Developing an agent network for dairy products in Africa

Part of my mandate for Lactopur, Inc. a small but well known Canadian dairy trading house, is to develop a network of representative agents in Africa. Finding a dairy rep requires the following:

- a trust worthy person
- good work ethics
- knowledgeable about the industry

It is possible to fulfill two out of three requirement, but it is difficult to fill all three of them.

However, our knowledge of the industry in this region of the world, the Canadian Embassies' trade commissioners and other personal contacts have yielded a few leads that we are pursuing.

In West and Central Africa it is possible to have an agent for a whole region, however, as we are moving towards North Africa, it is more difficult, due to irreconcilable cultural differences. Thus, one agent per country becomes a necessity, which is fine, because the markets are larger and more sophisticated.

On the Eastern coast it is more difficult to sell because they can buy from Europe, Australia and New Zealand for historic and cultural reasons, but the Latin American prodcts are starting to make an inroad in these teritories as well, especially due to the push of traders like Lactopur.

If you need an agent in Africa for the food industry:
- Make sure he/she respects the three requirements mentioned above
- Make sure you work hand in hand with the Embassies
- Understand the requirements for each market - make sure your agent is accepted culturally in these other countries
- Assess the size of the market before assigning it to one agent in order to make sure whether it can be one single territory or whether it has to be part of a composed teritory. If culturally it cannot be part of a composed teritory and it is not big enough, just serve it by yourself, without an agent.
- Make sure you have an inside man/woman, who can decipher the business culture and give you access to the business and political leaders
- Make sure your margins are well padded

communologi

Campus Abroad China - Part I

Hello everyone,

We are presently in Yichang, in the belly of the Chinese Chicken (central China), where the largest hydroelectric dam in the world has just been built. This engineering feat very much symbolizes the whole of China, of enourmous proportions, clockwork precision but tarnished appearance.

From the beginning of the trip so many things have happened, and I will try to give a swift account, which will be very poor however without the pictures that would normally accompany it.

June 17
Despite a botched departure by American Airlines, we made it in perfect working condition to Beijing, after testing the high-tech Japanese bathrooms in Tokyo.
June 18
Arrived in Beijing on the evening of the 18th, and we had steamed bread stuffed with meat as well as rediculously cheap beers (which will be a recurring theme througout the trip) at a local dive. Welcome to China!
June 19
Chinese breakfast is bigger and spicier than the American one!
We litterally climbed the Great Wall of China, as it is steep and rugged on top. Despite the heat, the sweat and the fatigue, CHinese people loevd taking pictures with us (especially Nick, as they thought he was Keanu Reeves).
Back at the guesthouse, I tried to exchange some USD and it took... 40 minutes! I will apply to the Guiness book of records for the longest exchange transaction ever!
Walking around the streets of Bei Jing, a few of us represented Canada in a street ping-pong competition.
After a ridiculous amount of food, we went to the Ho-Hai, a charming stretch around a lake filled with bars and restaurants.
June 20
Visited the state owned Bei Jing Electric Motor Company, our first contact with the Business world. They were very impressed with the amount and the quality of the questinos we asked... we passed the first test of not making a Chinese person loose face!
Then we had a taste of Chinese dissident culture in district 798, where art pieces of all kinds testify to the level of oppression experienced by the people - very underground until recently, but now a booming part of town.
June 21
Another day of cultural (re) education, visiting the fobidden palace, Bei-Hai park and finally ended up on Sanlitun in the embassy district. Half the group wanted western food, the other half wanted Chinese food, and in an effort worthy of the Olympic spirit, we met in the middle and went to an Egyptian restaurant!
At night some of us ate royally in a local dive and had enlightening discussions about evolutionnary psychology and gay monkeys.
June 22
Woke up early and did tai-chi in the park. It's not that easy...
Then we visited the SUmmer Palace, which has beautiful architecture and is even more impressive than the forbidden city. We dicided that we want our houses to have pavillions too and we agreed on the name of at least one of them: the Pavillion of Eternal Lavatory.
In the afternoon we had a great presentation by Julien Mazloum, product development director in a western company building infrared saunas. We learned a lot about the "dos and don'ts" for a western company trying to set up shop in China.
Then we went to celebrate St. Jean Baptiste with the Bei Jing Quebec community.
June 23
Meeting with a Western law firm, Blakes. Presentation by Anie Lagacee gave us yet another perspective on business risk in China.
In the afternoon we had a presentation by Olivier Rochefort from Radisson SAS about the hotel industry in China.
At night a couple of us went to meet Ray Plummer (we met him at the St Jean celebration). He is from New Brunswick and has been in CHina for the opast 13 years working for a construction project management company. An incredible guy with many stories from accross Asia, he introduced us to Bei Jing duck and Chinese white alcohol while providing us with yet another perspective on Chinese business and culture in general.
June 24
Personal project day: visiting the Hu-Tongs, ancient neighborhoods around the forbidden palace. Discovered many things about how the Chinese live and tried to insert ourselves into the beat, quite successfully I might add. Learned a lot about ancient Chinese architecture as well and how it eveloved over the years.
June 25
Flew to Yichang and set up HQs in the China Power Corp guesthouse. Went out and saw people dancing and playing all kinds of sports (including a Chinese version of the hacky-sack).
June 26
Presentation by the China YangZe Power Corp (CYPC) and visit of the Three Gorges Dam. We had access to restricted areas and saw the control room of the dam - very impressive.
This being another state owned corporation, we had some familiarity with the process, however it was a lot more official and structured.
At night we wondered the streets of Yichang and ended up in a local dive drinking 50 cent beers and talking about past international experiences.
June 27
Leaving for Shanghai!

This short overview cannot express the breadth of the experience, but it will satissfy at least the curiosity about the chronology of events. for some pictures please go to Patrick's blog at http://patrick.wfp.ca/.

Cheers everyone!

George

News Flash - International Food Prices Increase Affect China

"Le Devoir" had a small but significant article in its April 17th, 2008 issue in the Economy section, about how the increase in food prices worldwide affects China.

At the end of the first trimester, food prices in China increased by 21% from the same period last year, reported the Chinese National Statistics Bureau (NSB).

The (NSB) representative, Li Xiaochao said that "since last year, food has been the main factor of inflation, and it remains this year as well". Between January and March 2008, the CPI has increased by 8% over the same period last year, however if the food items are removed, then the increase is only 1.2%. This problem has been worsened by the increase in demand for biofuels, which leads to a transition from traditional crops like wheat towards corn because of higher sales prices.

This is a serious issue in developing countries like China, where 1/3 to 1/2 of the family revenue goes towards the purchase of food (the proportion is largest in the poor rural regions). The Chinese government is dreading social unrest caused by a food shortage, but until now nothing but the typical party rhetoric calling for increased productivity and production in the agriculture sector seems to have been accomplished.

A hungry China would be a terrible thing, with the potential to ignite a world war. The World Bank and the IMF are well aware and on Sunday they called for an urgent intervention. It remains to be seen what this intervention will be...

Chinese Government Structure

I am quite convinced that most people are wondering: what is the structure of the Chinese government? The "dragon" is large and quite complex, so I tried to simplify it a bit for us, Westerners, and our limited capacity of understanding complex administrative structures.

The first flow chart explains the administrative structure of the Chinese government and the different government departments, institutions and agencies needed in order to run this large "enterprise" called China:


The following chart shows the administrative structure of the regional administrative bodies in China:


I hope this simple map will make it easier to navigate the vastly complex Chinese governmental departments and agencies landscape and reduce the personal "institutional void" for each and one of us.

The next post will bring some clarity to Mao's life and role in China's evolution from Empire to Communist Super Power.

The Three Gorges Dam

When speaking bout the size of China, one cannot ignore the newest engineering feat that's being built right now: The Three Gorges Dam. Here are some figures that provide a vision of the sheer size of this project, courtesy of Wikipedia (with all the caveats that come with it). I would like to encourage people who have better or more precise information to contribute to the posts.

The total electric generating capacity of the dam will reach 22,500 megawatts in 2011, at which point it will be the largest hydro-electric power station in the world by capacity. The dam wall is made of concrete and is about 2,309 metres (7,575 ft) long, and 185 metres (607 ft) high. The wall is 115 metres (377.3 ft) wide on the bottom and 40 metres (131.2 ft) wide on top. The project used 27,200,000 cubic metres (35,600,000 cu yd) of concrete, 463,000 metric tons of steel, enough to build 63 Eiffel Towers, and moved about 10,260,000 cubic metres (13,400,000 cu yd) of earth.

The reservoir created by the Three Gorges Dam exceeds 660 kilometres (410 mi) in length and 1.12 kilometres (0.70 mi) in width on average, and contains 39,300,000,000 cubic metres (9.43 cu mi) of water, when the water level is at 175 metres (574 ft). The dam will reach its maximum capacity by the end of 2008.

When finished, the project will have cost no more than 180 billion yuan, over 20 billion yuan less than the initial estimated budget (a public engineering project that end up under-budget... that is a great feat in itself!) of 203.9 billion yuan, just under 30 billion USD. This calculation accounts for the effect of inflation, and the lower costs are attributed to a low inflation rate in recent years. It is estimated that the cost of construction will be recovered when the dam generates 1000 TWh of the electricity, which will be sold at the price of 250 billion yuan. This will take 10 more years after the dam starts full operation.

Sources for funding include the Three Gorges Dam Construction Fund, revenue from Gezhouba Dam, policy loans from the China Development Bank, loans from domestic and foreign commercial banks, corporate bonds, and revenue from Three Gorges Dam before and after it is fully operational, with additional charges for electricity contributing to the Three Gorges Construction Fund. The additional charges are as follows: Every province receiving power from the Three Gorges Dam has to pay an additional charge of ¥7.00 per MWh. Provinces that will not receive power from the Three Gorges Dam have to pay an additional charge of ¥4.00 per MWh. Tibet does not have to pay any additional money... I am sure they are thrilled about this.

The Campus Abroad delegation will visit the Three Gorges Dam between June 25 and June 27 of 2008. We will be accompanied by top management, a favor due to the close links between HEC Montreal and the Three Gorges Dam corporation: HEC Montreal provides Management Training to their top management.

Introducing China: It's Big... really Big!

Here are some numbers that will give you an idea of how Big China really is, in every sense of the word (these numbers are taken from Knowledge News, a very interesting publication providing general knowledge to the North Americans who actually care about this kind of stuff):

"Big Geographic Numbers

3.7 million – China's total area, in square miles (9.6 million sq km). Only Russia and Canada are significantly larger. China is about the same size as the United States. Whether it's slightly larger or slightly smaller depends on whether you count certain disputed territories.

14 – Number of countries that border on China. China's longest borders are with Mongolia, Russia, and India. Each is more than 2,000 miles (3,200 km) long.

Big Population Numbers

1.3 billion – China's total population. That's more than four times as many people as live in the United States, and about a fifth of the people on Earth. India is the only other nation with more than a billion people, and it still has 200 million fewer than China.

33 – Number of top-level administrative divisions in China, including 22 provinces, 4 municipalities, 5 autonomous regions (including Tibet), and 2 special administrative regions (Hong Kong and Macau). Each of the eight most populous provinces has at least 64 million people--more than Britain, France, or Italy. If any of those provinces were an independent nation, it would rank among the world's 20 most populous.

10 million – Population of Shanghai, China's largest city. Beijing, the capital, is home to about 7.5 million people, and Hong Kong to another 7 million. Since the 1950s, China has urbanized rapidly, but most of the people--around 60 percent--still live in rural areas.

Big Economic Numbers

7 trillion - China's gross domestic product (GDP), in U.S. dollars, adjusted for purchasing power parity (PPP). That's second only to the United States, whose GDP (PPP) is nearly $14 trillion. Basically, a nation's GDP is the value of all the goods and services it produces in a year. Economists adjust GDP for purchasing power parity to account for the fact that a dollar buys more in some places than it does in others.

Tenfold – Increase in China's GDP since 1978, when the communist regime opened up to foreign investment and began implementing market-based reforms.

53 – Percentage of China's population that lived in poverty in 1981, according to the World Bank. By 2001, the number had fallen to 8 percent. Of course, given China's size, that still amounts to more than 100 million people.

59 billion – Amount China says it will spend on its military in 2008, in U.S. dollars. The Pentagon says China's actual military expenditures will be much higher--perhaps more than twice that much. But that's still far less than the $583 billion the U.S. military has budgeted for 2008." by Steve Sampson

Of course, we will also have to mention the Chinese Wall, the only human built structure visible from space, the Grand Canal as well as the Three Gorges Dam that spans the Yangtze River in Sandouping, Yichang, Hubei. (More information about the dam will be provided in the next blog... )

It is for good reason that China has been labeled "the sleeping Dragon". And guess what: it's not sleeping anymore!

China series

Stay tuned for a series of articles on China, in preparation of the HEC Montreal MBA Campus Abroad experience...