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Win-win for Chinese & French Enterprises

Volume 3, 2016

 

The stop in Paris, held at the Université Paris Dauphine on May 25, was a fitting end to the 2nd CEIBS Europe Forum with two case studies that drove home the point of just how much can be achieved through collaboration. Chairman of Cathay Capital Cai Mingpo (EMBA 2004, CEO 2009) and Chairman & CEO of Biostime Luo Fei (EMBA 2006) spoke about their inspirational entrepreneurial experiences around the theme of “Business Opportunities in China and France: Win-Win Collaboration”. Cai Mingpo, the master of a €1.3-billion fund, has humble roots in a fishing village in Fujian. Luo Fei’s Biostime is the first Chinese company in history to acquire a French cooperative. How did Luo break through the cultural and legal barriers encountered throughout the process? “Because I knew exactly where we were going, so I was determined, fearing nothing,” he said. Here are excerpts from their speeches:

 

Cai Mingpo: Good People Can Turn Hell into Heaven

“I was born in a fishing village in Fujian and our culture can be summed up in the following words: ‘When you enjoy fruit, do not forget those who planted the tree’. Twenty-seven years ago I came to France; I did not know even a word of French. I first got to Orleans, where I learned French, and later I entered EMLYON Business School. After graduation, I joined Groupe SEB (a French manufacturer). I am what I am today, because of the help many people gave me. When I was 24, SEB sent me back to China, and I got a lot of sales for its products. Three years later, I decided to start my own business, and went back to Orleans. At the time I went into French villages to sell tombstones, and I learned a lot from the business. The most important thing is, if you have good products, and you are honest, your business will grow.

I can say France gave me everything, and I feel proud of my origins here.

I went back to Shanghai for my CEIBS EMBA studies in 2004, and prepared to create a fund with a French partner. Cathay Capital (France) was formally launched in 2007, with €70 million, which was too enormous for me at the time. Caisse des dépôts et consignations (CDC, Deposits and Consignments Fund) gave us a lot of support then, because they thought Cathay’s strategy was correct. We would help French companies to start business in China, and Chinese companies in France, and we would be facilitating cultural communication. We would not only do business, but also contribute to the economies of both countries, and only in doing so could we earn their trust and create a win-win situation.

Now we have €1.3 billion in our fund, and we have an innovation fund of €250 million, a very lucrative fund for small enterprises, and we established a fund of €500 million for medium-sized enterprises in 2014. Our partner in China is the China Development Bank (CDB), and ours is the foreign fund receiving the largest investment from the NDB. We have over 50 employees from China, France, Germany and the US, we have made investments in nearly 60 enterprises, among which are French and Chinese companies. Their total annual turnover reaches €5 billion.

We have transactions nearly every week. We must sell shares, and we often make acquisitions. Often I stay the first two weeks in the US, the third in China, and the fourth in France. I’ve been repeating that pattern a lot, and I have to have the three countries’ maps with me all the time.

 We have over 50 employees, so how can we get them to work in sync? To accomplish this I introduced the values of a Fujian fishing village. Fujian people strongly believe that ‘fraternity prevails’, that there is friendship and amity between people after all the gains and losses. In my organisation, people think it is our common effort even when I do only 1% of the work and they get the other 99% done. We have a round structure, and you get to be at the centre wherever you want. There are no fixed central points, and no headquarters. We span three continents, and it won’t do to have a hierarchy. We have no conflicts over power and self-interest. We just hold good people together, and as long as they are together, hell can be turned into heaven. On the other hand, if you have bad people together, you’ll have hell even if you are in heaven.”

 

Luo Fei: Resources, Technology and Market

“I’ve been working with French companies for 16 years. In 2000, when I first came to Paris, getting a visa was still very difficult, but now I have got my five-year visa, and can come and go as many times as I wish. I founded Biostime in 1999 to establish my own brand, and to help more people in need. At the time I found there was the issue of antibiotic abuse in China, which particularly affected children. I majored in bio-engineering, and I know probiotics can help children. So I collaborated with LALLEMAND SAS, using our brand in China to sell their products.

Then, probiotics for children was a brand-new concept in China. We went into the market and many moms were shocked at the name. They would say things like, ‘are you telling me to feed germs to my baby?’ We benefited from France’s premium biotechnology, the products had great features, and we created a market in innovative ways. Today we still hold 80% of the market share in China for this kind of product. All our probiotics come from French companies, and so we are contributing to the French economy as well.

In 2008, when we were considering how our company was to grow, we decided to produce infant milk powder. At that time such products had been highly standardised in China, with everybody producing the same product, at the same price. We thought that we must create new needs. People do not naturally need milk powder; they can drink human milk. So, when you want to produce infant milk powder, you have to set the quality standard as near to that of human milk as possible. We thought about developing better products to meet this need. So I worked with a French company on this project, focusing our efforts on the development of premium infant milk powder. When our product was released, it was priced twice as much as ordinary products, but it helped the assimilation of infants, and significantly lowered their rates of constipation.

I always believe: the market is always there. It’s just how you develop and satisfy needs.

Eventually we decided to invest in a French company, Isigny Sainte Mere, for our premium products. At the time, many people asked me why we invested in Isigny, and my answer was: because we needed resources. Normandy has a very good environment, good cows producing high-quality milk, and they have good technology accumulated over the years in producing infant milk powder. It’s their ‘resources + technology’ that we craved; meanwhile we have huge market demand in China. So, we call this pattern ‘RTM’: Resources, Technology, and Market.

 Both sides set goals, things we must do, and must achieve through any possible means. During the acquisition process, we solved many legal problems. For example, according to EU law, I could not become board member of the company, because I was not an EU resident, but this was hardly acceptable to a founder of a company. But later we found a way out. We arranged for another member of the company to be a board member, and invite me to make a guest appearance at every board meeting. The problem was solved in this way. So I think the important thing behind any collaboration is to set goals and achieve them.”