in French food giant Danone's feud with its local Chinese partner, Wahaha.

Perkowski identifies China's biggest problem as the lack of a capital market to allocate the country's huge savings efficiently. And how can a capital market develop without a rule of law that consistently protects property rights?

A thread running through the book is the fragmentation that Perkowski sees between a purely local market, with lower quality commanding lower prices, and a higher-technology "foreign/local market" that is a breeding ground for firms that will one day be able to compete globally.

Perkowski is sure that these markets will blur and eventually fuse into one. The "China price" will become the global price. So ambitious companies need to compete in both markets.

"How the global and local players fare, and how these two markets begin to come together, will not only determine how the Chinese market develops, but will also likely change the competitive landscape of just about every industy outside of China," he writes.