New Technologies Nurture New Markets

W. R. Grace & Co., founded in 1854, has been noted for its world leading technology in specialty chemicals and materials. Grace's cement additives and concrete admixtures have major shares in the markets of North America and Europe, according to Gui. However, in the early 1990s, the two products were still new for the Chinese market.

Grace China was the first company to introduce concrete admixture into China. This chemical is added to concrete to improve its properties, enhancing its strength and making it flow more smoothly. It is now widely used in many big construction projects in China, including airports, railways, subways and nuclear power plants.

As China began to pay more attention to saving energy, Grace's cement additives found a market. Using additives in cement production saves energy and is more environmentally-friendly. "It usually requires 40 kWh to produce a ton of cement, and a ton of carbon dioxide is emitted. When cement additives are used in the production, only 36 kWh is required, and there are less carbon dioxide emissions," Gui explained. The energy savings reduce costs, so the appeal of this product to those in the construction industry is huge.

Although Grace's construction products have long enjoyed success and earned an excellent reputation in the developed world, it experienced a hard time entering the Chinese market. "One difficulty is convincing Chinese people to try our products," Kenny said. "We don't sell iPads, we don't sell telephones. We sell chemicals. It is difficult when they don't know you, and even harder to convince them that you are a trailblazer."

Before the 1990s, China's cement producers had never used liquid cement additives, whereas in the developed world the use rate had reached 90 to 95 percent. Starting from zero, around 65 percent of China's 2 billion ton cement output is now made with cement additives.

Faced with fierce competition, Grace China has never resorted to competing through low prices, but rather it relies on its reputation for producing consistently high quality products. "Number one is we have technical advantage in quality products," Kenny said proudly about the chances of Grace in China.

The Rise of Local Talent

"I'm an American, but I hope the next president of Grace China will be Chinese. Many presidents of Grace's overseas companies are local countrymen," Kenny told China Today.

As a transnational corporation, Grace prefers employing locals for managerial posts. However, Kenny pointed out, when they first entered China, they found it difficult to find locals to take on these positions, as at the time China lacked managerial talent and many foreign companies were also seeking local managers. "We had expatriate people setting up the plant, they trained the local people and then went home," Kenny recalled.

Anderson Gui has been working for transnational corporations in China for 15 years. He saw that localization of transnational corporations in China was a gradual process, with top managers in these firms changing from Europeans or Americans to Southeast Asians, and then finally to Chinese.

In a sense, the localization process reflects the growth of local markets and talent. In the past, transnational corporations rarely approached China as an independent region in their global operations and it was usually incorporated into the Asia-Pacific Region with headquarters located in Singapore, Hong Kong or Taiwan. However, now most of these companies locate their Asia-Pacific Region headquarters in China's mainland or manage it as a separate region.

"The rise of local senior managers is not only due to the increasing importance of the Chinese market, which makes local experience more valuable, but also to the great improvement in local employees' competitiveness in international operations," Gui said.

Currently, as more and more domestic enterprises are able to provide competitive salaries for their employees, the salary packages offered by foreign firms are losing their appeal. "Currently, many young people choose foreign companies because they think these companies can provide them with a better platform to advance their career," Gui indicated.

Driven by the changing domestic environment, many transnational corporations have taken steps to change their style of managing human resources, trying to provide a better working environment and prospects for local employees. "What's important for us is to be a good place to work and to be a place where people can grow. I think we can form a win-win relationship. I hope we are providing a great place for young people to grow and learn," Kenny said.

Since China's first law on foreign investment, the Law of Chinese-Foreign Equity Joint Ventures, was passed in 1979, China has been relaxing its policies on foreign investment and trade and has lifted many restrictions on foreign products entering the Chinese market.

"When I first came to China, foreign enterprises in China were not allowed to trade, buy products from outside the country or import finished products to China. That has changed. We can now bring products from all over the world to Chinese clients. That helps, because our customers want our products that have not been made in China yet. This will help our growth greatly in the next five years," Kenny said.

Kenny is quite confident in the future of Grace China, "I wish I could be here in 30 years to see how China will change and how far we'll go," Kenny joked, telling us that Grace China is always looking for business opportunities in China, whether the products are for domestic market and or for export.