Roland Berger - Think-Act - Growth - # 14 2009

ROLAND BERGER STRATEGY CONSULTANTS
Jrg Wolle
assists companies
in expanding in
and to Asia
Franois-Henri
Pinault
calls for a new
view of luxury
The global magazine for decision-makers
Together en route
to growth
Why the world economy needs
both a strong North America
and a strong China
Will a cuddle culture succeed in the crisis?

The scramble for bilateral trade agreements in Washington.
Shaking hands suffices in Arab family businesses.
Issue 14
Contributors
Luis Atienza Serna
Executive President and Chief Executive Officer of Red Elctrica de Espana, Spain
Dirk Beeuwsaert
Chief Executive Officer at GDF SUEZ Energy International, Belgium
Dr. Wulf H. Bernotat
Chief Executive Officer of E.ON AG, Germany
Anatoly Chubais
Chief Executive Officer at ROA UES of Russia
Prof. Dr. Henning Kagermann
Co-Chief Executive Officer of SAP AG, Germany
Rafael Miranda Robredo
Chief Executive Officer of ENDESA, Spain
Dr. Rudolf Schulten
Chief Executive Officer of MVV Energie AG,
Designated Chief Financial Officer of EnBW AG, Germany
Prof. Dr. Burkhard Schwenker
Chief Executive Officer of Roland Berger Strategy Consultants, Germany
Prof. Dr. Fritz Vahrenholt
Chief Executive Officer of RWE Innogy GmbH, Germany
HANDBOOK UTILITY
MANAGEMENT
Andreas Bausch
Friedrich Schiller University of Jena and Jacobs University
Bremen, Germany
Burkhard Schwenker
Roland Berger Strategy Consultants GmbH, Hamburg,
Germany (Eds.)
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first views f
The world economy apparently has weathered the

worst, and 2010 could be another year of growth. Nevertheless,
the upswing will depend greatly on how the two global growth
drivers China and the US are faringand thus their impact on
the prevailing mood in other important economies. For our
dossier, we therefore went in search of the green shoots in
both countries, which have been the focus of much debate. And
we addressed the question of how Europe can turn the tailwind
of a strong business cycle into sustainable growth.
Regardless of how quickly the upswing arrives, the apocalypse
still expected by many commentators in early 2009 failed to
materialize. Indeed, it now even appears questionable whether
the economic and financial crisis will fundamentally impact
the principles of capitalism. Our columnistsone a confirmed
free-market advocate, the other an ardent liberalboth agree:
Our economic system will remain the way it is.
Still, I am certain that the recent crisis has raised many new questions for business leaders.
We need a new understanding of successful business management, we require new instruments
and, sometimes, we are also in need of more practice. In our report, we present a rather
unconventional place for managers to perfect their leadership skills: a conductors podium.
On that note, I wish you an inspiring and cheerful read.
Dr. Burkhard Schwenker

CEO Roland Berger Strategy Consultants
p contents
think:act is published in three languages (English, German and Chinese)
Virtuosos of management: In their quest for inspiration, leaders
Gary Locke is one of the most central decision-makers in Barack
have discovered the world of conducting. And indeed, the art of those
maestros offers more than a few lessons to executives. Page 48
Obamas administration. Diplomats from around the world are competing for his scarce time slots. A report from Washington. Page 38
Unconventional design ideas for social problems were developed

by the NGO project Architecture for Humanity. We present the
concept and other innovative ideas in our photo gallery. Page 24
Shopping fever: Chinas consumers are quite attracted to brands.

There are significant variances between different urban centers and
societal backgrounds, however. A bulletin from Shanghai. Page 32
contents f
food for thought

6 Green growth market
The world ties up stimulus packageswhich props eco industries.
8 True luxury, redefined
Why PPR believes in sustainability
as the mega brand value
10 The myth of a changing world
The economic crisis will change
capitalismor perhaps it wont
after all? A debate.
dossier
industry report
14 The complex art of curves

as seen by Darren Diss
42 Future markets
Bridges made of plastic,
silk sans spiders
16 Europe: fair chances for

sustainable growth
How quickly will the global
economy recover? An essay.
20 Performance West
Three US companies emerging
from the crisis invigorated
22 Performance East
Successful businesses from
China on the path of growth
24 Images of reinvention
Eight exciting projects in the
United States that show a great
deal of optimistic spirit
32 Brand bias in a Mandarin collar
Study: This is the real driver of
Chinese consumers.

GROWTH LEADERS
WANTED: THE
US AND CHINA
DOSSIER #14
Have we weathered the worst? Increasingly,
certain factors seem to indicate this trend. A
stable upswing requires drivers, however, which
this dossier is looking forespecially in the US
and China. The end of the crisis wont draw near
until these countries, together with Russia, once
again become the driving forces powering the
world economy. We show that chances are actually quite good and offer some success stories.
36 Quo vadis, US?

Essay: Why a strong China
needs a solid United States
38 More than dapper dinner talk
Report on the new world of
Washington diplomacy
44 Asia remains a growth driver

An interview with Jrg Wolle,
CEO of DKSH
business culture
48 Mind to motion: more passion!
What executives can glean from the
universe of conductors
50 Management in Arabic
The success story of clans
54 Work in progress
A current study identifies the
most important urban areas in
Eastern Europe.
56 Forty years after
Portrait: How consultant Mariano
Frey has managed to merge passion
and discipline for four decades.
regulars
3 First views
58 Service | Credits
The worst is over.

RUPERT MURDOCH, ENTREPRENEUR
The large part of

the worst is not yet
behind us.
DOMINIQUE STRAUSS-KAHN, DIRECTOR, IWF
Dossier
Growth leaders wanted:
the US and China
Starting on page 13
Articles that are marked with this

symbol can also be listened to on our
audio CD (page 59).
p food for thought
WORLD OF NUMBERS
Green growth market

Green tech is booming. According to recent studies by Roland Berger Strategy Consultants,
technologies, services and products for a sustainable resources and energy industry are in
greater demand than ever before. Global megatrends such as explosive population growth
and climate change are driving the green sectors. Many stimulus plans launched to counter
the economic crisis were written in green inkGreen Recovery is the buzzword.
10 %
a year is the predicted growth rate of the

green energy and energy storage sector,
which could reach a volume of 615 billion by the year 2020. Industry is working to improve sustainability in power
generation and reduce carbon dioxide
emissions. It is also reducing the dependence on fossil fuels. The market, which
includes hydroelectric, solar thermal,
photovoltaic, wind and geothermal energies, is characterized by technological
leapswind power plants and solar cells
are becoming more efficient all the time.
32
bil
lio
00
ne
The opportunities are grand. The most recent
studies indicate that the global market for green tech will
reach 3.2 trillion by the year 2020. The markets rapid
growth has made earlier projections obsolete. By 2007, companies that offered new technologies for recycling, water protection, or for the effective use of solar, geothermal or biomass
20
20
energies were earning more than 1.4 trillion worldwide. Green tech
has long become a self-sustaining economic factor that comprises
numerous industry sectors. Industrial construction, mechanical engineering and the electrotechnical industry are just three examples, in addition to the customized services that meet the needs of environmental technologies. This represents a
growth market with secure prospects for the future and well-qualified jobs.
uro
Photovoltaics: a growth industry

Solar cells made of silicon rule the global marketfor the moment. In the long term, however, the material-saving and cost-saving
technologies of thin-film-cell manufacturers will prevail. In this area, companies in the US and China are particularly well-positioned.
The worlds largest solar-cell manufacturers (global market share 2008)
Q-Cells
7.4 %
6
First
Solar
Suntech
Power
Sharp
6.4 %
6.3 %
6.0 %
food for thought f
Grist for the mills of green

The highest global growth rates are predicted for environmentally friendly energies, energy
storage, raw materials and materials efficiency. The circular materials economy will remain
constant; the weaker growth rate of sustainable mobility is a result of the economic crisis.
In contrast, population growth and climate change are driving sustainable water management
and ensuring strong growth. Energy efficiency remains the largest submarket.
The future is sustainable (estimated volume 2020 in billions of euros)

Environmentally friendly
energies/energy storage
10 %
Sustainable
mobility
10 %
30 %
615 billion
3.5 %
25 %
50 billion
estimated growth rate
5%
20 %
300 billion
5
Sustainable
water management
Energy efficiency
5%
6.4 %
10 %
800 billion
23 %
1,000 billion
Ind
Green business is a rebound

factor for the economy
Jap
ia
an
Ch
US
ina
During the crisis, China, India, Japan, the US and many

other countries are setting their hopes on new growth
through green recoveryhelping the economy recover through
environmentally friendly innovations, manufacturing and services. In the
20 economic recovery packages launched around the world since the crisis
struck, approximately $430 billion out of the total $2.8 trillion have earmarked for
programs and projects with an environmental focus. In Germany, it amounts to
13.2 percent of both economic recovery programs, which total 86 billion.
1/2
of all solar cells come from Asia; one-tenth of all

wind power plants are produced in India; the US
is the global leader for energy-efficient white
goods, with a 30 percent market share; Japan is sharply increasing
its photovoltaic capacity. This clearly indicates that the leading
3.8 %
10 %
The environmental market has evolved

into a global growth sector, with
Germany profiting particularly well
from that development. More than one
million people in Germany already
hold jobs in green industries. By 2020,
its market volume should grow to 467
billion and become the most important
economic sector. The targeted reduction
of CO2 emissions by 40 percent by the
year 2020 alone will result in investments of 400 billion.
World market share of Germany 2007
of all patents issued

in 2007 by the European Patent Office in
the area of environmental technology were
granted to German companies, with US
companies receiving 22 percent and Japanese companies 19 percent. German green
tech companies specializing in solar thermal and wind energies have been particularly innovative, submitting over 30 percent
each of the countrys patent applications.
JA Solar
Germany goes green
3%
335 billion
Circular economy
Raw materials and

materials efficiency
industrialized nations of the world have recognized the potential of

green tech. By international standards, German providers are usually too small and not sufficiently focused on global markets. Their
opportunity lies primarily in high-quality products, in technology
leadership, and in systems bundling of products and services.
Kyocera
Yingli
Motech
Sun
Power
Sanyo
3.7 %
3.6 %
3.4 %
3.0 %
2.7 %
7
p food for thought

Most of the time, the best ideas come from the front line.
Franois-Henri Pinault
True luxury, redefined

Sustainability and luxurytwo opposites? Not at all, argues Franois-Henri Pinault, CEO of luxury
goods company PPR. He committed his company to sustainable luxuryand is prepared to prove
the label is authentic. According to Pinault, doing good drives innovation and customer loyalty.
Crises hurt everyone except the luxury

industrythis was true in past economic
downturns. This time though, things are different. The current economic malaise is taking a severe toll on luxury companies. Handbags that cost $1,500 seem to have a legitimacy issue. So what to do? Drop prices or quality? No, says Franois-Henri Pinault, CEO of
PPR, whose luxe labels include Bottega
Veneta, Boucheron and Balenciaga. Instead
he proposes a new understanding of
luxurya richer, more socially conscious one
termed sustainable luxury.
To prove his commitment is genuine, Pinault
must bring two seemingly contradictory
values together. But can this really work?
Pinault is confident, and tours international
conferences with his concept. In his opinion,
it is the only way to deliver the innovative,
high-quality products his customers desire.
CONSUMPTION TODAY IS BASED
ON INDIVIDUAL VALUE DECISIONS
For Pinault the decision goes to the heart of

brand value. He says his customers want
their consumer choices to regain meaning,
and increasingly they want those choices to
be in accordance with their own values.
These values become part of a brand. In contrast, failure to comply with the requirements of sustainable development may
result in a client avoiding a brand. No company can afford to overlook sustainability.
To do so is to neglect brand management.
Nike learned the lesson the hard way when
reports of supply-chain sweatshops made the
swoosh symbol synonymous with worker
8
exploitation. Brands built on social commitment stand to suffer even more from an
insincere claim, as executives at eco-pioneer
The Body Shop found when their natural
ingredients harvested from the rain forest
were reported to cause more harm than good.
But is achieving sustainability too much of a
challenge for certain industries? At first
glance, luxury and sustainability appear to
be polar opposites. Pinault sees pairing the
strange bedfellows as critical to long-term
success. He is not the first to bring together
opposing concerns in the name of sustainability. Pro-hunting lobbies and environmentalists have been joining forces to protect the
habitats that support wild game. Utilities
companies are advising customers on how to
reduce energy usage in order to safeguard
supply. Likewise, to thrive, the luxury industry, arguably associated with waste and selfishness, must protect both natural resources
and the communities that foster highly
skilled craftspeople. Moreover, Pinault
believes the search for innovative solutions
that achieve sustainability will spur innovation. More than any other line of business,
luxury constantly needs to re-invent its
know-how, to avail itself of fresh talents, he
says. Sustainable development is equally
unable to dispense with innovation, if it is to
avoid repeating our past mistakes.
But how much does a serious commitment to
sustainability cost? Based on performance of
sustainable portfolios, investment research
firms such as risklab and Mercer are finding
sound strategies for environmental and
social responsibility may not cost more. Over
the long term, sustainable funds may even
outperform the competition. HewlettPackards commitment to the environment

launched an industry-leading recycling program in the 1980s. Today, the commitment
has spawned a division of revenue-generating products and services designed to make
data centers around the globe greener.
THE BEST IDEAS COME FROM THE
FRONT LINE. PINAULT LOOKS AT HOW
PEOPLE BEHAVE IN HIS STORES
Success of PPRs Stella McCartney brand and

its certified-organic cosmetic line might indicate that sustainable luxury is not only a
viable option, but a profitable one. And an
example of how a sustainable, profitable
strategy grew out of listening to customers
and responding with innovative products.
He adds, Most of the time, the best ideas
come from the front line. On a visit to a Puma
store, I remember a customer who refused to
take the shoe box with her, for ecological reasons. This new attitude has prompted us to
begin exploring ways of reducing the weight
of our packing materials.
The new attitude is behind the new market
segment called Lifestyles of Health and Sustainability (LOHAS). Whether purchasing
luxury products, mobile technology or building supplies, LOHAS consumers prefer
brands they can enjoy with a clear conscience. Most importantly, these customers
are willing and able to pay a premium for
peace of mind.
Integrating CSR criteria creates savings if
achieved upstream rather than at the end of
the process, says Pinault. A policy to lower
food for thought f
Luxury goods CEO Pinault

wants to turn his company
into a role model of sustainability. But does that pay off?
energy consumption in stores, offices, and

storage and logistical facilities reduces the
carbon footprint, but also has the potential
for enormous savings. Space-saving packaging and alternative forms of transportation
are being sought to reduce CO2 emissions,
but may also prove more cost-efficient.
THE LUXURY INDUSTRY RELIES ON
SKILLED CRAFTSPEOPLE. SUSTAINABILITY
IS A WAY OF SECURING SUPPLY HERE
Sustainable practices help retain and motivate a skilled pool of craftspeople. Genuine
luxury must safeguard the skills and the
mastery of craftspeople and their trade
secrets. Without those, it could not exist,
Pinault explains. But like customers, employees have values too. Speaking of both customers and craftspeople, Pinault says, For
several years now I have noticed people are
increasingly sensitive to corporate ethics,
proof that profit alone is not enough.
Of course, responsibility needs an image of
consistency. In this sense, recent events surrounding the financial crisis proved to be a
problem. After hearing of planned layoffs,
angry staff from two Paris stores surrounded
and blocked Pinault in his car. In an era of
blogs and YouTube, anger expressed by a
group of former employees can quickly
spread to the customer base. Pinault now
must balance immediate business needs
with sustainability, while still protecting the
PPR reputation.
Pinault accepts the challenge. Sustainable
luxury can only be achieved in the long term
through patience and perseverance, beginning with the little, sometimes almost invisible things. Sustainable development,
whether pursued for good business or the
greater good, might indeed be the luxury of
the coming years.
p food for thought
You can also listen to this article

on our audio CD (page 59).

The myth
of a
changing
world
In light of the worst economic crisis in almost 80
years, many are predicting
the end of capitalism
as we know it. According to
their theory, an era of a new,
kinder and gentler way of
doing business is dawning.
Yet could a warm and fuzzy
society really be on the horizon? Our authors dont
think so. They both argue
from completely different
perspectivesone from the
far left, and the other from
a liberal positionthat the
change rhetoric is based
on wishful thinking. The
grand new beginning is not
going to happen.
10
Upon examining the current distribution of power, one thing becomes obvious: Capitalism neither can nor will it
change in its essence. It is hardly likely that
it will mutate into a more humane version
of itself because of the current crisis.
Exploitation and class differences constitute its fundamental tenetsand these will
continue to exist.
Yet observers of the political debate might
also turn to face another question: Couldn't
the Left possibly benefit from this crisis?
From a radical leftist perspective, revolutionary change is most likely to succeed in times
of crisis. The First World War was the driving
force behind the Bolshevik Revolution of
We havent seen this much malicious

glee in a long time. Leftist politician
Sahra Wagenknecht knew it all along, and
Social Democrat Franz Mntefering wants
to toss capitalism into the garbage can of
history. Even some creative types and
intellectuals who feasted on the burgeoning economy are rejoicing about the end of
capitalismand have completely forgotten
who they have to thank for their prosperity.
Sawing off the branch that used to offer a
comfortable and cozy home seems to be the
order of the day for many. If we once
looked forward to socialism with a human
face, we certainly arent shedding any tears
today about the demise of predatory capitalism. Such an attitude is understandable
considering the dilettantism and rapacious
1917if only indirectly. World War II preceded the revolution in China and Indias independence. And lets not forget that the 1950s
and 1960s saw a few successful anti-colonial
sieges in Africa and Asia during a century of
revolutions, and directly after the colonial
powers had been weakened.
THE LEFT IS TOO DISORGANIZED
FOR REAL CHANGE
It is not enough to present political change

solely as a reaction to crisis, however. The
Left doesnt necessarily require a crisis to
seize power. And theres no guarantee that
the collapse of a few banks and automakers
greed of some managers, but it certainly

raises the question: What should we have
instead? Does anyone know what the alternative could look like? A return to a barter
economy? Should we do away with money?
Introduce eco-sharia with a ban on charging interest? A planned economy akin to
that in Cuba and North Korea? Or perhaps
the Mugabe model, in which all differences
are canceled out because everyone is suffering equally?
BELIEVING IN THE MAGICAL POWER OF
GOVERNMENT IS AN AUTHORITARIAN REFLEX
Unthinkable options just a year ago, expropriation and nationalization now seem to
be the last resort in crisis management. The
food for thought f
JOHN HUTNYK is the Academic Director

of the Centre for Cultural Studies at
Goldsmiths College, University of London. He
attended Deakin University and the University of Melbourne. Hutnyk has authored a number of books, including The Rumour of Calcutta: Tourism, Charity and the Poverty of Representation (1996), and Bad Marxism: Capitalism and Cultural Studies (2004).
HENRYK M. BRODER is a journalist

and author. He has written for the most influential German-language newspapers and
magazines, including Der Spiegel magazine,
as well as the Berliner Zeitung and
Tagesspiegel daily newspapers. Broder cofounded the Achse des Guten publishers network, is co-editor of The Jewish Calendar, and
has produced and directed several documentary films. He lives in Berlin and Jerusalem.
will result in the development of a less

exploitative capitalist system.
As Marx showed long ago, there are always
people who benefit from bad transactions
and take the place of those who have failed:
Opportunism is an analytical variable that
you shouldnt ignore when analyzing capitalism. This holds true even when being
skeptical about the comparison of the current political predicament to the Great
Depression, which more or less paved the
way for fascism. The situation today is obviously not ripe for a significant surge of fascism. No, the determining factor these days
is the lack of organized progressive groups
capable of using the situation to their advan-
tage. The media and the public are both

astonishingly open to change: A nicer capitalism is an option, discussions abound
about possible measures to combat climate
change, a little less corruption perhaps...But
where is the fighting spirit needed to drive
this prevailing mood beyond a mere rehabilitation of capitalism? The militant Left doesnt seem to be capable of action at the
moment. The parliamentary experiment is
so severely limited by the politics of the yellow press and opinion polls that it cant risk
a single idea. By contrast, the anarchists and
environmentalists on the left are torn
between corporate lobbying and an
alternative lifestyle. They are further
Americans are nationalizing General

Motors; the Germans do the same with Hypo
Real Estate. Of course, it is essentially possible that the government could shoo away
the vultures circling over ailing businesses
its just that no government has ever proven
that it is capable of doing so. However, there
are many examples of government interventions and takeovers that actually accelerated
the demise of infirm patients.
Believing in the magical power of government is an authoritarian reflex, an infantile
reaction to experiencing our own helplessness. Its all the same, whether its a child
losing his bulldozer in the sandbox and
calling for daddy to get his toy back, or a
shareholder who wants Uncle Sam to reimburse him for his losses. Neither of them
wants to give up anything they have. And

the shareholders inner child doesnt comprehend that the economy is a roller coaster that doesnt always go up.
THE CRITICS OF CAPITALISM CELEBRATE

ITS END WITHOUT RECOGNIZING THE ACTUAL
FLAW IN THE SYSTEM
One could also ask whether the attempt to

generate prosperity for everyone really
caused the crash. Just as traffic would be
paralyzed if every driver drove off at the
same time, the capital market would have
to collapse sooner or later after millions of
people were given the opportunity to purchase (or ruin?) property without
actually having funds of their own. The

11
p food for thought
paralyzed by knowing what the

1970s did to the idealism of the 1960s.
For those reasons, the crisis as a supposed
opportunity for comprehensive change will
prove to be an illusion. The intellectual
press naturally pursues discussions on ethical limitations, new democracy, hope, and
Yes we can. But these are all just empty
cliches. Worse: Its about the triumph of second-rate bourgeois politician surrogates.
New media, culture and services are joining
the brutality of armament, auto manufacturing and mining as the most important
profit streams for capital. Both these
streams can be aligned with wage slavery.
Where is the team for this day and age that
Without a Leninist
organization that
is prepared to enforce
real change, there is
no crisis.
John Hutnyk
greed of lenders coalesced with the

naivete of borrowers who hoped
to sell real estate that didnt belong to them
at a profit.
The critics of capitalism who are now celebrating its end tend to overlook the actual
flaw in the system. For example, the fact
that their beloved far-left Oskar Lafontaine
served (or is still serving?) on the supervisory board of Germanys federal reconstruction loan corporation and raised no
objections as the groups credit policy was
approved in committee. In addition, some
state banks were already bankrupt by the
time private institutions started experiencing difficulties. So much for the effectiveness of government control measures. We
can essentially explain the current situation with two fairy tales: The Fisherman and
12
Believing in the
magical power of
government is an
authoritarian reflex,
an infantile reaction
to experiencing our
own helplessness.
Henryk M. Broder
can seize the rudder, and has not already

been compromised by business plans and
prognoses in flow charts?
It would require a Leninist organization that
is prepared to enforce real changea radical
uprooting of all class relationships that form
the foundation of exploitation; all production relationships that enable capital owners
to profit from workers; all social relationships that arise from these production conditions; and all the ideas that justify them.
Without such change, there is no crisis, just a
crisis: a stage for entertaining news. Just
watch: CNN will produce a documentary
film with a styled, clean-shaven moderator.
Business as usual.
His Wife and The Emperor's New Clothes.

If you consider the Marxist theory that all
wealth is congealed human labor, then the
current situation should come as no surprise. We could have known if we had
just wanted to know. If only we had not
believed that greed is good and that our
money could work for us while we were
napping in our easy chairs.
THE CRISIS IS A BREATHER EN ROUTE
TO THE LAND OF MILK AND HONEY
The crisis we are currently experiencing

is not the end of capitalism, but merely a
breather en route to the land of milk and
honey, where effort is not rewarded, but
rather needs are satisfied. We were almost
there. Now the climb begins anew.
DOSSIER #14
GROWTH LEADERS
WANTED: THE
US AND CHINA
Have we weathered the worst? Increasingly,

certain factors seem to indicate this trend. A
stable upswing requires drivers, however, which
this dossier is looking forespecially in the US
and China. The end of the crisis wont draw near
until these countries, together with Russia, once
again become the driving forces powering the
world economy. We show that chances are actually quite good and offer some success stories.
The worst is over.

RUPERT MURDOCH, ENTREPRENEUR
The large part of

the worst is not yet
behind us.
DOMINIQUE STRAUSS-KAHN, DIRECTOR, IWF
D O S S I E R #1 4
14
Growth leaders wanted: the US and China
D O S S I E R #1 4
The complex art of curves

as seen by Darren Diss
L-curve, U-curve, V-curve? The shape of the future global economic recovery
remains entirely uncertain. British illustrator Darren Diss does not hold the definitive answer, either. At least, however, the complexity of the situation is more than
reflected in his work. Thus, it serves as an evocative entry into our dossierand
offers an emotional glimpse into the psychology of the economic rebound.
15
D O S S I E R #14
Courage of conviction:
Europe on the brink of boom
An essay by Burkhard Schwenker

16
THE IMF IS ALREADY PREDICTING a global growth

rate of 3.1 percent for 2010; the German Chamber of
Industry and Commerce (DIHK) just issued a growth
rate forecast of 2 percent for Germany. Allianz even
foresees 2.7 percent, and almost every stock market
has been experiencing a strong upward trend for
months. Is the crisis over? Are we already on the verge
of an upswing again? I dont want to rain on the parade
of optimism, but Im concerned that these growth forecasts dont offer us much to go on. Why? Because even
as late as October 2008, the IMF was still predicting a
growth rate of 3 percent for 2009, which it revised
downward in Januaryonly three months laterto
0.5 percent, and corrected once more in Aprilagain
a mere three months laterto minus 1.3 percent. That
is a spread of at least four percentage pointsand
with regard to the global economy! And it doesnt get
much clearer for 2010: Allianzs optimistic forecast for
Germany of 2.7 percent is a stark contrast to the 0.5
percent prediction offered by the German Institute for
Economic Research (DIW).
That is by no means a critique of those research
institutes, for the situation was so unique that their
complex, quantitative forecasting models simply had
to fail. They couldnt predict the severity of the downturnbut will they be able to correctly predict the
upturn at this moment in time? I think we have to
accept the fact that trends are no longer reliable, that
they can end abruptly or alter their course quickly
and not just since the crisis began, by the way. So we
no longer have any indicators that can give us a clear
direction, and the disconnect between capital markets
and the real economy has obviously grown so wide
that its ability to act as a predictor of economic development is doubtful, to say the least. In addition, it
should not come as a surprise, that there are two convincing arguments (namely, yes and no) on that fundamental economic question: Do we have to expect
high inflation or not?
In my opinion, this renders it necessary for us
to rely far more heavily on fundamental, entrepreneurial developmentand perhaps convictions as well. We
also have to think and work in scenarios that are clearly differentiated. Best and worst case no longer suffice:
We need a variety of visions for the future charting a
range of measures to deal with the situation. Unfortunately, its not enough just to develop scenarios. We
still have to decide which one is the most likelyhaving the courage of your own convictions is yet another
result of the crisis! For me, the trend is clear: My scenario is and remains the V curve. In other words: The
economies in the important industrialized nations will
once more experience significant growth in early 2010!
R OF COURSE CERTAIN CONDITIONS play a role,

and not all are easily foreseeable: How large are the
other risks on the banks balance sheets, will the
phasing out of government intervention succeed, how
high will unemployment rates climb, will we get inflationif it indeed occursunder control, at what level
are oil prices once again detrimental to growth? Yet
the most crucial factor for me and my positive assessment is the development in the US as well as China
and Russia, because the psychological impact of positive signals from these countries can contribute significantly to mobilizing the global economy. And these
signals are positive: Granted, the workings of the US
economy are not exactly transparent, but we can still
determine that skyrocketing unemployment rates are
at least slowing down and industry confidence is on
D O S S I E R #14
the rise again. And Americas economy moves fast, as

my colleagues in the US confirm on a regular basis.
General Motors, for instance, emerged from bankruptcy proceedings after a mere 39 daysthis pit-stopstyle bankruptcy is completely uniqueand many
venerable companies are banking on the potential of
green recovery. You will find a handful of examples
in the dossier of this magazine.
R IN CHINA, INDUSTRIAL PRODUCTION is enjoying

double-digit growth, and private consumption has
remained high. Auto sales, for example, are so
strong that we will likely see an increase of approximately 40 percent this year! Many analysts have
revised their growth projections back up to an
unprecedented 8 percent and morewhen just
a few months ago most shared the opinion that
China would be lucky to reach 6 percent, and
foresaw a political disaster. This positive development is a result of massive interventions in
the domestic market, as well as the steady transition of many state-owned companies. I, for one,
always return from China in an optimistic mood
because the country is actively driving growth with
these measures. One small, but perhaps telling example: While we in Germany apparently didnt even want
to host the World Expo in Hanover, in China it is used
to awaken national pride in the countrys potential.
R AND RUSSIATHE THIRD FACTOR for an

upswing is benefiting from rising oil prices. The government there calculated its budget at a price of $41
a barrel. The difference of about $40 to the value as
of this fall generates room for additional investments
in infrastructure and equipment, which could benefit
17
D O S S I E R #14
primarily German and European exports. Will they use

this maneuvering room? Skepticism is certainly
understandable, but we can also definitely recognize
a growing willingness there. For example, the now visible efforts in restructuring the automotive sector
could also be a positive signal.
The list of good news continues. The IMF and
Asian Development Bank foresee Chinas growth
potential at 9 percent for next year; India will close
out this year with at least 6 percent growth, with next
years rate back up to around 7 percent. To round out
the BRIC countries, Brazils growth forecasts range up
to 5 percent with an investment grade for its credit
rating, if you want to believe Moodys. And Europe?
We have the potential for a swift upswing, and one
clear realization has come out of this crisis: The real
economyin other words, industry, trade and B2B
servicesis taking on a decisive role! In other words:
Industrial expertise ranks highly once more, and
Europe is well-positioned for that. Here industry is
responsible for about 18 percent of value creation
in Germany it is even 24 percent and growingwhile
in the US it amounts to only about 14 percent, and
less than 10 percent in England. Peter Lscher, CEO
of Siemens, is right when he says, After the current
crisis is over, we will certainly see more industrialization rather than less! And its not just our industrial
strength, but above all our ability to connect industry
and services with new products and solutions. The
ideas of the virtual knowledge society have not been
realizedat least not yet. High-quality services dont
pop up just anyplace in the world, but emerge best
around industrial core regions. In other words, here in
Germany and (continental) Europe!
THIS ISNT JUST A NEAT CONCEPTUAL idea: The World
Economic Forums Global Competitiveness Report of

the major industrialized nations highlights our abilities
very clearly. The newest rankings just came out and
confirm our leaddespite the crisis! Germanyrepresenting continental Europeis in first place worldwide
for its unique competitive advantage, which essentially means that we are the best at differentiating ourselves internationally with our products and services.
We came in second place for our innovative capacity,
18
and as such are obviously far better in research and

development than many had believed. We took second
place for the level of our production processeshighquality production is competitive! And we occupy first
place for the quality of our infrastructure. I could run
down the list for Europe overall. In the category of
unique competitive advantage, for example, Europeans
occupied nine of the top ten slotsand the same is
true for production process quality.
So we are receiving signals for an upturn, and
we have the potential means to profit from it quickly.
But having and recognizing the right strengths is still
no guarantee for having the right answer to this decisive question: How can we successfully manage
growth so it is sustainable long-termor least more
sustainable? Aside from the concepts currently under
discussion and the issue of what role international
organizations could play, I see four areas we should
focus on to exploit Europes strengths and convert
them into real economic advantages.
FIRST: We can only succeed in achieving sustainability if we utilize our industrial strengths consistently to effectively generate long-term development.
Climate change is part of that, and above all the question of how we can combine environmental protection
and growth. I think that we are headed down the right
path with green tech, because we can learn today that
environmental protection and conserving scarce
resources can be transformed into growth.
We have conducted a series of studies for the
European environmental ministries and were able to
show that Germany and Europe have accomplished a
lot in this area already, and that European companies
are extremely well-positioned. The high percentage of
funds allotted for green tech, particularly in the economic stimulus packages in the US and China, indicates that the message was received around the
world. These stimulus programs have pumped $430
billion worldwide into environmental projects and subjectsa real surge that will open up new markets for
Europe. Of course, this advances the competition as
well. I am certain, however, that Europe can prevail in
heavier competition, for green tech is a crossover
technology that draws on the electro-technical indus-
try, industrial construction, mechanical engineering

and services. It is based on traditional European
strengthsand once again, this combination of manufacturing and services will make us successful.
SECOND: We dont need an absence or abundance of regulation, but rather smart regulation,
meaning that we must succeed in regulating while at
the same time deregulating where necessary. Not an
easy task for policy-makers, for theres no longer a
direction that is easily communicated. Still, financial
markets require strict regulation, while the real economy urgently needs more freedom to develop its
potential. Here, the G-20 sent positive signals on this
issue in Pittsburghwhile also delivering a declaration
against protectionism and a successful Doha Development Round. There is still a great deal to do in Europe
as well. Our enterprises achieve two-thirds of their revenues here, and that clearly indicates that we need to
drive the integration of markets quickly to create a real
domestic market, one that allows our business to gain
strength at home, in order to be successful abroad.
For that reason, I think it is very good that the EU will
begin developing a new, post-2010 strategy over the
next few months, thus seizing the opportunity of fully
tapping into Europes long-term potential.
THIRD: Investing more in education is probably
the most important condition for long-term growth. The

OECDs criticism of insufficient investment in educationin Germany, for examplewas right on the mark.
I disagree with their call for increasing the numbers of
academics, however, because defending our industrial
strength also creates excellent conditions for welltrained craftsmen and skilled workers. Our completely
unique dual education systemwhich differentiates
between practical and academic education routes
offers the right foundation, and one that we need to
strengthen rather than water down. That is admittedly
a German argument, rather than a European one. But it
proves one thing: In Europe, diversity, and certainly not
international mainstream, contributes to growth!
FOURTH: We need to rethink how we run compa-
nies. As we have experienced, trends are no longer reli-
able. For that reason, we need new instruments and we

have to say goodbye to the paradigm of wanting to
(and being able to!) quantify every plan down to the
last cent. We need more entrepreneurial courage in
decision-making and leadership againand the right
values to convince and enthuse the people within the
company. In this regard, Europe can draw on strengths
that we have neglected up to now or not sufficiently valued: Our long-term orientation, particularly with regard
to employment (short-time employment in Germany is
a prime example), having our companies more firmly
anchored in society, supported by a strong mid-sized
business structure, and our broader understanding of
business success. The fact that the philosophy of Germanys commercial code, which until recently was considered boring and old-fashioned, is once again garnering interest is proof positive of that. The high performance of European companies is the most convincing
piece of evidence, however. We examined the success
patterns of the worlds 3,000 most-successful businesses for the lengthy period of 1998 to 2008, with a
particular focus on Europe, and found impressive
results: The European companies in this top group grew
fastermore than 10 percent per year, compared with
less than 9 percent for the US, and only 3 percent for
the Japaneseand above all more profitable, with a 13
percent CAGR, compared with 7 percent for the others.
Thus, Europe has long stood for profitable growth, and
now we have the opportunity to transform our values
and capabilities into a superior model of European corporate leadership. This will provide a counterpoint to the
American model, which dominated the business world
for decadesand came crashing down in large parts
during the crisis!
D O S S I E R #14
Many venerable
companies are banking
on the potential
of green recovery.
ABOVE ALL, THE CRISIS WAS a shock to the entire
global economy, and it destroyed or at least threatened

vast amounts of wealth that had been earned through
hard work over the years. Yet the crisis also made a lot
of people think, including those engaged in businesses, and prompted the question of the necessary
changes. I am convinced that if Europe uses its
strengths, focusing on supporting and expanding
action in crucial areas, we can generate greater sustainability in the currently burgeoning economic upswing.
19
D O S S I E R #14
Performance West
Three companies that are achieving profitable growth in the USeven during the economic crisis: Audi benefits
from the countrys mood for change, Treehouse from the growing trend toward generic store brands, whereas
GameStop moves ahead of the competition due largely to smart logistics. Three examples for others to heed as well.
AUDI: YES WE CANSELL

An economic crisis often means sparkling water instead of bubbly
wine. Luxury does not belong hereor so one would think. Yet in the
luxury-car market segment, of all things, car manufacturer Audi has
been picking up the pace in recent months in the US. The company with
the four-ring logo snatched away market share from the competition
without massive discounts. In June 2009, Audi reached 9.1. percent,
its second-highest market share in company history, in the import luxury-car segment that it shares with Lexus, BMW, Volvo and Mercedes.
The highest, 9.2 percent, was achieved in April. In 2006, their market
share was still around 6.2 percent. In this difficult market, people consider their decisions carefully and dont automatically purchase the
same thing theyve always bought, states Bradley Stertz, spokesman
for Audi USA. I think thats an advantage for us.
With its clean diesel technology, Audi is also profiting from the
growing environmental awareness in the US. In addition, the company
is also positioning itself as part of the national mood for change evident since the election of President Obama. As one element of its marketing strategy, Audi sponsored news broadcasts on his inauguration.
According to the arrangement, these were largely free of ads. There
was just one ad at the beginning and one at the endfrom Audi. Thus,
change becomes a brand element. And Audi secured itself an advertising spot during the biggest sporting event, the NFL Super Bowl, as
well. Immediately after the football game broadcast, clicks for Audi on
the car shopping Web site Edmunds.com rose by 82 percent.
This advertising offensive costs money, however. Despite the crisis, Audi beefed up its marketing budget by 15 percent in 2009 and the
company is also betting on expansion rather than retreat regarding the
number of new models: By the year 2015, their number of car models
will climb from 26 to 40. That will cost around 2 billion per year. It was
a really big decision to continue investing aggressively in our products,
notes Stertz. So far, this strategy has certainly paid off. The new models
are selling particularly well. The sales numbers for the A5 are climbing
sharply upward and Audi has trouble meeting demand for the Q5, which
20
only hit the US market in February. While Audi USA is investing in market expansion, however, internal cost-saving measures are also relevant. Back in autumn 2007, Volkswagen USAand therefore Audi as
wellunderwent cuts to streamline operations, reducing its employee
numbers by approximately one-fourth. The company also moved its
headquarters from Auburn Hills, a suburb of Detroit, to business-friendly Herndon, Virginia. Whether it was foresight or a happy coincidence
the timing was right in any case. The lean organization certainly helps
during an economic downturn, says Stertz. Of course the company is
not immune to the economic climate. In June, Audi USA saw a drop in
revenue of 16 percent compared with the same period last year. Yet the
competition fared even worse. BMW was down by 28 percent, Lexus by
about 35 percent, and Hondas Acura line sold 34 percent fewer cars.
Audi at the 2009 New York International Auto Show. Their
brand benefits from the mood for change in the US.
D O S S I E R #14
GAMESTOP: SLOWING DOWN MEANS LOSING OUT

The red and white in the logo is reminiscent of a stop sign. Yet
GameStop, the worlds largest video game retailer, shows no signs of
stepping on the brakes. Quite the opposite: As about half of its gross
revenues come from the sale of used games and consoles, the company is profiting from the crisis. When cash is running low, a used, but
tested and repackaged game for $22 is more appealing than the brandnew version for $35. And people who could get a few dollars for their old
games are less likely to leave them gathering dust on the shelf.
GameStop buys used games and consoles, then checks, cleans
and repairs them, and sells the items for about twice the purchasing
price. The system relies on sophisticated logistics: Customers from
more affluent areas tend to purchase and sell their video games more
quickly than customers in a lower income bracket, who in turn are
more inclined to buy previously owned games. GameStop has developed a precise system that gets those used games right onto store
shelves. This keeps inventory low. And when it comes to pricing second-hand and new software, the company has enough experience to
ensure a solid cash flow. That is crucial for expansion. When GameStop
acquired Micromaniaa chain with 322 stores in Francelast year,
the company was able to pay the $580 million from its cash flow in
three months. And although competitors such as Amazon and Toys R
Us plan to step up expansion efforts in the used-game market,
GameStops lead seems to be big enough to avoid those dreaded words
game over anytime soon.
Revenues climbed last year by 24 percent to $8.8 billion, and
GameStop is hoping to gain another 12 percent this year. The company
is betting on the growing popularity of video games: New games like

Guitar Hero, where the player imitates playing original hit songs on the
guitar as accurately as possible, or fitness programs for the Nintendo
Wii console, have made gaming popular far beyond the traditional target group of teenage males. The Entertainment Software Association
reports that 65 percent of American households play video games. The
average age of players is 35 years oldand therefore far removed from
being a teenager anymore.
Fitness in front of the screen is the latest hit.
GameStop profits from the virtual workout trend.
TREEHOUSE FOODS: QUIET WINNER IN THE CRISIS

Generic store brands often lead a shadowy existence: no cheery overachievers to advertise them, no catchy jingles. And yet: They are the
winners of the current crisis. Store brands and no-name items make
up about 20 percent of revenues for major US retailers like Wal-Mart
and Safeway, because shoppers are looking more at price tags than
logos. Sales for generic products in supermarkets have gone up by
13 percent over the last five years, compared to only 7 percent for
brand-name goods.
This trend ought to continuea good thing for Sam Reed, CEO of
Treehouse Foods, Inc. His company produces canned soup, salad
dressings, baby food, pickles and coffee creamer for the generic store
brands of the 25 largest food retailers in the USand is very successful at it. Since its inception in 2005, Treehouse Foods has grown nonstop. In 2008, the company posted revenues of $1.5 billion, and the
share price in the second quarter of 2009 went up by more than
60 percent, compared with the same period in the previous year.
We believe that our prospects for the future are excellent, stated
Reed during the presentation of the companys most recent quarterly
results. Treehouse Foods products are packaged and sold as brands
including Cremora, Natures Goodness and Second Nature.
The crisis has boosted their sales. Yet it does not appear that
Treehouses growth will slow in good times, either, for the company
has consistently expanded its portfolio. One key element of their
growth strategy was six acquisitions over the last three years, which
greatly strengthened the food producers position in the area of salad
dressing and salsa. Treehouse Foods is now represented in 15 different product categories and can provide retailers with an entire assortment. This is particularly advantageous in the fragmented market for
store brands. Another indicator of solid growth: The company is securing the ingredients for its products on international markets with
future-oriented contracts. This allows for the cushioning of fluctuations in prices and currency.
21
D O S S I E R #14
Growth leaders wanted: USA and China
Performance East
A major exporter, China has suffered from the downturn. But the impressive growth is back, supported increasingly
by domestic demand. Here are examples of this resilience: Zhenyuan is thriving on the countrys greening
trend, Uni-Power in the vital small business sector. BBK is bringing the Chinese online with its mobile phones.
ZHENYUAN GROUP: GOING GREEN

Chinas image may be that of a major polluter, and its heavy
reliance on coal-fired power means it is up there with the US as one of
the worlds top producers of carbon dioxide. But the country is also at
the forefront of introducing renewable energy productsand has bold
ambitions to improve its environmental record.
A lot of the impetus is coming from Beijing, but there is also a
host of private companies working in this sector. One of them is
Zhenyuan Group, which since its establishment in 1992 has become
one of the most powerful private companies in Anyang City in Henan
province. The unifying theme of its work is its focus on energy, especially green sources of power, and real estate. The companys goal is to
become a leading green energy company, both at home and abroad.
Green business in China is growing, but competition is intense.
Group chairman Pian Yunlai says acquiring first-mover advantage is
crucial. We develop first, make progress, and then we innovate.
For him, innovation
means combining our traditional regional advantage with
advanced world technologies. It
is constantly changing and
evolving. This can also be said
of his company, which currently
employs more than 1,300 people and has assets of $165 million. Zhenyuans landmark innovations have been in biogas projects, including vehicle fuel and
household gas, which are aimed
Pian Yunlai is extending

the idea of where to
create innovation.
22
at feeding Chinas desire to boost its renewable-energy sector. Environmental protection is a key challenge facing China, especially in areas
such as controlling carbon dioxide emissions. This provides opportunities for producers who can get into the market quickly. Key projects for
Zhenyuan include plans to produce biogas to run automobiles. Its first
plant to produce this fuel begins operation this year and should be running at full industrial capacity by 2012. Another major project in this
vein is the coalbed methane project, which aims to provide compressed
natural gas (CNG) for automobile filling stations in nearby cities.
The key challenge for the company is technology. Compared
with some Western companies, our technologies are less developed,
Pian says. That means we need to introduce breakthrough technology from international markets. But we also need to make adjustments
to accommodate local circumstances. Therefore I think the main challenge is that we need an unconventional business concept to attract
core technology, talents and capital within a short period of time.
He is confident that this challenge can be overcome. Traditional
thinking on innovation has been to focus on European technologies and
the US capital market, but in Asia, we can also learn technologies from
Japan and South Korea, and target the capital market in Hong Kong.
Another element in the success of Zhenyuan: An understanding
of innovation that translates into areas such as safety control, as well
as building a new way to deal with the customer.
All in all, he thinks we are very sensitive to policies and opportunities. During the last seven to eight years, Zhenyuan Group has already
become the leading company in our region. And we enjoy great support
from local government and our customers.
The privatization of state-owned enterprises has led to significant improvement in Chinese business conditions. China has really
opened up to the outside world, and it has introduced some transparent
policies related to this. Previously, China did not know how to reform.
But now, in China, government policies, laws and the other conditions
have improved greatly.
Growth leaders wanted: USA and china
D O S S I E R #14
UNI-POWER GROUP: PROFITABLE GROWTH ENGINE

Zhejiang in eastern China is one of the provinces that has proven
an engine for the countrys economic growth in recent years. Much of
that strength has been built on Zhejiangs legions of small and mediumsized enterprises (SMEs). SMEs need financing, both as start-ups or to
expand. This is what the success of the Uni-Power Group (UPG) is based
on. Uni-Power is the leading guaranty company in Zhejiang. UPG tries to
offer a better financing strategy and help more enterprises realize their
potential. Chen Hangsheng, UPG chief executive, says, We position our
company to solve the financial difficulties of SMEs. We are very much
willing to develop together with those companies, and solving their
financial issues together is a starting point. In December last year, UPG
obtained a $1 million investment from SVB Financial Group banking unit
Silicon Valley Bank, as well as signing a deal to cooperate on setting up
a finance company providing loans to SMEs.
Of course, this is not an easy time for SMEs in China. The country
is awash in funding from the four trillion yuan, but much of that has
gone into the public sector. However, this also means that there are
opportunities for companies such as UPG, which can move in with guaranty funding for SMEs where the banks are more hesitant. From this
perspective, the crisis is actually an opportunity. Because of this financial crisis, we have gotten more customers and more business. Thats
why I say the current situation is a very rare and positive opportunity
for our company. The crisis will bring us more benefits and advantages.
From a broader point of view, Chen thinks the recent tough times
benefit corporate culture in China. In the past, some companies were
reluctant to change. So their problems were always going to be exposed
at some point. This financial crisis has forced them to look their business in the face, now they must change with the times. Chen argues
that there are clearly small companies in China that recognized early
on their need for innovation and change, and made a conscious decision to change. We want to cooperate with this kind of company.
Chen Hangsheng and

his company are drivers
of the Chinese boom.
BBK: CONNECTING THE CHINESE

China is going online: at last count, there were over 300 million
webizens. And more and more Chinese are using their mobile phones
to get connected. Its a market that every telecoms firm wants a piece
of, but strict regulatory controls make it a tough market to break into.
BBK is in. Ask young Chinese people what BBK is, and everyone
knows. Its focus on the latest technology for multifunction telephones,
as well as on design, has made the company a household name, especially among young people who like to change their phones regularly to
BBK production: The company

releases 14 new models annually.
keep up with fashion. Mobile sales are increasing by between 40 and

50 percent every year. We particularly focus on music mobile phones,
says Cen Min, BBKs marketing director. And we want BBK Mobile to be
a brand that young people like. He thinks the financial crisis has had a
positive impact on his company. We have done our business well and
in a solid way, while the crisis highlighted some of the problems of our
competitors, and we have fewer competitors now.
The group is very focused on consumer orientation and innovation. Innovation, in our understanding, means satisfying different customers needs, including brand image, product positioning, product
appearance, design and functions. The companys focus on delivering
on its promises has earned it a solid reputation in the business. Currently, BBK is targeting innovation in areas such as mobile communication and sound quality. Also, the company is keen to improve the
camera side of the phones, as well as the music player aspects.
Much of the work behind the innovation takes place at BBKs R&D
center in Dongguan, which has 100 engineers using software and hardware from US, Japan, and South Korea for research and design development. This think tank allows the company to release 14 new models
a year. And BBK is able to produce those phones, with a monthly capacity of one million units at its 30,000-square-meter factory.
23
D O S S I E R #1 4
Growth drivers wanted: US and China
BUSINESS IN FOCUS
Images of reinvention
It seems as though the United States has been seized by a spirit of optimism.
In the midst of an economic crisis, small and smart projects aimed at improving
lives are springing up all over the country. Here are some of the best examples.
[Start-up with a social approach]

WATER FOR EVERYONE
Alex Mittal, a young engineer from Philadelphia, Pennsylvania, wanted two things: to start up a business while helping to provide clean
water in developing countries. He had been inspired by the time that
he spent in Honduras as a volunteer with the Engineers without
Borders organization in 2006. Working with other volunteers, he
installed a pipeline that brought water to a village from a source five
kilometers away. Although the water was filtered, Mittal wondered
24
whether it would not be more effective to use anti-microbial materials that could already reduce the risk of polluted water and bacterial
infections during the transport route.
He put his idea into action and developed a coating that can not only
purify drinking water, but can also be used in anti-microbial products of automotive manufacturers and in the sports industry. Mittal
founded the Innova Materials and Ion Armour companies.
D O S S I E R #1 4
[Baking as a social project]

GREYSTON BAKERY HELPS OFFENDERS
We dont hire people to bake brownies; we bake brownies to hire people, is the motto of Greyston Bakery in Yonkers, New York, a business
that supplies gourmet restaurants with outstanding baked goods and
sells Do Goodie Brownies. Ben & Jerrys ice cream company is also
one of its regular customersand the bakery now posts annual revenues of several million dollars. Anyone who wants a job here needs
neither an impressive resume nor an unblemished record. Just rising
early and registering on the list in the bakerys office is sufficient

provided there is a job opening. The Greyston Bakery hires former
convicts, ex-drug dealers and sometimes even homeless people.
Founded in 1982 by former aerospace engineer Bernie Glassman,
all profits from the bakery go to support social projects like an AIDS
clinic, social assistance offices and housing assistance. In addition,
all employees have access to continuing training opportunities.
25
[Environment]
GO GREEN INITIATIVE
Back in the summer of 2002, then 32-year-old Jill Buck sat at her
kitchen table and despaired. She had searched the Internet, inquired
at local and federal organizations, but didnt find what she was looking
for: a comprehensive environmental learning program for her three
children. Instead of giving up, she wrote out a plan of how such a project could work: simple, straightforward and free of charge for the
schools. She sent her ideas to environmental organizationsand
launched the Go Green Initiative. Children should learn to save water
and energy, to recycle and to compost. Schools should improve their
26
energy consumption and make do without pesticides and insecticides. And cities and communities should get involved as well. The
plan has caught on: Today, more than 2,000 schools with 2.2 million
students from all 50 states of the US, from Mexico, Canada, Uganda,
Indonesia, Greece and France are participating in the initiative. Buck
is particularly proud of the successes achieved by the Barbara Bush
Elementary School in Grand Prairie, Texas: Teachers, parents, local
businesses and children jointly cut greenhouse gas emissions by 48
tons, saved 434,000 gallons of water and planted almost 5,000 trees.
D O S S I E R #1 4
[Better air down south]

MEXICAN BORDER CROSSINGS
The region along the Mexican-American border is plagued with environmental problems. Water and air quality have worsened in recent
years and many chemicalssome toxicare collecting in the soil.
The US-Mexican Border Program aims to improve the health of the
approximately 12 million people who live in this area by eliminating
environmental problems. Coordinated by the American and Mexican
environmental agencies, this transnational project focuses on cleaning the air, providing safe drinking water and minimizing exposure to
hazardous waste and the risks that entails. In doing so, the program
also actively incorporates local organizations.
One part of the program focuses on the disposal of old automobile
and truck tires, which are stacking up by the thousands in the border
region. When burned, the tires will cause toxic pollution of the air,
water and soil. If they are just left where they are, however, they will
become water collectors, creating a breeding ground for insects that
can carry diseases such as the West Nile virus.
27
D O S S I E R #1 4
[Sustainable living]
ARCHITECTURE FOR HUMANITY
Architect Cameron Sinclair considers collaborative design as the
future of architecture. Instead of awarding architecture companies
the task of designing social housing and community centers, Sinclairs nonprofit Architecture for Humanity initiative relies on crowdsourcing, which taps into the knowledge of the masses. One project
recently initiated by the World Economic Forum in Davos is the
Open Architecture Challenge. The World Bank estimates that around
100 million additional classrooms will be needed in 100 countries by
the year 2015a problem that requires creative solutions. The Open
28
Architecture Challenge therefore called on designers and planners

from every corner of the globe to work with students and teachers to
create the classroom of the future. 1,666 designs were submitted
from 65 different countries, 48 of which are developing nations, with
plans ranging from a multi-story school building in Chicago to a oneroom schoolhouse in Morocco. Involving the community and building
users from the onset is one of the fundamental principles of Architecture for Humanity. The organization is working with 4,650 designers
and architects on 245 projects in 31 countries.
D O S S I E R #1 4
[Immigration and integration]

NORTH FAIR OAKS PROJECT
Crime was commonplace in North Fair Oaks, California. Robberies,
auto theft and burglary were all a sad daily routineafter all, this
area was one of the most important heroin routes between Mexico
and the region. Crime rates have gone down in recent years, however, and residents are starting to feel safer. The credit for this development is due not least to the Community Alliance to Reclaim
our Neighborhood, a project supported by a $64,000 grant from
the Peninsula Community Foundation. Its self-proclaimed goal:
Promote a stronger and better cooperation between the community

and the local police force.
Creating better opportunities for children of immigrants is a key
element, since they are often recruited by gangs. The Sheriffs
Activities League has initiated an afterschool program for children
and young people offering football, basketball and street hockey
along with more unusual activities such as flamenco dancing,
African drumming and bookbinding.
29
D O S S I E R #1 4
[From crisis to a new boom?]

NEW ECONOMY INITIATIVE FOR DETROIT
The auto industry in Michigan is mired deep in the crisis, with its
employees bearing the brunt. The New Economy Initiative for Southeast Michigan is launching a $100 million effort to bring traditional
automotive suppliers together with new industries such as medical
device manufacturers or alternative energy producers. The first
phase focuses on developing talent, encouraging innovation and
promoting entrepreneurship. One project, the College for Creative
Studies Argonaut, has received a $3 million grant. Dating back to the
1920s, the eleven-story Art Deco building had housed the design
30
studio of General Motors and was abandoned in 1999. Soon the

building will offer nearly 2,000 art, media and design students a
place steeped in history where they can learn and discoverand
possibly become an engine to revive this former business district.
The Argonaut Project will enhance Detroits reputation as a creative
center and inspire new momentum for revitalizing the city, states
Olga Stella Savic, Director of Strategy for the Detroit Economic Growth
Corporation. This kind of project is exactly what we need in order to
generate economic spin-off effects.
[Crisis work]
HELP AFTER THE HOUSING CRASH
The MacArthur Foundation has committed $32.2 million to preserving 70,000 rental housing units. Thus, the foundation is reacting to
the housing market crash, which has demonstrated that home ownership is not always the best strategy, even if government policy
has long supported it. Since the onset of the new millennium, over
one million rental housing units have disappeared due to demolition,
their conversion to condominiums as well as skyrocketing rents.
Experts predict that another million will disappear in the coming
decade. The consequence will be a shortage of rental housing not
only in urban, but also in rural areas. Initially, the MacArthur project
will focus on families in Maryland, senior citizens in rural Iowa and
Vermont, low-wage workers in Florida and Oregon as well as homeless people in Los Angeles. In addition, it will be promoting energy
efficiency in rental housing in Pennsylvania, and preserving dilapidated buildings in Minnesota. The projects are part of the
MacArthurs Window of Opportunity Initiative, which aims to devote
$150 million to preserving affordable rental units across the United
States over the next 10 years.
D O S S I E R #1 4
D O S S I E R #14
Brand bias in a Mandarin

collar: how the Chinese buy
Nearly 1.2 billion customers with purchasing poweran attractive notion for consumer
goods providers. Brand affinity is increasing among the Chinese. Yet what drives Chinas
consumers? What are the regional differences? Insights into a strategic target group.

IS IT THE RETURN of Chinese aristocracy? Or a

Mao revival? One thing is certainly true: Shanghai's
young upper class is wearing Mandarin collars. Not just
any kind, but the shirts and narrowly tailored jackets
sold under the Shanghai Tang label, a varying blend of
Western minimalism and traditional Chinese garb. Be it
in the fashionable music and nightlife center New Factories or in one of the ultramodern bars of Pudong:
Other than a globally functional business style, it is
especially the young and wealthy Chinese hipsters
who are currently sporting the somewhat retroinspired but very well-made (and thus expensive)
products from Shanghai Tang.
TWO MODEL CONSUMERS

Megalopolis:
SUSAN GAN, SINGLE, 35
works as a systems administrator at a large
Chinese corporation
retrieves her information from the Internet
reads a national daily newspaper
uses two credit cards
shops for clothes once a week
values risk, convenience, price-oriented
purchasing decisions
Third-tier city:
NEIL ZHENG, MARRIED, 43
owns a small shop
reads the local daily newspaper
obtains her information from the TV
does not have a credit card
lives in a small house on the edge of the city
enjoys exercise, independence, family, style
32
THE SUCCESS of this Hong Kong-based company

is not a purely Chinese phenomenon. The hipness
appeal of its products was advanced not least by glamorous boutiques in New York, Paris, and London. The
majority owner is now luxury goods manufacturer
Richemont. And yet: The companys future relies substantially on growth on the Chinese mainland. And its
success with Chinese consumers speaks volumes
about their expectations and preferences. These are
analyzed in detail in a current study conducted by
Roland Berger Strategy Consultants.
Incidentally, this study found that while Chinese
high society currently enjoys looking to the West to
identify the latest trends, the most trusted brands are
Chinese in origin. It appears that Chinese consumers
want both: world class and the familiarity of Chinese
values. This seems a brand strategy that links Western
concepts of trendiness with Chinese tradition to create
something new and promises to be extremely successful. Most importantly, it offers a unique selling point,
since companies in the West simply cant offer any Chinese provenance.
SHANGHAI TANG DOES REFER TO such historic originsand does so in a self-confident, even grandiose
manner. The brand manifesto of the company asserted that while the entire West hurls itself toward
China, anxious that it will miss the consumerist train
as it finally pulls away from the platform, Shanghai
Tang chooses its own path and departs on its conquest of fashionistas all over the world. Indeed, the
company does not produce retro clothing. Flagship
stores in the fashionable Xintiandi district, in the
Grand Hyatt or at Pudong Airport are anything but tied
to the past. Instead, the goal apparently is to breathe
D O S S I E R #14
Who shops at malls?

Who prefers to buy household
goods at malls (by city)?
63%
54%
34%
Who prefers to buy household

goods at malls (by income)?
31%
AND THEY ARE TAKING ACTION to stimulate fur-
ther growtheven during the current economic crisis, which has significantly slowed growth in China for
the moment. This year alone, Guangzhou will invest
more than $11 billion in infrastructure projects. The
Asian Games, which will be held in the city next year,
will attract no small amount of money. And even without this, Mayor Zhang Guangning wants to improve
35%
22%
,
99 000
,0 10 00
0
15 ,00
0, 00
15 00
0,
25 00
0, 000
0*
21%
33%
<5
,0
0
5, 0
0
0
49 0
,9 9
50 9
China's brand cosmos:

Shanghai Tang (above,
below), Lenovo (middle)
YET NOT ALL MALLS ARE CREATED EQUAL. While

strolling through many of the outwardly garish temples of consumption, the interior design quickly illustrates whether this really is a templeor rather an
oversized village church. The malls are also distinguished by the origin of the presented brands. Some
concentrate on Western mega-brands, others on
domestic Chinese products. This means that every
mall strategy must include an evaluation of the individual outletsand possibly combine a mall presence with stand-alone solutions.
As the diversified retail preferences among
consumers in different cities indicate: Whoever
wants to conquer the Chinese market must develop a
strategy that incorporates more than Shanghai and
Beijing, but simultaneously conducts a precise
analysis of the various locations. Cities such as
Guangzhou and Shenzhen have their very own identitiesand are developing a prosperity and economic dynamism that makes them very attractive as
investment candidates.
Tie
r-3
Tie
r-2
Tie
r-1
21%
Me
ga
life into the brand manifestowhile also defining a

new Chinese consumer culture.
Particularly the brand experience at the point
of sale is obviously very important to Chinese consumers. In Shanghai, mega-malls seem to be competing with each other in size and apparent opulence.
This makes sense, as especially in the four largest
Chinese cities and with high-earning consumers, the
mall enjoys a high level of trust as a retail form.
*Annual income in CNY (1 = 9.5 CNY)
Top discussed automotive topics, Q4/2008

24%
Power system
15%
Price
15%
Appearance
10%
Other
8%
External
equipment
8%
Internal
equipment
7%
Transmission
system
6%
Marketing
5%
Safety system
Source: CIC Automotive IWOM Practice
33
D O S S I E R #14
(see think:act issue 3). The model consumers on

page 32 are examples of different character profiles.
It is obvious that residents of the mega-cities are
exceptionally consumption-oriented, and they seek
out and prefer primarily emotional brand values.
There is an interesting parallel tendency: a consideration of "total cost" issues is particularly prevalent
among big-city residents.
One possible explanation: The product selection
in large metropolitan areas is much greater, and price
differences are enormous. Whether hotel rates, food,
or automobiles: extremely expensive and very affordable often go hand-in-hand in Shanghai. Restaurants,
for example. One can enjoy an outstanding meal at a
good restaurant for under 10 but also quickly spend
more than 40 per personfor exceptionally extravagant menu items. Which by the way are not hidden
at the back of the menu, as is customary in the West,
but are often highlighted on the first page instead.
SHANGHAI IS DEVELOPING a consumer culture
the living standards of citizens and develop modern

industries, as he declared at the presentation of the
investment plan. Observers consider these government investments to be essentialnot limited to but
also in Guangzhou. Li Qingqing, an economist at the
South China Normal University, demands additional
massive investments.
SHENZHEN AND GUANGZHOU already have their
own unique identities and function differently than
Beijing or Shanghai. The Berger study, however, indicates that the divergence in value profiles between
these four large cities and the numerous smaller but
also increasingly economically attractive locations is
still very wide. To illustrate this, the Roland Berger
study uses the methodology of the brand profiler
34
that favors the loud and extreme anyway. At the same

time, the city does not desire the reputation of a Gomorrah that it once had in the 1930s. One year before the
World Expo, the city on the Huangpu River is apparently
trying to present a greener face. It is impressive and
even rather touching how downtown Shanghai seeks
opportunities for urban green spaces between skyscrapers and under massive city highways. While these
attempts don't exactly make this urban Moloch a cozy
place by European standards, it is clear that city
dwellers are discovering an affinity for nature.
The Roland Berger study confirms this finding.
In cities of all sizes, well over 80 percent of all consumers consider the environmental policies of companies when making purchase decisions. Buzzwords
such as ecology and health are a constant presence
in advertising. Wal-Mart has gone even further. In January, the company announced that newly opened
stores will consume 40 percent less energy. The retailer intends to reduce water consumption by half and
even decrease the use of plastic bags by 80 percent.
THIS NEW ECO-MINDEDNESS of the Chinese offers
considerable opportunities, especially for distressed
auto manufacturing giants. Previously, virtually no one
sold hybrid cars in China. Shanghai General Motors is

now attempting to develop the first hybrid vehicle produced in China. The car promises to deliver 15 percent
more fuel efficiency. This is also an important social
argument since, as experts anticipate, there will soon
be 100 million vehicles on Chinas roads.
More importantly, however, is for GM to also
communicate the message to consumers. And what
they think is largely inaccessible to businesses and
even traditional market research methods. Scouting
the Internet can be helpful. The issue often discussed
in the West, as to whether ordinary citizen bloggers
can or even should replace independent, professional
journalists, is not framed in these terms in China. The
country has little experience with Western-style independent media outlets. At the same time, the Chinese
express their opinions on the Web up to what their
modem speeds will allow. Together with Internet
researchers from CIC, Roland Berger consultants
analyzed the Chinese online discussion culture. It
revealed that the Chinese express personal opinions
significantly more openly than Americans (see chart
Trend-conscious Chinese shoppers. Brand affinity is

strong, especially among younger consumers.
at right) and are much more active in producing their

own content. And they feel protected by the anonymity of the Internet, which is why they will even express
controversial opinions.
Last, but not least, this means that they also
engage in heated discussions about companies and
their products. In their study, consultants focused on
the auto industry and analyzed more than 19 million
online blog entries. The favorite topic of bloggers was
vehicle power trains (which may also include environmental impact), followed by price and design (see
chart on page 33).
It is interesting to observe how the Internet
increases the explosive power of isolated disagreements between companies and customers. Subsequently, CA Ford Mazda was forced to endure a wave
of discussion after a retailer apparently refused to
honor an agreed price to a group of consumers. Potential buyers had formed an online group in order to
negotiate a better price. The formation of such isolated purchasing cooperatives with the objective of
negotiating group discounts is commonplaceand
the discussion was all the more intense for it.
UNLIKE MANY WESTERN Internet discussions,
Chinese debates usually remain quite factual. Personal insults are the exception. For this reason, the
online forums provide an excellent portrait of Chinese consumer societyand its ambitions. The Web
site of the China Daily newspaper, for instance, hosts
a discussion about the relationship between the Chinese and American auto industries. Participants are
earnestly discussing whether and especially how
Chinese companies can conquer the US market. The
basic tenor is realistic but also optimistic. Such as
this statement from josef617 about a patently ineffective trade show appearance by the Chinese brand
Geely: Geelys launch was a missed opportunity and
a disappointment. The Detroit launch garnered practically no media response. And the coverage it did
receive reflected the negative reactions of trade
show visitors. Journalists at the event even laughed,
reports the exasperated josef617. He continues:
When Chinese companies learn how to reach and
service the US market, American consumers will finally understand the value of Chinese products.
D O S S I E R #14
Online discussion culture: more active and

vibrant than in the West
I have expressed personal
opinions and/or written about
myself online 1
56%
72%
UNITED STATES
CHINA
When online, I feel free to say

and do things I would not do or
say while offline 1
32%
73%
UNITED STATES
CHINA
User-generated content (consumer

reviews, forum boards or blogs)
influences purchase decisions.2
19%
58%
UNITED STATES
CHINA
1) IAC and JWT, China Leads the US in

Digital Self-Expression, November 2007; 2)
Netpop, Chinese Surpass Americans in Web
2.0 Use, November 2007
35
D O S S I E R #14
Where is the US heading?

The US in crisisand China is the big winner? No, argues Chinese academic Shen Dingli
in this exclusive essay. Both countries need each other. The global economic downturn
highlights the necessity for further cooperation between the two.
THE US IS FACING A TREMENDOUS amount of difficulty presently. Internationally, its popularity had
plunged to a historical low before President Obama.
Its troops are trapped in Iraqwithout having had
much legal basis to ever enter it. Domestically, the
American enterprise spirit is under close scrutiny,
given the financial tsunami and its aftermath around
the world.
America used to brag about its system and
wanted to propagate it globally. Washington has advocated the American democracy as the right model for
all countries. The US has firmly believed that its freemarket capitalism was the righteous institution to set
people free. But such preaching has met major setbacks. The war in Iraq has illustrated that a democracy doesnt automatically neutralize the risk of a huge
disaster. Also, modern capitalism does not guarantee
the lack of individual greednor does it ensure that
there will be a government sense of responsibility to
intervene appropriately.
THEREFORE, THE LEGACY of the Bush administration has led to a fundamental query about where
America is heading. And, given the rapid rise of China
over the past 30 years, indeed the world would expect
that Beijing could play a constructive role at the
present time.
The problems the US is having are resolvable.
True, Americas founders have built a system of
checks and balances, but this can never guarantee
the correctness of the country all the time. Democracy ensures that the majority matters, but the majority may not always acquire an adequate amount of
relevant information before offering its collective
response. This explains why the imperfect US system
has exhibited deep flaws lately.
Despite these, the American system has been
created in such a way that it can adjust. America has
36
paid the price lately, but has acted to change leadership in Congress and in the executive branch. New
policies have been formulated and implemented;
troops will be withdrawn from Iraq and Afghanistan
within President Obamas tenure. The prison at Guantanamo is being closed. The new program of investment and recovery is reinvigorating the US economy.
The White House is also making efforts to restructure
mortgage debts for millions who cannot pay for their
houses within the original time frame. President
Obama has been widely commended for his far-reaching commitment to a world free of nuclear weapons.
SO THE US IS MAKING a comeback, with new hope
and respect. Once those new policies are fully implemented, there will be more positive outcomes that
help improve the American economy and ensure
world prosperity. It is expected that this adjustment
will take time, but the search for new direction has
been set. Americans may end up finding that while
they still enjoy private ownership and personal freedom, their financial institutions and some major manufacturing establishments might be partly owned by
the government, and the US has embarked on a more
responsible and restrained form of capitalism with
more federal oversight and intervention.
During this process of globalization, the US
downturn and recovery are impacting the rest of the
world. Chinas economic cooperation with America has
built up a high bilateral dependence. Both are in the
same boat: The decline of the US economy leads to
global recession, and causes some 20 million Chinese
migrant workers to return, unemployed, to rural
homes. On the other, the mutual need of Washington
and Beijing has created chain reactionsAmerican
investment in and outsourcing to China; job creation
in China; Chinese export to America; and Chinas
possessing $1.95 trillion as reserve. These enable
Growth Leaders Wanted: the US and China
To ensure the
peaceful rise of China
in the next decades,
the country needs
America and the
rest of the world to
grow sustainably.
S H E N DINGLI
SHEN DINGLI is professor of international

relations and director of the Center for American
Studies at Fudan University, Shanghai. His academic interests include Sino-US relations,
nuclear arms control and non-proliferation, and
Chinese foreign and defense policy. He was a
post-doctoral fellow at Princeton University from
1989 to 1991. Dr. Shen is member of the International Institute for Strategic Studies and an International Council member of the Asia Society.
China to increase spending for bailing out and

expanding investment in US treasury bonds.
Strong economic ties between China and the US
have not developed without turbulence. Those madein-China goods in the United States are ordered by the
US and have enriched the lives of some 15 percent of
low-income Americans. However, those same Americans could lose jobs due to the massive influx of such
goods. Though a strong dollar helps America spend, it
also decreases the competitiveness of American
export. Behind the busy transportation of goods
across the Pacific, China and the US have experienced
difficulties around trade imbalance, currency appreciation, protection of intellectual property rights and
other issues. So far they have managed to compromise through mutual concessions.
D O S S I E R #14
The US needs China, but China also needs a

prosperous America, says Shen Dingli.
THE ONGOING FINANCIAL CRISIS highlights the

importance of China-US cooperation. Their bilateral
summit meeting on the sidelines of G20 in London
has reaffirmed such a commitment to build a positive,
comprehensive cooperation in the years to come. The
two countries have created a Strategic and Economic
Dialogue mechanism, to exchange views regularly at
a high level and to resolve problems promptly. As
China and the US are closely intertwined, their strong
cooperation helps ensure peace and prosperity in the
world. Operating on a basis of mutual respect and
equality, they will be able to avoid conflict and reap
common benefit for themselves and the world.
Finally, there has been talk lately of G2 or
Chimerica. It is partly true in terms of the importance of China-US cooperation, but untrue in terms of
their ability, especially Chinas own limits. To ensure
the peaceful rise of China in the next few decades, the
country also needs America and the world to grow
sustainably. China and the West can do a lot to sustain our planet to thrive, and to achieve an all-win.
37
Diplomacy is not defined by

stylish dinners alone. As times
get tough, international
diplomats fight hard for their
countriesand their companies.
D O S S I E R #14
Put away those fine plates!

A new administration, the global crisis, bilateral trade agreements: Washingtons
ambassadors compete fiercely for the attention of US trade officials. Gone are the days
of purely ceremonial diplomacy. Insider Ana Carcani Rold reports from the capital.
ABOVE ALL, do not fail to give good dinners and

to pay attention to the women, Napoleon once advised
his ambassador to London in 1802. The Congress
of Vienna in 1814, which followed the downfall of
Napoleon, set the rules on how diplomats operated
their craftmuch of which was ceremonial protocol.
Those days are gone. Today, ambassadors to Washington are not recruited based on table manners but rather
based on a good grasp of international affairs and global economics. Times are tough economically, and the
tendency toward bilateral trade agreements makes it
imperative that every diplomat should get a good
foothold in the US capital city.
The US Department of State is the first stop for
a foreign ambassador to Washington. But once an
ambassador is done presenting his credentials to the
president, he has to hit the ground running. Besides
paying quick visits to Capitol Hill, he must establish
contacts at the more important, and sometimes less
obvious, Office of the US Trade Representative (USTR)
and the Department of Commerces International Trade
Administration (ITA). Washington is a dynamic city.
The Department of Commerce can be a driving force for
forging trade opportunities, says Carlos Gutierrez,
former US secretary of commerce. Officials at ITAs
Commercial Service are experts in the emerging
markets and specialty industries that are driving trade
and commerce.
THE INTENSE COMPETITION in the Washington
diplomatic scene is readily apparent once you traverse
the halls of power at USTR and ITA. Twenty years ago
there were barely a hundred foreign embassies; today,
the number has jumped to more than 200, all vying for
the attention and cooperation of the US administration
and the US Congress. Relationship-building with senior
US trade officials is imperative, and outreach to officials
at USTR and the Department of Commerce must be
ongoing. Requesting a meeting with the new US trade

representative, Ambassador Ron Kirk, and with Secretary of Commerce Gary Locke should be at the top of
the Ambassadors priority list, says Loretta Solon
Greene, former US Commercial Service official. As these
new Cabinet members look to mold the administrations
trade policy, ambassadors need to make sure their
issues and concerns are part of the dialogue that is
shaping this new policy.
Within ITA, the division of the US Commercial
Service functions as the trade promotion arm for the
US government. One of Commercial Services greatest
contributions to US businesses is the 108 national
offices and 150 international offices directly connected
to US embassies around the world. This type of network
facilitates meetings, conferences and trade missions
to enhance economic opportunity for American workers and businesses and vice versa. It has often been
said that the Commercial Service is the match.com
for matching US businesses up with international trade
opportunities.
THE USTR IS THE BOUTIQUE operation of the US
Government for international trade on behalf of the
Executive Office of the President (EOP). It employs
approximately 200 people in Washington, Geneva and
Brussels. Their portfolio is to negotiate directly with foreign governments to create trade agreements, resolve
disputes and participate in global trade policy organization. They are the voice of the president on trade policy when they meet with governments, business
groups, legislators and public-interest groups. Their role
is to gather input on trade issues and explain the presidents trade policy positions, clarifies Greene.
Establishing contacts in these important government outfits and the US Congress is not easy, especially for a newly arrived ambassador. Specialized firms in
Washingtons high-powered K Street help embassy
39
D O S S I E R #14
staff to navigate that system. Adam Falkoff, president

of CapitalKeys, a boutique firm specializing in strategic
consulting and public affairs, says he is continually
asked for our counsel regarding direct foreign investment and strategies on how to grow international businesses by expanding homegrown goods and services
to the United States. The more complex set of foreign
interests also means that new actors are traversing
Washingtons halls of power. We have noticed a sharp
rise in the growth and the added importance of standalone, government-run, diplomatic business development organizations, explains Falkoff.
At the top of many priority lists:

Gary Locke, secretary of commerce
40
THE OVERRIDING CONCERN with the international

trade community is whether the Obama administration
is open to increased international trade. The current
global financial woes have increased this uncertainty,
and waves of protectionist measures have plagued otherwise good relations. Everyone is guilty of protectionism in these times; the US and Mexico felt rather quickly the follies of such measures. Months earlier, when
the US decided to end a trucking program with Mexico
at the border, the latter retaliated by blocking the passage of over a thousand US goods to Mexico. Trade wars
have been ignited despite the goodwill and promises of the G20 nations. (Despite pledges to not enact
protectionist measures at the G20 meeting in November last year, a World Bank Group report said that 17 out
of the 20 members did not keep their word.) In Washington the trade wars are felt prominently.
On the table are trade deals that were the unfinished business of President Bush. The actions a Democrat-controlled Congress and a new administration take
in supporting or hampering free trade dictate the new
activity in the diplomatic community. There is much at
stake: three pending free trade agreements (FTAs) with
Colombia, Panama and South Korea, all three left over
from the Bush administration. The passage of these
agreements will solidify how the new administration
feels about increased trade. There are also ongoing
trade disputes with Canada and Mexicoand the
potential re-negotiation of the North American Free
Trade Agreement (NAFTA).
Congressional Democrats are hostile to free
trade. Congressman Mike Michaud, a Democrat from
Maine and co-founder of the House Trade Working
Group, declared recently that moving forward with the

Panama and Colombia FTAs would be absolutely outrageous and a serious mistake.
THE INTERNATIONAL TRADE COMMUNITY will deter-
mine the new administrations commitment to free

trade based on President Obamas actions on the pending trade agreements. Currently no steps for legislative action on these have been observed on Capitol Hill.
Other countries hoping to get free trade agreements
will have to continue standing in line until pending
trade activities surface on the Hill.
This period of uncertainty at the federal level
has unleashed Washingtons ambassadors to seek
trade elsewhere: individual US states. Some have capitalized on the unique US states system and particular sovereignty. Some of the larger states, such as California, Florida and Texas, are already striking important bilateral trade deals with foreign countries
through partnerships and memoranda of understanding (often referred to by the acronym MOU).
And its not just other political actors that count.
In todays global economy, to enhance your competitive edge, public-private partnerships are vital, says
Frank Vargo, vice president for international economic
affairs at the National Association of Manufacturers
(NAM). Ambassadors that dont network with industry
leaders all over the US are missing the boat. The days
when a diplomat can just stick to foreign policy are
gone. Trade and investment are so vital that you just
have got to work harder to be in a better position for
trade opportunities, says Vargo.
TAKE CHILE, FOR EXAMPLE. The country has
enjoyed an excellent trade relationship with the US
since their FTA was implemented in 2004something
which has helped the South American country to significantly raise its standards of living in the past five
years. Chile sells everything from seafood, wood panels and molding, to wine, salmon and fruits freely to the
United States. But unlike other good trade partners of
the US, Chile has increased its insurance premium
against a new administration that would not favor the
same liberties in trade: innovative trade relationships
with some of Americas biggest states. In June 2008,
Chile signed a series of memoranda of understanding
with the state of California. The ambassador of Chile to

the United States, in Washington, was responsible for
developing these relationships.
His Excellency Mariano Fernandez, former
ambassador of Chile to the US, developed the ChileCalifornia plan for the 21st Century to develop initiatives on environment, energy, higher education, digital
technology and agriculture. Fernandez worked hard
beyond the beltway in order to secure more trade and
business for his country. It paid off, especially at a time
when such activities are frozen for the time being at the
federal level. When Fernandez successor arrived in
Washington a few months ago, at the top of his agenda
was a trip to California to meet with Governor Arnold
Schwarzenegger, indicating the special relationship
Chile and California have forged despite waves of protectionism and uncertainty at the federal level.
AND IT DOESNT STOP with California. Fernandez
laid the groundwork for unprecedented activity at the
state level. He explained in an interview: We have
organized a seminar to promote Chile and to get new
business. For instance, biotechnology in Boston, real
estate in Florida and Miami, concession and public
works in Chicago, energy in New York. Now we are
preparing two in California because of the ChileCalifornia planone about solar energy, and the other
about organic agriculture. Other ambassadors are
following suit while the new administration sorts out
itself in the trade arena.
What this shows is just how complex international diplomacy has become. Also, what is happening in
Washington is closely connected to intergovernmental
processes elsewhere. One major event that is currently being debated in Washington circles and that is garnering momentous attention for diplomats concerned
with international trade and opening their markets: the
D O S S I E R #14
World Expo in Shanghai. Scheduled to open on May 1,

2010, the international extravaganza is expecting 70
million visitors, the majority of them belonging to the
burgeoning Chinese middle class. China has spared no
expense for this event. How much do you do in Shanghai? diplomats ask each other. More than 150 countries are investing and plan to build magnanimous
pavilions to showcase their culture andmost importantlyproducts to the Chinese middle class, which is
poised to start buying them.
EXPOSITIONS FULFILL important foreign policy
objectives and can appreciably boost our national
image in a region with considerable strategic and commercial importance, says Ambassador Lisa Gable, who
represented the United States at the 2005 World Expo,
which took place in Aichi, Japan. The fair attracted 22
million visitors and was truly a very effective tool for
diplomacy and international commerce. US citizens
benefited directly from our participation, as eight governors traveled to Aichi to secure economic development projects and well-paying jobs for their home
states, explains Ambassador Gable. We worked closely with the Department of Commerce, the US Foreign
and Commercial Service, and 16 state delegations to
develop a cost-effective platform for driving foreign
direct investment into our states.
This is Asias century. What is the US planning for
Shanghai? With a 1990s congressional directive that
says no public funds can be spent on world fairs, the US
State Department has looked to the private enterprise
to fill the void. That has been particularly difficult given
the financial woes that the private sector has experienced in 2009. But not participating in Shanghai would
put the US in the periphery of influence and opportunity at a time it needs it the most. Washington insiders
agree: Now, it is Asias turn.
Everybody wants to meet him:

Ron Kirk, the new US trade representative
ANA CARCANI ROLD is the editor-in-chief of the Diplomatic Courier

magazine, a global affairs quarterly publication for the diplomatic community.
In Washington, she is also a senior fellow with the leading Independent
Womens Forum where she advocates for womens rights on an international
scale. Mrs. Rold has published numerous works in major magazines and
newspapers and has appeared on radio and television.
41
p industry report
MARKETS OF THE FUTURE

Cement that will capture CO2. The bridge of the future is made of plastic. Biogas will soon become
more efficient. And in the future, the production of spider silk will no longer require real spiders.
green cement
US-based Calera has developed an energy-saving
process for cement manufacturing It also should drastically
reduce CO 2-emissions. The cement industry is the thirdlargest source of CO 2. China and India in particular have
significantly increased cement production in recent years.
The process utilizes the waste heat produced by power
plants, the overall largest producers of CO 2. The greenhouse
gases that coal and gas power plants would otherwise emit
into the sky are now essentially captured in large quantities.
According to data provided by Calera founder Brent
Constantz, every ton of this innovative cement chemically
binds half a ton of carbon dioxide in a stable and lasting
form. Furthermore, the process enables the making of any
fill materials needed for cement and asphalt production.
The prerequisite: Cement production facilities and power
plants cannot be located too far apart. Calera already has a
pilot facility in operation. The company produces more
than a ton of green cement daily near a natural gas power
plant in Moss Landing, California, on the Pacific coast.
Emissions from the gas power plant flow through large
seawater tanks where they chemically react with the elements magnesium and calcium, which are dissolved in
the water. The reaction is similar to bio-mineralization,
which coral uses to form its skeleton.
Cement production in China and India since 2004

(in millions of tons)
China
India
1,253.5
967.8
136.9
2004
1,377.8
1,388.4
172.3
175.6
1,079.6
146.8
2005
162.0
2006
2007
2008
Source: Federal Association of the German Cement Industry
42
bridges made of plastic

Reinforced steel has shaped the world of architecture.
Its tensile strength allows for the construction of skyscrapers and long freeway bridges. Its material life span is limited, however, because weather conditions corrode the steel
in the concrete. This effect particularly applies to heavilytraveled road bridges, which typically receive a complete
overhaul after 20 years due to rot, rust or frost.
Because of the effort involved, the team restoring the
Broadway Bridge in the US state Oregon would rather
invest in high-longevity materials. Their solution: glassreinforced plastic (GRP). This selection allowed the 2.4 by
14 meter-long GRP panelswhich will lie on the steel girders as the road surfaceto be prefabricated and mounted in
just two layers. Whats more, the road surface on the wings
weighed a mere 87 tonsand thus only a fraction of what
a reinforced steel bridge weighs. In addition, the new surface yields great economic advantages. Experts estimate
that while these plastic bridges are half as expensive as
traditional construction, they last twice as long.
About 100 bridges in Canada, Korea and the USA have
been erected with GRP panels.
By contrast, only a few locations in Europe have traffic
rolling over these long-lived lightweights so far.
industry report f
Driving with a good conscience: Volkswagen

subsidiary Audi recently introduced this natural gas-powered concept car based on the A5
networked biomethane
Biogas is one of the most important carriers
of renewable energy. So far, however, the gas has
almost exclusively been burned where it is utilized. During that process, only 30 percent of the
energy is converted into electricity during the
process and 40 percent is lost as heat. While
small agricultural operations can utilize the heat
themselves, large communal biogas plant operators have no idea what to do with it. They just
release the heat into the atmosphere. It would
make more sense to transfer the gas in smaller
quantities through the gas grid to where electricity should be produced. This necessitates
that biogas has a sufficiently high methane content. In Germany, biogas has to contain 96 percent methane to be transported through the gas
network. This percentage was established by the
German government in the summer of 2008
when it passed the new Gas Grid Injection Act,
thereby taking on a pioneering role on the inter-
The largest biogas

producers in the EU 1
Production2
Country
national stage. According to experts, Italy and

France are soon to follow.
The technology for refining biogas into biomethane already exists. But private gas project
companies such as Landwrme GmbH in
Munich have developed a new business model
based on the law. They purchase the gas from a
biogas plant, refine it and sell it as biomethane
directly to their own clients through the gas
grid. Although these companies are still rare,
their significance could grow rapidlylike the
demand for biogas for powering vehicles or local
block-type thermal power stations.
Germany
2,383.1
Great Britain
1,624.2
Italy
406.2
Spain
329.9
France
309.2
Netherlands
174.0
Austria
139.1
Denmark
97.9
Belgium
78.6
Czech Republic
78.5
Other
280.5
Total
5,901.2
Source: EuroObserver
1
in 2007
in 1,000 tons oil units
industrial spider silk
Ten micrometers
Close-up of a manmade spinning thread
Spider silk is an astonishing biomaterial. The strands are five times

stronger than steel, making the protein threads highly interesting for many
industrial applications. However, producing the silk through mass breeding
is impossible because the spiders will devour each other when kept in close
quarters. Now a new bio-technological method developed at the Technical
University of Munich (TUM) is designed to deliver a breakthrough. A
research group there has succeeded in producing the silk in large quantities
using genetically programmed bacteria. The outsourced company AMSilk
GmbH with headquarters in Munich was already founded back in 2007 to
market this new technology.
When manufactured industrially, spider silk could make it possible to
produce bulletproof vests or parachutes that are lighter, yet sturdier than
traditional models. The medical community sees promise in using the proteins strands to repair damaged nerve pathways and heal paralysis.
43
p industry report
Asia remains a growth driver

Increased cost pressures are prompting numerous Western companies to consider eliminating
subsidiaries or offices in Asianamely in countries that are not traditional core markets.
DKSH offers an alternative. This global service provider helps some companies expand into
Asian markets and handles marketing, sales and logistics services for other businesses.
THINK:ACT Think Asia. Think DKSH. Your

company slogan is your program. How worried are you about Asia at the moment?
JRG WOLLE Think Asia. Think DKSH. This
means that every company considering an
expansion within or to Asia, should first think
about DKSH. Since the merger, we have
achieved seven consecutive years of doubledigit profitability growth. The number of our
employees and thus our footprint has increased
by 50 percent, to 22,000 specialists worldwide.
Since 2002, sales have increased by 80 percent
and earnings by 165 percent. December 2008
was the best month since our company was
founded. But Asia is also not completely
immune from the crisis. We therefore anticipate
a decline of business in certain areas.
Which markets are impacted the most?
Countries that are strongly linked to the global
economy, such as Japan, Singapore and South
Korea, will feel the impact more strongly. However, the advantage of the Asian markets is that
they have already survived a crisis. In 1997 to
98, Asia experienced an incredibly difficult time,
during which countries like Thailand, the
Philippines and Malaysia were forced to fundamentally rethink their approaches. Still, they
learned an enormous amount and are now better prepared for the downturn. The structures of
the individual countries are substantially
stronger than at that time, and substantial cash
reserves are on hand. We should also not forget
that a country such as China has grown at an
44
average rate of 9 percent over the past 25 years.

If the Chinese economy expands by only 7
percent this year, its still very fast growth compared to the West. Asia will remain the worlds
growth region for the foreseeable future.
Can Europe and the United States learn
something from Asia this time around?
In certain areas, undoubtedly. The Asians have
become much more confident since they successfully coped with their own economic crisis.
At the moment, confidence is a scarce commodity here in Europe. It is well-known that crises,
like expansions, originate in people minds.
Furthermore, East Asian countries are much
more long-term-oriented than in Europe and
especially in the United States. In Asia, difficulties do not fluster people so quickly. In the Far
East, one senses that hunger for success and a
fighting spirit to never give up. Companies are
tightening their belts and voluntarily cutting
salariessuch as Toyotawhile investments in
innovation are not being scaled back. The
objective is to emerge from the crisis even
stronger and use the crisis as an opportunity to
gain market share.
The crisis as opportunity. How do you
advise manufacturers whose products you
are marketing in Asia?
Dont let the negative atmosphere get you
down! The world is not coming to an end. Focus
on the strengths that have made you successful!
As a rule, this means innovation, innovation
and more innovation! Dont stop investing in

development, even when the market is contracting. Maintain education and training programs. Anyone can reduce costs. Yet looking
ahead two or three years to anticipate what
customer needs will be and actually producing
it, is more challenging, but also more promising. The pharmaceutical industry sets a good
example in this regard.
Who is suffering more and who less?
Daily consumer goods are still selling well
because people are going out to restaurants less
frequently and instead are eating at home. The
pharmaceutical sector also remains successful.
In contrast, luxury goods have been severely
affected by the crisis, and sales in many areas
have downright collapsed.
DKSH evolved from a traditional trading
house that focused on brokering goods into
the leading provider of market-expansion
services. What exactly does that mean?
Market-expansion services means that as a
service provider, DKSH helps companies and
brands expand into new or already existing
markets, especially in Asia. Every day, CEOs
and management boards around the world are
telling their executives to expand business and
market share and to penetrate new markets.
As soon as companies, regardless of their size,
make a strategic decision to expand into Asia,
we actively support and guide them to ensure
successful introduction into foreign markets.
JRG WOLLE, 52, has been CEO of

the DKSH Group since 2002, which
emerged from the Wolle-orchestrated
merger of the Asian activities of Zrich
trading houses Diethelm Keller and
SiberHegner. He was previously CEO at
SiberHegner. A native of Saxony, he
studied mechanical engineering in
Chemnitz, where he also earned a doctorate. He continued his professional
development at IMD in Lausanne and
Stanford University in Palo Alto. Wolle is
married and has one daughter.
p industry report
We share our market expertise, consulting

know-how, experience and local relationships,
as well as providing comprehensive sales and
logistics services.
How can you assist companies that already
have a presence in Asia?
One question arises more often today than ever:
Which locations do we really need, and which
do we really want to operate ourselves? Companies are examining all possible measures for
lowering costs. The result is increased demand
for outsourcing, which is where DKSH can provide custom-tailored support as a partner; we
deliberately position ourselves as a service company under the slogan Crisis as opportunity
outsourcing partner DKSH. We are currently
building the DKSH service brand, which stands
for the newly created category of marketexpansion services.
Who are your clients?
We represent more than 5,500 manufacturers
from a wide variety of industries around the
world. We bring their products to the Far East,
where we supply over 550,000 customers
including supermarkets, convenience stores,
hospitals, pharmacies, physicians and local
industries. We also operate local sourcing or
acquisition of highly specialized raw materials
for manufacturers, especially in Europe and
the US. For a broad spectrum of clients, ranging from lozenge producer Ricola, to Roche and
Pepsi, we handle such services as marketing,
sales, distribution and even debt collection in
Hong Kong and China. Were doing the same
for Beiersdorf in East Asia with the Nivea
brand. Interacting with hundreds of thousands
of customers requires an infallible instinct for
whether somebody will actually pay the bill in
the end. This is only possible for someone like
ourselves, who have an in-depth understanding
46
of each particular culture. DKSH has nearly

150 years of experience in Asian markets.
For many smaller companies, Asia still
represents terra incognita. Can business in
these countries compensate for crisisinduced losses at home?
Certainly not if you are trying to sell European
shelf warmers in Asia, as we can observe all the
time. With our hundreds of thousands of daily
customer contacts, we can precisely anticipate
what will sell and what wont. The prerequisite
is that the product fits into one of our four
areas of business specialization: consumer
goods, pharmaceutical products, technology,
and special raw materials. These are either
discovered by our scouts, who are on the lookout at trade events for attractive and innovative products that could be marketed in Asia,
or manufacturers will contact us directly.
How do you proceed with a new customer?
First, we always try to present the most realistic picture possible, and we especially want to
create awareness that the continent does not
consist of only China and India. For smaller
companies in particular, countries such as Vietnam or Malaysia can be much more attractive.
Next, we determine which markets are an exact
match for a manufacturers products. After
that, a business plan is prepared and the various implementation stepsfrom sales and
industry report f
The Asians have become much more confident since they

successfully coped with their own economic crisis. At the moment,
confidence is a scarce commodity here in Europe.
marketing to distribution, logistics and debt

collection, as well as customer service. Manufacturers always receive a custom-tailored solution, designed to meet their specific needs.
Are you focused on companies exceeding a
certain size?
No, as we provide one-stop regional processing
for smaller companies with innovative, highquality products that do not have the necessary
financial or personnel resources to independently enter markets in countries with challenging entry barriers. DKSH is a long-term marketing, sales, distribution and customer service
partner for these companies.
Especially nowadays, large companies are
focusing on their core competencies, particularly product development and marketing. Everything else is outsourced to specialized service
providers. With its comprehensive Asian distribution network, DKSH is in demand as an outsourcing partner for sales, warehousing, comprehensive distribution, targeted distribution,
and debt collection.
Does DKSH participate in setup costs?
Of course we are prepared to invest in sowing
seeds but only on the clear understanding that
we also share in the harvest. The manufacturer
DKSH is a leading company for market

expansion services with an emphasis
on Asia, where it maintains a network of 440
offices. The roots of the company date
back to 1860. The overwhelming majority of
its 22,000 employees are active in the
Asian region. Headquarters in Zrich
manages with just under two dozen staff
members. The largest privately held company in Switzerland achieved sales of 8.4 billion
Swiss francs in 2008.
must also make a contribution to successful

brand building over the long term.
You operate a corporation with 22,000 people, most of whom are in Asia, from Zurich,
with a staff of less than 20 employees. How
do you manage that?
The first basic rule for me is You cant fax a
handshake. I spend 50 percent of my time
traveling. Only when I see these people and
have an exchange with them, do I understand
what motivates them. This is a necessary precondition that is absolutely indispensable. One
must have a desire to lead as well as constantly
have the courage to make tough decisions and
implement them consistently. For us, 75 percent of information should be used for decisionmaking, while the rest is decades of experience
on the front lines or intuition. I try to exemplify
efficient, unbureaucratic action and require
the same from my employees, who enjoy a
great deal of entrepreneurial freedom. Anything else would hamstring the company.
Ultimately, its important to implement a
decisionor make a correction.
But this does not yet solve the cultural
issues. How do you and your leadership
team handle the many different cultures
that characterize your company?
People who cant interact with different cultures are not a good fit for our company. We
dont have a diversity program. At our company, working closely with the widest range of
cultures is a given! Upper management, which
includes about 100 people, is comprised of 35
different nationalities.
Even so, taking the step from Europe to Asia
is a huge cultural challenge for many companies. What are the most common mistakes?
The notion that there is a single Asia must be
the most common. Asia is at least as diverse

and multifaceted as Europe. Before making a
decision, you should pay a visit in person. Talk
to successful companies in different markets.
They will gladly tell you what works and what
doesnt. As we know, asking questions is free.
Definitely go ahead with testing your ideas
first, before formulating a large-scale strategy.
After all, you must have a product that is
appropriate for one of the markets. Do your
homework. Have professionals examine
whether a product truly matches local preferences. To think that the Chinese must like
something because it appeals to you personally
would be naive.
What about the repeatedly quoted pitfalls
that Americans and Europeans allegedly
stumble into?
Gaining a foothold in Asia is not magic. It is
certainly erroneous to think that the more
books you read, the fewer mistakes you will
make. Success in Japan does not depend solely
on bowing correctly. We occasionally have the
impression that certain business people from
the Western hemisphere are abandoning common sense upon check-in. You dont have to
jump through hoops. It is critical that you activate your antennae, are able to listen and prepared to learn. And have someone to accompany you who is familiar with both worlds.
So this is where you come in!
We are indeed committed to understanding
both sides, Asia and the West. This is the traditional DNA of our company. We are curious
about everything that takes place in the Asian
world. Our founders had a deep commitment to
the people there. Our cultural understanding is
based on this, as is our function as a bridge to
facilitate economic exchange. We know what
makes these people tick.
47
As the musicians go along with the experiment, not only can managers gain valuable insightsit also creates some passable sounds.
Mind to motion: more passion!

While searching for metaphors, management theory discovered the art of conducting. Top executives
can tangibly learn from maestros during a seminar with the RIAS Youth Orchestra. At the
conductors stand, decision-makers primarily learn how to persuade with both body and soul.
Pick up the pace. You can accelerate the

tempo. The gentleman at the conductors
stand follows these instructions and indeed:
The RIAS Youth Orchestra launches into the
memorable overture of Bizets Carmen with
even more exuberance. Pauses are lessening
and the leitmotif emerges more dynamically.
Its Saturday afternoon, and these musicians
face a rather unusual assignment: They must
play a series of musical classicswhile being
led by amateurs. In the large auditorium at
Berlin Brandenburg Broadcasting, executives from international companies have
their first encounter with holding a conductors baton. This unusual event is called
Managers Are Conducting. The original
48
idea for the two-day seminars, which the

RIAS Orchestra now offers on a regular
basis: An extraordinary experience such as
this can also inspire decision-makers in their
day-to-day business operations. Yet what are
the benefits of a hopeless undertaking such
as conducting an orchestra with a mere 10
hours of preparation?
LEARNING EFFECT 1: NEW CHALLENGES
One experience: handling totally new tasks.

The nervousness while raising the baton for
the first time is palpably exuded by every
participantsuch as by one junior manager
from Hamburg in a casual sports jacket, who
balances rather stiffly on the raised plat-
form, conducting in a more timid than highhanded fashion. He persists, however. This
tenacity on the conductors podium is a
reflection of day-to-day business operations,
from an executives point of view. Decisionmakers today must be prepared to face new
challenges without any prior preparation,
says participant Timo Krutoff, director of
the finance division at ThyssenKrupp Presta
Camshafts. Especially as the concept of job
rotation in management becomes even
more prevalent, this seminar is the perfect
baptism of fire.
To survive intact and in tact, one must accept
the challenging role-reversal. Inspired by the
music itself, the executives embark on their
business culture f
The feedback is immediate.

Christian Reichart, executive director of the RIAS Youth
Orchestra, on how management and conducting relate.
mission. After a few rehearsals, movements
begin to feel familiarwith growing enthusiasm. Its amazing. They actually respond to
my gestures, is the consensus. And indeed,
the musicians register every emotive movementas well as every accidental wobble.
You learn how to precisely control your
body, which is also a useful experience for
practiced orators, says Krutoff. And even
more so, as verbal instructions are off-limits.
The limited intellectual control makes the
job of conductor a unique one. In the workplace, I mostly communicate with arguments,
from one mind to another. Thats not enough
here, explains Georg Schlumpp, director
of personnel development at Converteam
GmbH. Dont be so hesitant, coaxes
Reichart, the seminar leader and executive
director of the RIAS Youth Orchestra, while
addressing the group. Coming out of my
shell and displaying emotions in an unknown
environment is difficult, admits Schlumpp.
LEARNING EFFECT 2: MAINTAINING DISTANCE
The most important lesson, however, might

be a different one: namely finding the right
balance between closeness and distance.
The conductor is part of the orchestra, but
must simultaneously control and guide the
groupmuch like a senior manager. This
requires a certain distance. The dual function of player and supervisor is among the
most difficult responsibilities for a conductor, who must be emotional but must not let
upmuch like decision-makers at large companies. Accordingly, Reichart corrects a participant when she appears to lose herself in
the music. Conductors who completely surrender to the music lose the larger perspective. And managers who constantly fraternize with subordinates soon lose their standing in the company. Conducting, just like
managing, is not about democratic processes.
How was I? a novice conductor asks the
orchestraand only sees puzzled faces in
response. Conductors dont ask for feedback.
THINK: ACT Mr. Reichart, what do managing a company and conducting an orchestra have in common?
CHRISTIAN REICHART Claiming leadership.
And to some degree, the instruments used to
exercise this leadership. Both conductors and
managers must be able to persuade in order
to motivate their employees. Otherwise only
delegating remains.
What do managers learn in your seminar?
A conductor cannot call out to the brass section: Play a little quieter, the clarinet is
more important than you at the moment.
Nevertheless, that person must dampen
some musicians if they drown out others by
disproportionate volume. This is communicated through gestures, facial expressions,
and posture. Managers can also supplement
a verbal message with nonverbal information and thereby convey more credibility
and persuasiveness. The orchestra is an
incorruptible reflection of the conductors
presence, and the feedback is immediate.
What has been the biggest surprise for
you in your seminars?
From time to time, there are rather introverted individuals who really open up in
front of the orchestra or those who do all the
LEARNING EFFECT 3: CONTROL ISNT EVERYTHING
They also should not attempt to micromanage everything and everyone. One participant attempts to do exactly this during a
movement from Schuberts Unfinished Symphony. The managers eyes dart rapidly back
and forth; he wants to look at every musician simultaneously, quickly animate the
violins, then the wind section. This is quite
unnecessary. When are you constantly
intervening, you dont trust the musicians,
says Reichart. Information overload only
causes insecurity. Provide clear instructions
CHRISTIAN REICHART is the executive director of the RIAS Youth Orchestra.

talking on the first day and then withdraw.
Every time, I experience again how well it
works when someone without conducting
experience, but with self-confidence and a
clear will to lead, is standing in front of the
orchestra. In these cases, there are rarely
any difficulties and, interestingly enough,
also very few technical problems. The selforganization of the orchestra coalesces, and
it becomes a truly exciting moment for the
ensemble as well: The musicians are on the
edges of their seats, curious about what will
happen nextand how.
whenever you want something to change.

The question remains whether the conductor per se is an appropriate metaphor for
the executives of today. In any case, it
appears that the understanding of a company as an ensemble of interacting virtuosos is
perhaps idealistic but not totally misplaced.
Conducting means working with people
who can do something better than you. This
realization of one participant can surely
be transferred to the management of talentbased companies. The issue is whether executive managers actually see a need for it.
49
Today, the successors of

the original founders
learn all the modern management methods, while
preserving their companies own identity as well.
Management, Arab-style
They lead huge companies and have been enormously successfulfor generations. And they are the
great unknown in global economic activities: Arab family enterprises. They have long since liberated
themselves from dependence on oil. So what are the strengths of the clan management model?
The Arab world is becoming more business-friendly, according to the most

recent study by the World Banks Doing
Business Project. Most of the 22 countries in
North Africa and the Middle East that are
members of the League of Arab States have
implemented important economic reforms
and loosened restrictions on trade and
investments. Due to rising oil prices and
stronger global trade relations, the Arabic
region has seen high growth rates in recent
years. Nevertheless, the area is still far from
realizing its full growth potential. Yet in all
areas where governments have improved
conditions in their national and economic
policy framework, enormous economic
power has been unleashed. Indeed, the
region no longer wants to be dependent on
oil. All in all, a situation that accommodates
the strengths of family businesses that have
been successful for generations.
50
Large sovereign wealth funds based in the

Gulf region have been attracting attention
in the media for their shopping sprees
throughout Europe, Asia and America. But
people tend to overlook who actually drives
development in that region. Over 90 percent
of all companies in the Arab world are currently family-owned. Families such as the
Kanoo clan in Bahrain and Dubai, the
Nuquls in Jordan, the Zayanis in Bahrain,
the Al Ghurairs from the United Arab Emirates or the Sallams in Egypt control massive empiresempires not founded on oil.
They supply the population in the regions
22 countries with consumer goods, as well
as control industrial manufacturing, the
construction industry, the automotive trade,
logistics, services, and the banking and
insurance industries. These large Arab family-owned enterprises are usually highly
diversified, thereby preserving a traditional
feature of Arabic business customs: networks. To this day, a dense web of interdependent relationships makes the Arab
economy one of the most complex networks
in the world.
Arabic family enterprises were rooted mainly in their own region until just a few years
ago. In the meantime, a new generation of
leaders has internationalized their business
activities heavily, and their growth has been
massive in recent years. At the moment,
their resistance to the financial crisis has
been quite distinctive. The heads of Arab
family-owned enterprises represent the
globalized segment of Arabic society, states
Steffen Hertog, Kuwait Professor in the
Middle East and Mediterranean Studies Program at Sciences Po Paris. They are more
worldly than the political elite and represent possibly the most important bridge to
developed nations around the globe.
business culture f
Arab family enterprises are increasingly successful because the founders successors
have mastered international management
standardsbut nevertheless have preserved
the organizational and leadership principles
based on cultural values passed down for
thousands of years. Traditional management
principles that represent a decisive competitive factor in an increasingly complex global
economy rattled by crisis include:
1. GROWTH UNDER YOUR OWN POWER
Like most Arab family-owned enterprises,
the Kanoo Group in Dubai and Bahrain has
maintained its financial independence over
generations. As early as during the Great
Depression of the 1930swhich seriously
impacted the House of Kanoo as well
Ahmed Kanoo, the fledgling successor of Haji
Yusuf Kanoo, reached a decision that shapes
the companys philosophy to this day: We
will not borrow money from banks, we will
diversify in different industries and expand
into other countries under our own power.
THE K ANOO FAMILYS TRICK: THEY AVOID
BANK LOANS WHEREVER POSSIBLE. FOR THEM,
THE CRISIS IS AN OPPORTUNITY.
The strategy was a success: Today, the company is active in a wide array of industries
and has resisted management trends such
as outsourcing. Founded by Haji Yusuf Bin
Ahmed Kanoo back in 1880, the trading and
shipping company has grown into a diversified global conglomerate with business
activities and joint ventures in many industries including trade, tourism, shipping,
energy, machinery, logistics and specialty
chemicals, as well as financial participation
in countless other ventures. Today, cousins
Khalid and Mishal Kanoo follow in the footsteps of their predecessors: We avoid bank
loans whenever possible, even as part of
integrated investment plans. Many familyowned Arab enterprises regard the economic
crisis as an opportunity: Since they traditionally operate with a high capital-to-assets
ratio, they can use acquisitions to boost their
companies to the top. Aside from that, in
RETURN TO FORMER GLORY?

1,000 years ago, Arabia was another word
for prosperity. A highly developed money
economy, differentiated craftsman guilds,
productive agriculture, and trade relations
reaching clear to India, China and Europe all
helped the region flourish. Arabs were rightfully considered clever business people who
shared a long-term perspective. This was
paired with an acute sense of social responsibility appearing at the latest with the
advent of Islam.
The rise and fall of different ruling clans
since the 10th century and European colonialism since the 16th century interrupted
growth and prosperity for hundreds of
years. The region was only ready for a new
beginning after oil was discovered there in
the 1930s and the nationalization of foreign-owned companies after World War II.
While the enormous wealth of the ruling
classes in nations that are rich in oil and raw
material resources has catapulted many
Arabic countries up to a Western standard
within a brief period of time, the social gap
within their own borders grew deeper and
wider all the time.
To this day, poverty and a lack of education
plague large segments of the Arab population. The traditional roles being imposed on
women leaves a vast amount of potential
untapped; protectionism and trade limitations make international cooperation difficult. The Arab world offers a heterogeneous
image of countries rich in raw materials and
agrarian societies at widely differing levels
of economic development. The Israeli-Palestinian conflict and the fight against terrorism in some Arabic states also hamper economic and social development.
some cases, the crisis is forcing companies to

refocus on core competencies out of necessity, according to Hertog.
For family-owned private equity companies,
this opens up new opportunities to invest
their own partner families capital in buying
up parts of other companies, modernizing
them and consolidating them with complementary companies. Thus: According to
Hertog, family-owned enterprises will continue to dominate the Arab business world,
and will do so in an increasingly modern,
more focused and leaner way.
2. THINKING IN GENERATIONS
Behind the business success of these diversified empires stands the family at its core.
Patriarchal and managed according to a
strict code of honor, Arab family enterprises
think in terms of generations. Every (male)
member of the family is in the service of the
company, with the goal of enhancing their
prosperity and reputation.
ARABIC COMPANIES ARE SHAPED
BY RESPECT FOR THE ELDERS. THIS
NURTURES NETWORKS.
They show the highest respect for their elders perspective and vision. Even after the
owners step down from day-to-day operations and management, they remain closely
tied to the company with their expertise and
networks. For example, at Bahrain-based J.A.
Zayani & Sons, family elders meet almost
daily in a family council where they discuss
long-term strategy for the company, which
earns its money with consumer goods, elevators, industrial products and insurance. Furthermore, the senior family members and
their many years of political and business
connections can facilitate new business
deals. At the same time, Arabs invest a great
deal of money and effort in educating the
51
p business culture
When you do the right things, then not just for yourself
but also for your counterpart.
Ghassam Nuqul
younger generations. Pursuing studies at top

international universities and gaining several years of practical experience has now
become a given.
And yet: Upon their return, the contenders
must prove themselves in a test of toughness
that lasts several yearsoften in their own
companies, and even with their own market
activities. In the Egyptian Olympic Group,
which makes white goods that are found in
almost every household throughout the
region, owner Saad Sallam has established a
business-launching competition for the
numerous young members of his company.
The winners receive startup capital from a
family-financed fund.
3. PERSONAL RELATIONSHIPS
Even if a company is headed up by managers
outside the family, every capable heir is
active on behalf of the company and family.
This next generation of successors goes into
politics, administration and diplomacy,
where they can open doors and pave the way
which otherwise remains inaccessible without the network. Herein lies the key to success for Arab family enterprises even today:
personal relationships established and maintained over generations. Hertog notes: Families and clans influence not only business life
in the Arabic world; in many cases, they
influence the political process as well. The
strategic use of family relationships is part of
the social DNA of this system.
HAGGLING IS ESSENTIAL WHEN DOING
BUSINESS, WHILE ALLOWING THE OTHER PERSON
TO SAVE FACE. THAT BUILDS TRUST.
Family-owned companies in the Arabic

world embody an alternative model to
Anglo-Saxon capitalism. They firmly dislike
the growing anonymity in business relationships, the frequent changes in management
52
within relatively short periods of time, and

the trend of pegging corporate strategy to
quarterly numbers. Even business deals are
initiated to a unique rhythm here. After a
lengthy consideration process, these familyowned Arab enterprises push for a quick
conclusion of the contract.
When it comes to negotiation, observing the
highly symbolic effect of behavior and
adhering to ancient rituals is essential. The
often mentioned bazaar mentality is no
cliche here. During negotiations for discounts and concessions, haggling souqstylesouqs being traditional Arabic marketsis a tried-and-true technique passed
down through generations for getting to
know ones counterpart well and building a
personal, emotional relationship. Saving
face is essentialboth your own as well as
that of business partners. There is almost
nothing worse than compromising the
image of ones counterpart.
For that reason, they might start out haggling for all theyre worth, but in the end,
Arabic business people will never push for
the outermost limit of their negotiations.
Stable trade relations and trust count for
more than maximizing short-term profits.
Theyre betting on something known in
game theory as multiple-period games, with
long-term business partners.
It is best if these also are family-owned companies, explains Timm Tiller, director of the
International Institute for Family Enterprises (IIFE) in Cairo. Therefore, the turnover of
contacts every few years in management-led
companies are highly unpopular. They
want to know who they are dealing with
personally, and which values and behaviors
can be relied on in those people. Often its
the father first, and 20 years later the son,
notes Tiller, whose institute has established
an international conference platform in the
Middle East for family enterprises.
Arab entrepreneurs with their own principles:

Ghassam Nuqul, Vice Chairman of the Nuqul Group
Jordan (above) and Mohammed al Ghurair, CEO of
the Al Ghurair Investment Group
4. GIVING TO GAIN
Go after success, not profits! Ghassam
Nuqul received this fatherly advice early on
when he joined the family businessthe
Nuqul Group headquartered in Jordan,
founded by his father Elia in 1952. Now vice
chairman, Ghassam adheres to this motto as
he manages operations for the conglomerates 30 businesses and more than 5,800
employees. Nuqul is also diversified and
earns money with cellulose and paper products, aluminum, steel construction, financial
participation investments, and the sole distributorship of numerous international
automotive brands in Jordan. According to
Ghassam Nuqul, the philanthropy principle
business culture f
plays a strategic role: When you do the right

things, then not just for yourself, but also for
your counterpart.
The principles of philanthropy and social
justice are deeply rooted in the Islamic psyche. Family enterprises feel especially obligated to drive social change, both structural
and cultural, in accordance with the teachings of the Koran. They are responsible for
ensuring job stability, valuing employees,
and providing high-quality training and continuing education opportunities not only for
their employees, but also for their children.
ARAB CLANS RECEIVE LOANS WITHOUT
OFFERING COLLATERALTHIS ALLOWS THEM
TO EXPAND THEIR BUSINESSES EVEN TODAY
The influential clans have finally understood what is essential to the future of the
Arab world: education and broad access to
international knowledge networks. And its
about time. The education deficit in vast segments of the population and the resulting
recruiting problems for companies are
among the greatest challenges facing most

Arab societies. Now the entrepreneurs are
doing something about it. Many familyowned businesses have founded private universities and educational institutions, or are
consistently supporting schools and higher
education. Their perspective reaches far
beyond their own factory gates. They invest
in future-oriented social fields to remain successful as a family-owned enterprise, even if
the investment only has an indirect impact
on their own business profits or will not
yield a positive effect until a couple of generations down the road.
As a result, the success principles cultivated
over many generations in Arab family enterprises will be the key to ensuring their international competitiveness. While the European, Asian and American economic systems
seem to be caught in a crisis of values and
a growing number of bank loans fail due to
distrust, Arab clans can still receive loans
without offering collateraland therefore
dont find it difficult to finance their international expansion. Khalid Rhashid Al Zayani,
a member of the Zayani family and founder

of Al Zayani Investment Group in Bahrain:
We dont give the banks any collateral. We
never have. We receive the loans. And we
pay them back. Thats we have been doing
for 100 years. In short: They maintain business relationships where a ritual handshake
replaces the contract.
WITH THE RITUAL HANDSHAKE REPLACING A
CONTRACT, THE BASIC PRINCIPLE IS: A MAN
WITHOUT VALUES HAS GOT NOTHING LEFT
The business community of family enterprises in the Arab world is becoming a driver of
cultural change in the region. By virtue of
their names, the members stand for traditional values: networking, trust, reliability.
Mohammed Essa Al Ghurair, CEO of the Al
Ghurair Investment Group in Dubai, comments: If you dont have any values, then
what have you got? The values embodied by
your family business are what get you ahead.
They build trust. For that reason, values are
the core of every family enterprise.
LIBERALIZATION MOVEMENT
The Dubai Skyline. Rising oil prices and more intense trade relations
have resulted in solid growth rates for the Arab region recently.
The latest study of the World Banks Doing Business Project (2008) indicates that it has become much easier for international companies and
investors to do business with the Arab world. The majority of the 20 Arab
economies based in the Levant, North Africa and the Gulf Region have gone
through important economic reforms, in addition to easing trade restrictions
and investment restrictions. Due to the rising oil prices and intensified global
trade relations, the Arab region often reached spectacular growth rates in
recent years.
Nevertheless, Arabia is still far away from exploring its full growth potential.
Yet all areas where national and economic parameters are improving exhibit
great economic power. There are indicators that the entire region has a strong
desire to reach independence from oil. These conditions provide a promising
setting for the strengths of family-owned large businesses that have proven
themselves successful for generations.
53
p business culture
WORK IN PROGRESS
Roland Berger ranks eastern European business hot spots and shows how to make money with e-health.
Another study looks at the future of the Chinese auto industry. Finally, the consultants introduce their
new environmental atlas for Germanyand offer ideas on how to strengthen the automotive industry.
CITY RANKING
Eastern hot spots

The infrastructure works, people are educated, the flair is international: thats what
makes cities attractive to international companies. Roland Berger Strategy Consultants
has rated 10 central and eastern European
capitals according to these criteria and discovered the hot spots. At the top of the CEE
City Rankings 2009 is Vienna, counted as
central European by this research, with 89.9
points out of a possible 100. It is followed by
Prague (70.8) and Budapest (52.3). Ljubljana
(39.6), Moscow (34.0), Warsaw (30.0) and
Bratislava (23.4) are mid-pack, with
Bucharest (13.7), Kiev (13.5) and Zagreb (10.0)
bringing up the rear.
The capitals of central and eastern Europe
have been catching up massively. With this
study, we aim to show how attractive these
cities actually are, internationally speaking,
explains Vladimir Preveden, the studys
author and Managing Partner at Roland
Bergers Zagreb Office. That Vienna came
out on top was expected, but the others are
catching up. Central and eastern European
cities are already ahead on two out of six
aspects. But the smaller capitals in the region
must establish themselves internationally
and sharpen their profile.
When it comes to infrastructure, Vienna is
out in front, ahead of Prague and Budapest.
In education, the order is the same: Vienna,
followed by Prague and Budapest. Innovation sees a surprise winner, with Ljubljana
leading, followed by Budapest and Prague.
In terms of internationality, Vienna scores a
grand slam, with a maximum 100 points,
followed by Prague with 36.2, and Ljubljana
and Bratislava jointly holding third.
54
Thought-provoking architecture in Vienna. The city is still the most relevant business metropolis in central and
eastern Europe. But other hot spots are starting to catch up, and even take the lead in some aspects.
GROWTH MARKET FOR ICT
Making money with e-health

Health is a growth industry. As people get
older, the opportunities increase. However,
the industry is being forced to become more
efficient. Information and communications
technology (ICT) can help achieve the necessary efficiency. According to a Roland Berger
study, the market for electronic health care
services (e-health) offers the telecommunications industry huge potential.
However, differences in the level of development and financing within Europe are preventing rapid market penetration. A clear
strategy, differentiated offers for potential
customers and investors, new value-adding

services, and quick market entry through collaborative efforts can help.
Both health care systems as well as telecommunications markets in Europe are facing
dramatic changes, says Alexander Mogg,
Partner in the InfoCom Competence Center
at Roland Berger. To continue growing successfully, telecommunications providers are
currently scoping out new business segments. Joachim Kartte, Head of the Pharma
& Healthcare Competence Center, adds: The
industry will increasingly have to use information and communications technology
(ICT) to help care for more and more older
people while budgets remain unchanged.
business culture f
MAPPING THE ENVIRONMENT
Atlas for green growth

Growth sector green business: Roland Berger
has compiled the second environmental
atlas of Germany. The countrys environmental industry has easily surpassed all
growth forecasts. By 2020, it will be the countrys foremost industry, accounting for 14 percent of GDP. The economic crisis will slow
this development only briefly. Growth is
being driven by three megatrends: global
population growth, industrialization in the
emerging countries and the worldwide
desire to increase prosperity. Accordingly,
revenues from environmental industries will
more than double to 3,100 billion over the
next 11 years. German manufacturers are
benefiting more than others from the global
green recovery that will inject fresh vitality
into the worlds languishing economy. Global
market shares of between 6 percent and
30 percent already position them among
the worlds technological front-runners.
Environmental technology is the lead industry in the 21st century, says CEO Burkhard
Schwenker. There are high hopes that this
sector will soften the blow of stagnation in
other branches of industry, for example. It is
also seen as a way to combat climate change
and the raw-materials crisis. In addition,
environmental technology will ease the
burden of pollution as the worlds population continues to grow.
Production of solar cells in eastern Germany. The green
industry is seen as having a promising future.
ASIA GOES GREEN
China, electric car leader?

The Chinese automotive industry is bypassing further refinement of the combustion
engine and is instead aiming to blaze the
trail for electric and hybrid vehicle technology. To reach this goal, the government is
counting on massive tax incentives and subsidies. The Roland Berger study Powertrain
2020: Chinas ambition to become market
leader in e-vehicles describes the actions
being taken by the Chinese government and
outlines scenarios for the future e-mobility
markets. By 2020, the global market share for
electric vehicles (EVs) and hybrid vehicles
(PHEVs) will be between 9 and 10 percent; in
countries such as China, it could be as high
as over 50 percent. The markets for batteries,
motors and other components will experience similar outstanding growth: by 2020
they will expand from 20 billion to 50 billion annually, and in the following decades
to more than 100 billion. At the same time,
competition will become more and more cutthroat. To succeed, manufacturers have to
cut costs, secure market share, expand business models and form strategic partnerships.
When it comes to electric and hybrid cars,
China is challenging the automotive industries in the Western industrial countries,
says Wolfgang Bernhart, Partner in the Automotive Competence Center at Roland Berger
Strategy Consultants. The technological
An innovation (from Toyota) at the Shanghai Motor Show.

The question is how innovative the Chinese car industry
will become during the next years.
head start that Western manufacturers have

with conventional powertrains is tough to
overcomeand the Chinese realize this. But
the race for electric mobility is just getting
under way.
AUTOMOTIVE INDUSTRY
Support your dealers!

The downturn of the world economy, in
combination with structural problems like
overcapacity and overcrowded dealer networks, hit automakers very hard. Manufacturer-posted results for 2008 in Germany
alone show drops of up to 50 percent, while
at the same time sales/distribution in
Europe amounts to almost 100 billionor
about one-third of the price of each car. In
the search for quick ways to cut costs and
raise performance, Roland Berger identified
seven action fields to strengthen the industry. They focus on new-car stocks, the usedcar business, dealer network, service and
parts business, sales at the POS, the wholesale level, and brand. These fields combined
can eliminate the weaknesses in current
sales/distribution strategiese.g., insufficient dealer profitabilityand maintain
strengths, such as brand representation and
dealer-customer relationship, among others.
55
p forty years after

Managers must make decisions pragmatically. Passion serves
inspiration, discipline attends to practical implementation.
The confessor
Four decades ago, Mariano Frey began his career with Roland Berger. A veteran
of the management world who advocates matching passion with discipline,
he would not hire the Italian poet Dantetoo inefficient. Paolo Griseri reports.
He sits a mere few steps from Milans city

centerin a stable. Reminiscences of
Italys industrial history hang on the walls.
The office of equestrian fan and Roland
Berger partner Mariano Frey is located at
the old streetcar depot in Milan. It was built
back in the 1800s, at a time when railcars
were still pulled by horses.
It is fitting that Signore Frey has his office
here: His passions are business and horses.
He believes that these creatures have something to teach the business world: They
showed me that passion and discipline
belong together.
EQUESTRIANISM TEACHES CORE QUALITIES
FOR BUSINESSDISCIPLINE AND PASSION
Frey has both, making his job almost a calling. One time, he came close to switching
sidesand left Roland Berger in 1984 for six
months. Once again, it was about horses: The
rider could have participated in the Olympic
Games in Los Angeles. But Frey stayed
business simply proved too addictive.
Born into a family of musicians, the now 68year-old has always been restless, which is
perhaps typical for consultants. While still
studying at the Universit Bocconi in Milan,
he gained his first career experience with
Falk, the biggest steel company during the
reconstruction years, in the research section
of their acquisitions department. He met
Roland Berger in 1969, and in the same year
he joined Berger in opening the companys
Italian branch office in Milan.
56
Passion was part of the program then, too.

Yet just how emotional can the world of
management really be? Does Freys chosen
motto, passion and discipline, even apply?
I have tried to implement this principle,
although it was clear to me that while many
Italians value passion a great deal, they dont
quite esteem discipline that much, he comments. And yet managers must make decisions very pragmatically and rationally. Passion serves inspiration; discipline attends to
the practical implementation.
To him, consultants are akin to confessors.
They can give advice, but should not place
themselves above managers or shareholders: Now and then we consultants are used
as mediators between company owners and
their managers. However, if I determine that
my advice is being disregarded and we are
wasting time, then I will say so openly to the
customer. If necessary, I will terminate the
relationship.
Frey has very straightforward opinions
and that includes those about the economic
crisis. The financial system represents an
infrastructure of economic activity, just like
streets, bridges and railroads. It is the financial system that needs to get industry up and
runningnot the other way around. He also
believes that the relationship between politics and business is in a crisis as well. The
government aid programs for struggling
companies in the United States represent an
exception due to the prevalent culture there,
he says. But in Europeand especially in
Italythis unnatural relationship between
public administration and private business

is a characteristic of the system. He cites the
Alitalia case as an example. The Italian government prevented Air France from acquiring the airline for nationalistic reasons and
to protect the Italian airport hubseven
though their flight volumes didnt justify
PAOLO GRISERI is a business journalist

with Romes La Repubblica newspaper. His
recent work includes reports on Fiats
attempts to prevail in the bidding war over
its competitor Opel. La Repubblica is one of
Italys foremost daily newspapers and considered a left-liberal leaning publication.
their survival as hubs. Other European governments have taken similar action in recent
months, as in the case of Germanys Opel.
BAILOUTS FOR BUSINESSES INDICATE THAT SOMETHING
IS WRONG WITH THE ECONOMIC SYSTEM
Frey considers that a missed opportunity.

The crisis is the best possible moment to
make the economic system more efficient by
rewarding the best ideas and people who
deserve it the most.
Frey knows a lot about opportunities born
from change. One particularly daring coup
was the image re-branding of Barilla, which
he oversaw in the 1970s. Back then, Barilla
was a leading company for pasta and sauces.
The problem: Barilla wanted to launch products on the market that greatly differed from
forty years after f
This provides an example for how cultural

understanding and economic efficiency
belong together. A combination such as this
also shapes Freys friendship with architect
Renzo Piano. I became acquainted with him
when Gianni Agnelli, then president of Fiat,
wanted to renovate a huge abandoned factory, the Lingotto building in Turin. No easy
undertaking: a building with a 500-meterlong faade and requiring kilometers-long
sections of restructuring work done. I cannot leave the future of this factory to the
bulldozers, stated Agnelli back then.
HOLISTIC THINKING, SURPRISING SOLUTIONS
Mariano Frey together with Roland Berger founded the Roland Berger office in Italy in the 1960s. Frey was
responsible for the strong positioning of strategy consultants within key companies in the Italian economy.
their brand image, products such as cookies

and sweets. Thus, we had to break the association of Barillas name with spaghetti and
tomato sauce. Freys team came up with an
idea that was brilliant in its simplicity: Mulino bianco, the white mill. The name didnt
just stand for a product line and a new perspective on food, but also satisfied a yearning
for the good old days. For in the 1970s, Italy
had just made the transition from an agrarian culture to an industrial society, with hundreds of thousands of people leaving the
countryside to work on factory assembly
lines. The cookie packages with the old mill
logo and the launch advertising campaign
reminded these new workers of their childhood. Mulino bianco was a big success.
Prominent Italian architect Renzo Piano converted the

Lingotto building in Turin, a former Fiat complex. Frey
advised the planner on feasibility.
Pianos job was to bring the building into the

future architecturally, while keeping costs
under control. What counts, according to
Freys insight at the time, is letting great
ideas soar while keeping them securely
anchored in the ground at the same timein
other words, connecting ideas and pragmatism. That is why he recommends to young
Italian managers to sow their wild oats in
the more pragmatic Anglo-Saxon world. In
Italy, he says, there are too many people who
get caught up in pretty phrases. I am Italian,
but I tell you that if it were up to me, I would
teach objectivity in the schools and the ability to narrow things down to essentials.
Asked about a poet like Dante Alighieri, who
embellished his writings with puns and
wordplay, I would never hire him as a manager. Or to put it even more provocatively: If
such a poet worked for me, Id fire him.
57
p service
credits
FOLLOW-UP
Sitting Bull,
the capitalist
READING TIPS
p food for thought
reportage
According to conventional wisdom, Native

Americans are economically disadvantaged nowadays. A
New paths, old wisdom
report in the think:act
:
issue 6 on the business of the Cree Indians in Canada indicated that it doesnt
The story from think:act 6
have to be this way.
They earn money with power plants and hightech bear hunts. A tribe of Sioux Indians, descendants of the legendary Sitting Bull, is now going
a step further. The North Dakota tribe has
announced that it is taking over the New York
financial management company Westrock.
The acquisition of a financial company by Native
Americans is unprecedented. Westrock manages
assets of $1.4 billion with a staff of 150.
The Wemindji Cree of eastern Canada have achieved prosperity. They operate their own power plant
and hunt from helicopters. Behind these accomplishments is a chief who applies age-old wisdom to
the challenges of modern times.
Have we really landed in Indian country? asks Aurel Dan incredulously. Dan,
from Lausanne, Switzerland, and founder of
the TeleInvest electronic trading platform,
sounds almost disappointed as his nineseater airplane rolls down the runway at
Wemindjis tiny airstrip. Dan is participating
in an air rally through the eastern part of
Canada. This side trip to the James Bay in
northern Quebec was intended to be the
picturesque high point of the trip. He was
expecting what he remembered seeing in

movies about the Wild West: white tents,
smoke rising up out of them, dancing Indians and bonfires. Instead, he saw something
that was totally different.
Wemindji is a small, remote settlement. The
houses are neatly lined up along paved
streets, and pick-up trucks are parked in
front of every home. There is a mall in the
town center, a gas station and a big sports
arena. Only some houses yards have a tipi,
and that is mostly because some older Cree

still like to cook outside.
With older people clearly a minority, the
town has a young feel. In fact, 70 percent of
the Cree here are less than 35 years old.
WEMINDJI IS A SUCCESS STORY ON THE

FRINGES OF THE CANADIAN TUNDRA. FIRST CAME
PROSPERITY, THEN CAME THE BABY BOOM
The village is doing well, and the upswing in

prosperity has resulted in a baby boom.
24
Lenovo restructuring
The success story of Chinese computer maker
Lenovo is impressive. Not least due to the recent
takeover of IBMs PC division did the Chinese rise
rapidly to the very top of the global IT company
hierarchy. This was also featured in think:act. Yet

weak demand in Europe and the US has hit the
Chinese hard recently. The position of the worlds
third-largest computer manufacturer has been
wrested from Lenovo by Taiwan-based Acer. Now
the company has responded. Restructuring was
accompanied by a leadership reorganization, with
Lenovo veteran Yang Yuanqing emerging as the
CEO. The Economist magazine interprets the latest
particulars as going back to the roots. According to
reports, the company does not even anticipate
growth opportunities in China at the moment.
Gender quotas on boards of directors?

Gender equity on Norwegian boards of directors
was the subject of a think:act 12 report. In Norway,
women must fill 40 percent of the supervisory
board positions of all publicly traded companies.
Now the idea is also gaining traction in Germany.
Manuela Schwesig, a Social Democrat politician
and a state minister for Mecklenburg-Vorpommern,
is proposing a 40 percent quota for all companies
listed on the stock exchange. She asserts that
Germanys women are better educated now than
at any time in the nations history. There are many
women with the right potential. Their power lies
idle because they cant reach leadership positions,
she says in the Financial Times Deutschland.
MASTHEAD
PUBLISHER
Prof. Dr. Burkhard Schwenker, CEO
Roland Berger Strategy Consultants
Am Sandtorkai 41, 20457 Hamburg,
Germany, Tel.: +49 40 37631-40
AUTHORS
Clifford Coonan (Beijing), Paolo Griseri (Rome),
Frank Gruenberg, Siri Schubert
(San Francisco), Florian Sievers, Angelika Steffen,
Johannes Wiek
DIRECTOR
Torsten Oltmanns
CONTRIBUTING AUTHORS
Henryk M. Broder (Berlin), Prof. John Hutnyk
(London)
EDITORIAL ADVISORY BOARD

Roland Berger Strategy Consultants
Dr. Christoph Kleppel ,
Felicitas Schneider
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EDITORS IN CHIEF
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Deputy: Tobias Knauer
ART DIRECTION
Blasius Thaetter
MANAGING EDITOR
Marlies Viktorin
EDITORIAL
Tobias Birzer
58
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Mobile; p. 24: gallerystock/BIWA; p. 25: StockFood/
Paul Blundell; p. 26: gettyimages/Siri Stafford;
p. 27: gallerystock/Anthony Suau; p. 28: gallerystock/Sasha Bezzubov; p. 29: Piet Truhlar; p. 30:
College for Creative Studies; p. 31: gettyimages/
Among other topics, this

issue examines the question
of whether success stories are
predictable. The Accidental
Billionaires, Ben Mezrichs analysis of Facebook, provides a pertinent case study. John and Doris
Naisbitt analyze the foundations
of the boom in China. They not
only observe how rapidly
Chinese society is undergoing
a transformation, but also show
that large-scale Westernization
should not be expected. In
Handbook Utility Management,
Burkhard Schwenker and
Andreas Bausch examine current and future challenges for
managers of energy and natural
gas companies. Finally, the question of how worldviews affect
the behavior of individuals and
organizations is examined in the
book Communication and Crisis,
currently available in German.
BEN MEZRICH:
The Accidental
Billionaires:
The Founding
of Facebook
JOHN & DORIS

NAISBITT:
Chinas Megatrends: The
8 Pillars of
a New Society
ANDREAS
BAUSCH,
BURKHARD
SCHWENKER:
Handbook Utility
Management
service@think-act.info
Do you have any questions for
the editor or the editorial team?
Would you like to learn more
about studies by Roland Berger
Strategy Consultants? Just send an
e-mail to service@think-act.info
TORSTEN
OLTMANNS ET
AL. (PUBLISHER):
Communication
and Crisis
(in German only)
Highlights from this issue on CD
Listen to the following articles:

ON THE BRINK OF BOOM: (P. 16)
k EUROPE
An encouraging essay by Burkhard Schwenker
MYTH OF A CHANGING WORLD (P. 10)
k THE
Why the crisis does not signify the end of capitalism
BIAS IN A MANDARIN COLLAR: HOW THE CHINESE BUY
k BRAND
Chinas consumer conduct is quite diversified. A report.
TO MOTION: MORE PASSION! (P. 48)
k MIND
What do senior decision-makers and conductors have in common?
(P. 32)

Roland Berger - Think-Act - Growth - # 14 2009

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ROLAND BERGER STRATEGY CONSULTANTS

The global magazine for decision-makers

Will a cuddle culture succeed in the crisis?

The world economy apparently has weathered the

Dr. Burkhard Schwenker

think:act is published in three languages (English, German and Chinese)

Virtuosos of management: In their quest for inspiration, leaders

Gary Locke is one of the most central decision-makers in Barack

Unconventional design ideas for social problems were developed

Shopping fever: Chinas consumers are quite attracted to brands.

food for thought

14 The complex art of curves

16 Europe: fair chances for

36 Quo vadis, US?

44 Asia remains a growth driver

The worst is over.

The large part of

Articles that are marked with this

p food for thought

Green growth market

a year is the predicted growth rate of the

The opportunities are grand. The most recent

Photovoltaics: a growth industry

The worlds largest solar-cell manufacturers (global market share 2008)

food for thought f

Grist for the mills of green

The future is sustainable (estimated volume 2020 in billions of euros)

Green business is a rebound

During the crisis, China, India, Japan, the US and many

of all solar cells come from Asia; one-tenth of all

The environmental market has evolved

World market share of Germany 2007

of all patents issued

Germany goes green

Raw materials and

industrialized nations of the world have recognized the potential of

p food for thought

True luxury, redefined

Crises hurt everyone except the luxury

For Pinault the decision goes to the heart of

outperform the competition. HewlettPackards commitment to the environment

Success of PPRs Stella McCartney brand and

food for thought f

Luxury goods CEO Pinault

energy consumption in stores, offices, and

p food for thought

You can also listen to this article

We havent seen this much malicious

It is not enough to present political change

greed of some managers, but it certainly

food for thought f

JOHN HUTNYK is the Academic Director

HENRYK M. BRODER is a journalist

will result in the development of a less

tage. The media and the public are both

Americans are nationalizing General

wants to give up anything they have. And

THE CRITICS OF CAPITALISM CELEBRATE

One could also ask whether the attempt to

p food for thought

paralyzed by knowing what the

greed of lenders coalesced with the

can seize the rudder, and has not already