Day 9 & 10 - Free Day, Farewell Dinner, and Travel Home

February 28, 2010

Free Day and Farewell Dinner

While many students went to the Chu Chi tunnels on the free day, Kristyn and I spent the day at a local Vietnamese spa. We decided to spend some down time taking advantage of the inexpensive spa prices. Hard to beat a $3 manicure and $40 2 hour hot stone massage!

Our last night in Ho Chi Minh City was spent at Nam Kha Restaurant for our Farewell Dinner. We all enjoyed the food, drinks, and company. Dr. Jacobina had each team give a toast and it was nice to hear what the different teams had to say about the EMBA experience and the international residency. Most importantly, each and every team talked about the relationships we've formed with our cohort members over the past 18 months and how we've learned so much from each other. Everyone felt fortunate to have good teams, professors, and cohort members. Personally, I felt the residency offered the opportunity to get to know classmates outside of our teams. I really enjoyed getting to know more about my classmates and forming friendships with other cohort members.

Giancarlo represents Team 2 with a toast

Ron represents Team 3 with a toast

Very early the next morning (4am!) we checked out of the hotel and headed to the airport for out trip home. Some of us decided to stay awake the entire night in hopes of resetting our internal clocks during the plane ride back to the U.S. It was an exhausting trip home but we were all very excited to be heading home to our family and friends.

Day 8 - Mekong Delta

February 27, 2010

Mekong Delta Day Trip

On Saturday we spent the day traveling out to the countryside of Vietnam to the Mekong Delta region. When we arrived at the Mekong Delta we took a boat ride down the delta and our tour guide showed us how the people use to live in wooden houses on stilts. We were also given fresh coconut water to drink during the ride. It was warm, but the taste wasn't too bad. The ride ended on a small island where coconut candy is made. We were able to watch the candy being made from beginning to end. We even got to taste a sample which was very tasty! Coconut candy was for sale along with other items such as snake wine. John offered snake wine to the group, and about half of our cohort tried it. After seeing the faces of those that took a shot of the wine, I decided to stand back and take pictures instead of tasting it!

Enjoying coconut water on a Mekong Delta boat ride

Snake wine

After trying the coconut candy and snake wine, we took a donkey wagon ride to another part of the island and we were offered honey rice tea and rice wine. The Dominion Cohort guys seemed to enjoy the shots of rice wine!

The guys trying rice wine

The next part of our tour was on a gondola. Each gondola sat 3 students and we took a short ride through a smaller channel of the Mekong. The scenery was beautiful! The gondola took us back to the larger boat and we headed off to another small island for local tropical fruits and musical concerts given by locals.

Aaron on the gondola ride

Emerson, Ron, and Murray had to help paddle their gondola

Scenery on the gondola ride

When the Mekong Delta tour was over we stopped at the Mekong Restaurant for lunch. It was an interactive experience - the first item was made table side using a whole crispy fish for spring rolls. We were also served various other traditional Vietnamese dishes including stewed pork and spinach with garlic. The food was great and the restaurant gardens were enjoyable to walk through after lunch.

Crispy fish used for spring rolls

We had a free night after the Mekong Delta tour and a bunch of us gathered for dinner at The Rex hotel located around the corner from The Caravelle. The Rex has a rooftop restaurant and bar that we thought would be a nice change of scenery. The menu offered a variety of international items and the crowd seemed to be a diverse international group as well.

Dominion Cohort ladies at The Rex Rooftop bar & restaurant

Day 7 - IDG Ventures, CyWorld, and Ho Chi Minh Stock Exchange

February 26, 2010

IDG Ventures and CyWorld Visits

Our second day of Vietnam business visits started with Cyworld and IDG Ventures. We met with Michael, the CFO of Cyworld who gave us a brief overview of the company. Cyworld is a Korean based social network company that launched in Vietnam in 2007. In Korea, Cyworld contains 90% of the social networking market share and is the main social network in Vietnam now. Facebook and Myspace are not popular in Korea or Vietnam, making the competition less for Cyworld on a global scale. Michael did mention that Cyworld has a few local competitors however.

Cyworld currently has 1.8 million users of which most are female and college students. Cyworld's entry into Vietnam was successful partly due to the demographic of many people under 30 years of age. Additionally, the increasing use of mobile phones has helped with Cyworld's success. Today 80% of Cyworld usage is over a mobile device.

Cyworld's success is interesting and seems to come from the differences Cyworld has compared to the other large social networks. Prior to this meeting I did not realize the differences in social networks from country to country. Michael explained to us how cultural differences play an important role in the success of a social network. Cyworld has been successful in Vietnam because of the approach they took to addressing cultural differences. One way of doing this is in the meaning behind Cyworld. The word "cy" means relationships in Korean and Cyworld's focus is on real relationships and real friends. This approach is vastly different from Facebook in the U.S. where several Facebook users have "friends" that they do not know well. In order to register and set up an account with Cyworld you must use a real name and in Korea you have to have a government ID# to set up an account. This differs from Facebook in that regard, since anyone can sign up with any name of choice.

Cyworld's revenue model is build around micro-transactions and advertisements. Cyworld hosts several applications and games in which users buy things. We were curious how this took place knowing that Vietnam was not credit based. Micheal informed us that they were able to overcome this challenge by using cards of credit (pre-paid cards) and paypal to make the micro-transactions.

We also met with Thu Huong Duong, PR & Operations Director for IDG Ventures. Thu did an excellent job of explaining the opportunities and threats that exist in Vietnam and how IDG Ventures is able to assist new companies start up. IDG Ventures is the first and largest fund in Vietnam, of which Cyworld is included. Currently IDG Ventures has 5 funds and is managing $1 billion. Thu explained that IDG Ventures usually sees an ROI in 5-7 years and returns are 25-30%!

IDG Venture is also international and will continue to look for opportunity in various countries. In Vietnam, Thu explained there is opportunity in infrastructure, power plants, and online payments. In the near future IDG Ventures sees opportunity in education and medical portfolios.

Thu also explained some of the threats and challenges of business in Vietnam. Much like we learned from the U.S. Consulate meeting, the Vietnamese government poses a challenge with the numerous regulations and laws. There are strict internet and media laws that created challenges for Cyworld. IDG Ventures is able to work with the government on behalf of the clients in their portfolios. For example, when the government wanted to ban on-line gaming in response to an increase in child crime, IDG was able to get the government to agree to place a limit on the amount of time children could play games on-line instead of a complete ban. This was a huge success for IDG and Cyworld, and allowed Cyworld to continue operating in their core competency of online gaming.

When IDG Ventures selects a company to invest in, they are careful to follow strict selection criteria to include:

• Strong Management
• Unique Product/Service
• Defensible Market Position
• Customer Focus
• Operational & Financial Best Practices
• Adaptability

Of the selection criteria listed about, IDG Ventures is most concerned about Strong Management and looks very closely at the management team they are investing in. They look for managers that are able to adapt to the Vietnam culture and have experience operating globally.

Vietnam War Museum

After the morning meetings John took us over to the Vietnam War Museum. The museum holds several war artifacts and U.S. military helicopters, tanks, and planes. The barbed wire containers in the photo below are "Tiger Cages" that prisoners were held in. It was hard for me to imagine someone being held captive in those conditions. The museum was from the perspective of the North Vietnam, which was interesting to read coming from the U.S. view of the war.

Lacquer Factory

John also took us to a lacquer factory where various types of decorative lacquer is made by locals. Plates, bowls, coasters, vases, jewelry boxes, and much more are hand made at the factory. We were given a short tour of the factory and saw how egg shells and mother of pearls are used to decorate the lacquer. At the end of the tour we had the chance to visit a gift shop and purchase lacquer to bring home with us. We were very impressed with the work and spent a lot of time browsing and shopping. Just about everyone made a purchase that afternoon.

Vietnamese locals making decorative lacquer

Ho Chi Minh Stock Exchange Visit

The last stop of the day and final residency business visit was with the Ho Chi Minh Stock Exchange (HOSE). Representatives from various departments at HOSE gave us a presentation on the overview of HOSE, it's market structure, and strategies for future development.

The structure of the Vietnam stock market is interesting. The Ministry of Finance (MOF) leads the State Securities Commission which manages the HOSE and the Ha Noi Stock Exchange (HNX), as well as the Vietnam Securities Depository (VSD). I found it interesting that Ho Chi Minh and Ha Noi have separate stock exchanges and the HOSE representatives commented that there is definite competition between HOSE and HNX.

In comparison to HKE which is well developed, HOSE is relatively new and was opened in July 2000 as the HoChiMinhCity Securities Trading Center (HoSTC). In 2007 HoSTC became HOSE and today HOSE has 17 MOU's wiht other countries to include the HKE. Naturally, due to the emerging development of HOSE and the overall Vietnam economy, the HOSE is operating on a much smaller scale than HKE is. However, like the HKE, HOSE primarily trades online, and while they do have a trading floor (shown below) very few transactions are done on the trading floor.

We also learned that like other stock exchanges, HOSE faces insider trading challenges and when cases are detected they are transferred to the State Security Commission for review. I was surprised to learn that only 2 cases of insider trading and 2 cases of manipulation have been detected thus far. I'm confident there are other cases that are most likely kept quiet within the government.

Free Night: Trung Nguyen Coffee Shop and Market visit

A few of us spent the remainder of the afternoon visiting a local coffee shop, Trung Nguyen, a recommendation from John. The Vietnamese coffee is very good, and one thing I noticed that was a contrast to the U.S., was that the Vietnamese sit down and take their time to enjoy a cup of coffee. While some people in the U.S. do this, most grab a cup on the go. We enjoyed spending a few minutes relaxing with a cup of Vietnamese coffee. During this experience I thought back to our International Marketing class and the Illy Cafe case we discussed. A key takeaway from that case was the success Illy experienced in Europe due to the cultural habits of taking time to sit and enjoy coffee. When Illy entered into the U.S. market they did not experience the same growth due to the U.S. fast paced coffee stop. In comparison, Vietnamese coffee habits are more inline with European and I actually spotted a few Illy coffee signs.

After the coffee break we headed over to the market and took a brief tour of the numerous aisles of "stuff". The market had several things to offer, and we purchased a few t-shirts, DVD's, bookmarks, and hats. Similar to Hong Kong, Vietnam is full of entrepreneurs!

Day 6 - U.S. Commercial Services and Nike Shoe Factory

February 25, 2010

Tour of Ho Chi Minh City

John greeted us at the hotel and took us around a quick city tour before our meeting with the U.S. Commercial Services. After coming from Hong Kong and comparing the two cities there was no doubt that Ho Chi Minh was the emerging economy. I was truly surprised by the poor infrastructure throughout the city. Outside of our Caravelle Hotel, the streets and sidewalks of Ho Chi Minh were in desperate need of repair. Most sidewalks were torn up in places and the roads have no traffic signs or lights. The Vietnamese ride around the city on scooters and somehow figure out their own traffic patterns. We were amazed at the number of scooters and how they moved in and out of the city streets...and sometimes even sidewalks! More than once I thought I might get run over walking down a sidewalk! In addition to the streets and sidewalks we also took special note of the electricity situation. On most street corners we found several power lines tied together and also saw workers fixing several posts.

Caravelle Hotel

John, our tour guide

Typical traffic in Ho Chi Minh City

Electric wiring on the streets of Ho Chi Minh City

Chinese temple in Vietnam

U.S. Commercial Services Visit

The first business meeting in Vietnam was with Dave Avern, Commercial Officer for the U.S. Consulate Commercial Services. This meeting was a great way to start the Vietnam trip and learn about the intricacies of Vietnamese business. Dave explained to us that the role of his office is to assist U.S. companies that want to export products and services in Vietnam. Currently 13 billion is exported from Vietnam to the U.S. in comparison to only 3 billion that is exported from the U.S. to Vietnam. Trade in Vietnam kicked off in 2001 when the U.S.-Vietnam bilateral trade agreement was implemented and has grown from 1.7 billion in 2001 to 16 billion in 2008. Vietnam has particularly grown in the last 3 years and many of the buildings that we saw in Ho Chi Minh City were built within those 3 years. Poverty in Vietnam has also improved; today about 13% live under poverty, however in 1995 75% lived under poverty. The emerging economy of Vietnam provides much opportunity and the U.S. Consulate is present in Ho Chi Minh City to help foster opportunity between the U.S. and Vietnam. In particular, the need in Vietnam for training and management services provides an opportunity for more established economies such as the U.S. to come in and provide those services.

Dave also talked to us about understanding the Vietnamese culture for U.S. companies wanting to do business with Vietnam. The Vietnamese culture is one built on consensus and relationship building. U.S. business partners need to understand this and not expect decisions to be made in the same way that they would when dealing with U.S. companies. Additonally, face to face meetings are important in Vietnam.

Doing business in Vietnam does not come without challenges. The lack of infrastructure in Vietnam is a major challenge. Many roads still need to be built connecting cities. If this is accomplished it will help with trade throughout North and South Vietnam. Public transportation is also lacking in Vietnam, however Dave thought within the next 20 years the Japanese are likely to provide funding and build public transportation for the Vietnamese. Additionally, there are power generation issues. Dave mentioned that the power in Ho Chi Minh City will go down every other evening. I can see why after seeing the electrical lines throughout the city.

Another challenge U.S. companies must address is the Vietnamese government. Corruption is a major issue within the Vietnamese government and is often found in the form of bribery. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies from engaging in bribery, kickbacks, and other corrupt acts. The FCPA can often put U.S. companies at a disadvantage when they are trying to form relationships with Vietnamese businesses.

The communist government poses challenges because of the controls placed over business, media, and real estate. All of the media in Vietnam is under government control to include newspapers, Internet sites, and even individual bloggers. Dave told us that the government was recently prosecuting bloggers if they posted personal beliefs differing from the government's policies. The government also requires approval for any event held in which more than 12 Vietnamese people are attending. This requirement applies to business events as well, and can often hold up the progress of event planning. The controls over real estate are another challenge for business wishing to set up in Vietnam. Until recently no foreigners were able to own real estate in Vietnam. This appears to be changing and will offer more opportunity for U.S. companies to develop resorts and hotels.

Another challenge is the lack of credit card usage in Vietnam. The Vietnamese are cash based and do not have nor do any business with credit cards. This can create challenges for international businesses in terms of exchanging currencies, however these challenges have been overcome by working with local Vietnamese banks. Because of the lack of credit in Vietnam, E-Commerce has not grown and probably will not until more credit is established.

The Vietnamese government realizes the challenges that their regulations have created and the impact to the growth of the economy. They have recently engaged in dialog with businesses to give relief on some of the stringent regulations. The government has established the "Project 30" program in which Vietnamese businesses have compiled a list of the thirty worst regulations that hinder business growth in Vietnam.

Nike Shoe Factory Visit (Ching Luh Co., Ltd.)

The next stop was the Nike Shoe Factory - Ching Luh Co. During our visit we first met with Larry Levi, Production Operation Director for Nike and Kelly, from Ching Luh. They gave us a presentation providing details about Nike's Asia and Vietnam operations, their consumer markets, and their future outlook for growth in Vietnam. We were also given a tour of the factory and we were able to see the entire shoe production process.

It was evident in the presentations and tour that Nike and Ching Luh have formed excellent working relationships that allow for efficient production processes. Larry explained to us that the Ching Luh factory fills Nike's manufacturing needs since Nike is not in the manufacturing business and is more of a development and marketing company. We quickly realized how important this partnership was when we were told that 70% of Nike's production is done in Asia and 90% of Nike's footwear is made in Asia! Nike's presence in Vietnam has been beneficial and provides the community with many jobs. Within the factory location we visited Nike employs 112 Vietnamese staff and 17 ex patriots.

The tour of the factory was a great experience and really made the visit complete for me. We were able to walk through the entire production process and see how a Nike shoe is made from the raw materials all the way to the assembly. Along the production line we noticed red and green signs that were strategically placed at specific points along critical chains. We talked to our tour guide about the critical chain in the production line and found out that the shoe factory learned this concept from Toyota.

The conditions of the factory were interesting to me. While I found the conditions to be below standards, it seemed that the workers were very content. The factory did not have air condition, however the workers seemed fine with this and most of them were in long pants and open toed shoes with socks or stockings on. I was surprised to see they were not required to wear close toed shoes. Another thing I took note of was that they were all standing and very few had the option to sit on a chair or stool. The workers in the factory were predominately female and the floor managers were predominately male. The workers were extremely focused and were not interacting with other workers, unless the job required them to do so. We asked the tour guide what shoe they were working on and found out it was a summer model called the Dart VIII. I plan to look for that shoe once it hits the retail stores in the summer months.

Outside the Ching Luh Shoe factory

Vietnamese Water Puppet Show

Later that evening we went to see a traditional Vietnamese water puppet show at the Golden Dragon Theatre. It was an interesting act of puppetry with musicians that played instruments and sang in Vietnamese. While we couldn't understand the songs, we were able to follow along with the acts of the show. It seemed to be a popular event, as the theatre was full.

Opening act of the water puppet show

After the show we were ready for dinner and made our way over to La Camargue Restaurant where we had our first Vietnamese - French dinner. The French influence was evident in the food - it was very good and seemed authentic. We had typical French dishes such as french onion soup, braised beef with potato, and excellent fresh baked bread.

Dinner at La Camargue Restaurant

Day 5 - Giant Buddha and Depart for Vietnam

February 24, 2010

Free Day: Visit Giant Buddha

On our last day in Hong Kong most of our cohort took the MTR to visit the Giant Buddha. Thanks to Gity who coordinated the trip for us!

While I was already impressed with Hong Kong's infrastructure, the trip on the MTR impressed me even more. The train centers are very clean and extremely efficient. It was very easy for us to navigate Hong Kong and I think just about everyone commented on how much safer the MTR seemed compared to DC's metro. After taking the MTR we took a cable car up to the top of the mountain where the Giant Buddha was. We decided to get the "Crystal Cabin" cable car which has a glass bottom. The ride was 45 mins long, and for some of us the glass bottom was a bit scary! The long trip was well worth it and even though it was a foggy day we made it up 200 stairs to see the Giant Buddha.

The dog lover in me thought this billboard was great!

Aaron riding the MTR

Cable car that leads to the Giant Buddha

We chose the Crystal Cabin cable car...scary for some of us riding up the mountain!

Group of us in front of the 200 stair climb to the Giant Buddha

The Giant Buddha

Me with a few monks

After the long trip to visit the Giant Buddha we came back to the hotel to pack up for our flight to Ho Chi Mihn City, Vietnam. We gathered in the hotel around 5pm and headed back to the airport. The trip to Vietnam was uneventful, however we all noticed that it took much longer to get our bags in Vietnam than it had in any other airport. We also took note of the numerous cardboard boxes that were on the baggage carousel filled with items from Hong Kong that the locals were going to sell in Vietnam. We arrived in Vietnam at 10pm and were greeted by our tour guide, John Hoangm, who took us to the Caravelle Hotel.

Day 4 - HKTDC & Hong Kong University Visits

February 23, 2010

Hong Kong Trade Development Council (HKTDC)

On our second day of business meetings we went back to Central Hong Kong to meet with the Hong Kong Trade Development Council. Ms. Cherry Lee, Manager of Overseas Promotions gave a presentation on the management of opportunities and challenges of business in China and Hong Kong with the focus on how Hong Kong plays a role in maximizing opportunities.

Ms. Cherry Lee and Rich Teel

Cherry explained to us the role of the HKTDC and why they can help international businesses enter into China through Hong Kong. HKTDC was established in 1966 and they try to match business partners and connect customers who ware focused on trade in Asia. HKTDC's primary focus is bringing business to Hong Kong and then connecting to Asia. They do this through two business models:

Model A: Produce in China for global markets

Model B: Produce in China for China markets

Cherry explained how there is much opportunity in China and how the country holds the world's 3rd largest economy. The GDP growth has been 10.2% over 10 years. Additionally China is no long seen as a production based market and is experiencing growth in the consumer market. Growth in the consumer market is shown by the domestic consumption rise of 15.5% growth in 2009. This is also seen in the growth of consumer spending and a rise in mobile phones (747 million users) and internet users (300 million users), and an increasing demand for business services and technologies. Cherry also explained the challenges of doing business in China and how HKTDC can help weave through some of those challenges such as, finding good business partners, realizing profits, coping w/ bureaucracy, mitigating business risk, and retaining quality staff.

Cherry was enthusiastic about the future for Hong Kong and the assistance that HKTDC can offer to businesses wishing to enter into Asian markets. Cherry provided several advantages that Hong Kong has to offer with the assistance of the HKTDC:

Resilient Economy

• Strong, independent legal system built around the "one country, two system" model
• Open & transparent government
• Anti-corruption culture
• Service-oriented economy

International Financial Center

• Convertible currency linked to the US Dollar
• Free flow capital
• Strong, well-regulated banking system
• Low and simple taxes (15% personal tax, 16.5% Corporate tax)
• International arbitration

Ideal Location

• 4 hour plane ride to all of Asia's key markets
• 5 hour plane ride to half of the world's population
• Infrastructure integration with Pearl River Delta
• #1 International Air Cargo
• Closer Economic Partnership Arrangement (CEPA)
• Tariff-free access to mainland China

Dynamic People

• Diverse international workforce
• Entrepreneurial spirit
• People educated overseas
• Hub of creativity

Aberdeen Fishing Village

We had some time before lunch so Winnie took us to the Aberdeen Fishing Village where we were able to take a quick boat tour. On the boat tour we saw the old fishing village which still contains some junks and house boats among yachts and the background of modern sky rise condos. Also in Aberdeen is the Jumbo floating restaurant that is accessible via ferry. We did not eat there, but Winnie said it was a popular place.

Enjoying the boat ride

Jumbo floating Chinese restaurant

Aberdeen house boat

A few of us catching some sun

Lunch at Golden Bauhinia

Before heading to our next meeting we went to the Golden Bauhinia Square and took a few pictures in front of the golden blooming bauhinia. The golden sculpture is a reminder of the return of Hong Kong to the People's Republic of China. While taking pictures in front of the golden bauhinia we were approached by a few local entrepreneurs who wanted to take a picture and sell the print to us. Most of us ended up with a printed photo that afternoon! We also couldn't help but notice a group of mainland Chinese girls who were posing for a photo op...they adorable! Finally we sat down for another great Dim Sum lunch at Golden Bauhinia restaurant. The dim sum lunch was similar to the previous days lunch and just as enjoyable.

Mainland Chinese children pose for a photo

Golden Bauhinia Square

Dim Sum lunch

Hong Kong University - Professor Enright

The afternoon meeting was supposed to be with the U.S. Embassy Commercial Services, however there was a schedule conflict and we ended up meeting with Professor Enright from Hong Kong University. The meeting with Professor Enright was fantastic and we enjoyed hearing his lecture on the future growth of China. He has been in Hong Kong since 1996 and came from the Harvard Business School. Professor Enright explained how he moved to Hong Kong because it was much more feasible for him to keep up with the world's business because it moves rapidly in Asia, as opposed to the U.S. where he can keep up with events by checking in a few times a month. He emphasized that this point is applicable to businesses that want to do business with Hong Kong or China - they must have a presence in Hong Kong/China to be successful. In addition to teaching he consults as an advisor on economic development.

Professor Enrights presentation focused on China's future and how countries will need to prepare for a future with China. Much like the HKTDC, Professor Enright told us how China's economy is the fastest growing in the world and has a growing consumer goods market which is expected to be the largest by 2015. He was careful to explain that the Chinese leadership may hinder international growth as the Chinese is more ideological and less interested in international cooperation. Along those lines, he explained how the Chinese are outcome driven and are resilient. They are less concerned with principles and will not entertain international pressures and will most likely continue to focus on domestic consumption growth. Because of China's focus on outcomes, Professor Enright suggested that companies wishing to enter into China do so with the understanding that they need to prepare for multiple scenarios and adjust strategies/contingencies as they evolve. The point that the Chinese are resilient and outcome driven was emphasized many times and any international company must understand how to be agile enough to cater to the Chinese political activities.

The second half of Professor Enright's presentation was about the growth within the Pearl River Delta (Hong Kong, Macau, PRD) and was in line with the morning brief from HKTDC. There is much opportunity in the Pearl River Delta with the expansion of urban populations.

Overall the meeting with Professor Enright was extremely valuable and I think everyone walked away a bit smarter about the Chinese market.

Farewell Dinner at Victoria Peak

For our last night in Hong Kong we had a farewell dinner at Cafe Deco at Victoria Peak. We took a tram up a steep mountain to get to the top of Victoria Peak. Once we were there, the views of the Hong Kong night life were amazing. The pictures I took do not do it justice! At Cafe Deco we enjoyed American cuisine and a little wine. Murray and Gity gave very nice speeches reflecting on the trip so far and the last 18 months of the EMBA program.

View from Victoria Peak

Saowanee, Gity, and I at Victoria Peak

Day 3 - Alcoa and Hong Kong Stock Exchange Visits

February 22, 2010

Alcoa Visit

Monday was our first day of business visits in Hong Kong. We met Winnie at the hotel lobby at 9am and then took the charter bus over to Central Hong Kong for our visit with Alcoa.

We were greeted by Mr. Anil Govada, who is the Managing Director of Alcoa's Asia Pacific operation. Anil has been with Alcoa for 27 years and started at Alcoa in Pittsburgh. While in Pittsburgh, Anil worked on Asia-Pacific sales which eventually led him to his current position in Hong Kong. Anil is also a VT graduate!

Anil gave a detailed presentation and Q&A session on the history of Alcoa, the future growths and challenges, and what it takes to be a global manager. The presentation gave a good history of Alcoa and their motto "Alcoa can't wait for tomorrow". Anil's presentation taught us that Alcoa was founded in 1888 and today has 240 locations in 35 countries, with 87,000 employees worldwide. Alcoa aluminum is in everything to include electronic gadgets, air & space travel, beverage containers, cars, and iPods. I think what many of us found most interesting was that Ferrari's were made by Alcoa! I come from a business/finance background in Defense Contracting and therefore have little experience with the aluminum industry, however I found Anil's presentation to be very interesting and amazed at everything Alcoa does.

From a business standpoint, Anil explained how Alcoa has become an aluminum leader and they have successfully taken on the Jack Welch/GE model of becoming #1 or #2 in more than 90% of their businesses. Anil told us about the 1990's and early 2000's when Acloa acquired several companies, but have since divested them because they did not fit the #1 or #2 business model. Anil also explained that Alcoa principles are centered around integrity, shareholders, employees, customers, environment, accountability, and profitability. When asked what Anil thought was the key to Alcoa's success, he said without a doubt personal integrity is #1 for long-term growth. Along those lines he also explained that Alcoa may look at shareholder growth, but would not do so at the expense of the bottom line. Alcoa has taken a "disciplined execution" approach and which for the most part means sticking to their core competencies and keeping 2-3 profitable portfolios to compensate for non-performers. In recent years Alcoa has managed through the financial crisis by focusing on cash growth and reducing capital spending. I asked Anil if the thought that focus would continue in future years and he indicated he did, as it is good business practice to constantly look at ways to reduce capital expenditures (without interupting R&D growth). One last take away I found fascinating from Alcoa's business model, was their capability to close the accounting month in 8 hours! Anil didn't expand on the process for doing so (as I'm sure it's proprietary!), but an 8 hour accounting close is unheard of; most companies close over 3-4 business days. I am very curious as to the details of how Alcoa was able to achieve an 8 hour close and would like to contact Anil in the future to see if he is willing to share Alcoa's strategy.

As for Alcoa's future international growth, Anil indicated the company sees growth opportunities in both India and Vietnam. Actually, Alcoa is currently performing business in every major country except India, which I find to be quite an accomplishment. Alcoa is also looking at mega trends as part of their growth opportunities and see urbanization and climate change as areas for growth.

Last, but definitely not least, Anil talked to us about his experiences as a global manager and what it was like for him coming to Hong Kong from the US. Much of what Anil discussed, was similar to what we learned in Dr. French's Oganizational Behavior class as well as Dr. Gnyawali's Global Strategic Management class. In both courses we discussed the importance of global managers adapting to local cultural norms. Anil explained that to be successful in a foreign country, you must have an open mind and be willing to adapt to the culture you are in. He explained for example, the work hours in Hong Kong differ from the US in that employees come to work in the late morning (9-10am) and take a 2 hour lunch around 1pm, then come back and work until midnight. Anil believes this is because the living situations also differ in that the people in Hong Kong live in smaller apartments with several family members, so therefore they spend a lot of time outside of the house. Anil also explained that as a global manger he had to take on the customs of his Hong Kong employees. During the Chinese New Year he was expected to give each employee a red envelope with a small gift of money.

Mr. Anil Goada with Team 3

After the meeting, Alcoa hosted lunch for us at Zen restaurant which was a short walk from the Alcoa office. At Zen we enjoyed a traditional Chinese Dim Sum lunch which included a variety of foods: shrimp & pork dumplings, BBQ pork dumplings, spring rolls, spinach with garlic, fried rice, and fried noodles. I tried just about everything but my favorite dishes were the spring rolls and the spinach! Soft drinks were included with our lunch, however several of us enjoyed the traditional hot tea offered with Dim Sum. It was fun watching everyone try to eat with chopsticks...most of us did pretty well!

Zen - Our first Dim Sum lunch

Hong Kong Stock Exchange Visit

During our visit at the Hong Kong Stock Exchange (HKE) we were given a presentation and tour by Mr. Eddy Lam, Senior Manager, Corporate Communications Department. Mr. Lam's presentation gave a 20 minute history of the HKE which explained how the HKE changed over time as Hong Kong changed from Brittish control to Chinese control. After the presentation, Eddy gave us a breif tour of the HKE. The HKE was not what I expected it to be. I was surpised to see the floor empty and expected it to be very busy like the NY Stock Exchange. During the tour Eddy explained that most of the trading was done electronically, however some traders were still on the floor and did business the "old fashioned way". Another noticable difference between the NY Stock Exchange and HKE were the color codings. In Hong Kong and China, red is a positive color, so at the HKE positive numbers were coded red and negative numbers are coded green.

View of the trading floor

Me posing as a trader

Evening walking around the Promenade and Temple Street Night Market

We had a free evening so a few of us took a walk around the Kowloon shopping district, the Promenade on the Harbour, and the Avenue of Stars. During our walk we I noticed how fast the locals move, there are a lot of people moving quickly so if you don't keep up you might get lost!

Shopping district in Kowloon

View of Central from the Promenade

Avenue of Stars - Jackie Chan hand prints

After the walk around the harbour, we went down to the Temple Street Night Market and found loads of things for sale by various street vendors. We were approached by just about every vendor who wanted us to buy anything from chopsticks, chess sets, DVDs, cell phone accessories, toys, and even dog clothes! Murray quickly figured out how to negotiate between vendors and was able to get a great price on a chess set for his son.

"Toto" modeling the clothes for sale at the market