American Businesses Booming in China

Half a million Mary Kay workers, three new McDonald's a week in China.

ByEric Noll and Jessica Hopper
November 17, 2010, 12:23 PM

Nov. 17, 2010 — -- Mary Kay, the classic American makeup company, took its pink hats and pink Buicks 7,000 miles to China -- and after 15 years of trial and error, business is booming there.

Nearly 20 percent of the company's business now comes from China, said K.K. Chua, president of Mary Kay's Asia Pacific region.

"We're just scratching the surface in China right now considering that China is a country with more than 1.4 billion people," Chua said. "I think in the time to come, we will see the business having a lot more lengths to run."

When the Texas-based company gathers a few of its Chinese salespeople for a pep talk, a few means 40,000 members of the country's half-million-person Mary Kay workforce.

Mary Kay's success in China meant shifting from their well-known model of paying home visits to setting up "beauty centers."

"When we bring the products across to China, we must do some adaptation," Chua said. "First, it has to do with packaging, we have to stream the packaging down because everybody is used to smaller packaging."

Another big lesson for the company was that Chinese women don't want to be more tanned. They want their creams to make them whiter.

The company created specific products that appealed to Chinese women. Some of those newly formed serums have become surprise hits in the United States, too.

"It's a pretty ironic phenomenon that something that's developed in the East is now suitable in the West," Chua said. "Now, in Mary Kay, there is a saying that East does equate [to] West."

Mary Kay is one of several big American brands finding their way to Chinese consumers. Because the Chinese do like American brands and American know-how, everything from our architects to management experts, there is a shot at vast amounts of money and benefit to American stockholders.

The boom in consumption by American consumers could be good for American workers too.

One estimate suggests that a 20 percent rise in Chinese consumption theoretically could lead to an extra $25 billion of American exports, creating more than 200,000 American jobs.

McDonald's and the Rice Burger

Another major American brand making big waves in China is McDonald's. The company has spent 20 years working in the country and now opens a new location every other day.

Tim Fenton, the president of McDonald's Asia-Pacific, Middle East and Africa division, said that the company had to experiment with food until getting it right.

One of the company's biggest blunders when it arrived in China was the rice burger.

"They didn't buy it," Fenton said. "People come to McDonald's for what we are. They don't want to come to us for rice."

The biggest seller is a crunchy chicken sandwich that is super spicy, probably too spicy for most American palettes. An alternative to McDonald's famous french fries is steamed corn in a cup. Instead of the fast food chain's apple pie, the Chinese like taro pie, which tastes like a chopped potato in gooey, sweet syrup.

McDonald's uses only food grown by Chinese farmers and hires 66,000 employees making wages much lower than workers in the U.S. but still on par with China's average salary of $2,600. A manager at a McDonald's in China makes nearly triple the average salary.

Fenton said that American businesses in China need the Three Ps to succeed -- "Patience, persistence and pockets, deep pockets. When you do business in China, you have to be in for the long haul. You have to have a long term strategy."

That long-term strategy includes some fun additions not offered in an American McDonald's. In China, couples can get married at one of the restaurants and parents can pick up a Ronald McDonald cake.

Another American stalwart institution, the Gap, just opened a string of stores in Beijing and Shanghai after two years of intense research. The company redesigned some of its trademark jeans to appeal to Chinese consumers, even designing specific clothes for different cities in China.

The jeans in Beijing will run bigger because people there are taller and the weather is colder.

General Motors Partnering With Chinese Government

It's not just retail and fast food.

Automaker General Motors sold a record two million cars in China last year. The company is on a path to selling more cars in China than in the United States. At least 95 percent of those cars were made entirely in China using Chinese workers.

The Chinese government and General Motors split the profit, with 49 percent of sales going to the automaker and 51 percent to the Chinese government. Most of the sales are to first-time buyers, many drawn from the 700,000 Chinese still living in poverty in villages but hoping to move up.

For the future, the newest joint design is a Jetsons-style electric car, a car so tiny it's about a third of the size of a traditional vehicle. During the design's unveiling, GM said that it predicted that by 2040, there will be 1.2 billion cars on the planet and 60 percent of people would be living in cities.

For huge cities like those in China, the five-foot-by-five-foot vehicle is meant for that not-so-distant future when millions of Chinese will need to drive to work each day.

Even if the jobs are all Chinese, with 1.3 billion customers who's going to walk away?

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