For Larry Hotaling, a Big Mac can serve a much loftier purpose than a greasy lunch: It can be a tool for evaluating a city in China as a potential supply base.
Hotaling, a consultant and a former executive for Flextronics International Ltd. in China and Thailand, said one easy way to eyeball a location and see if it's well-integrated into the world economy is to look for a McDonald's.
By his theory, if you see the arches, you're golden. If not, he said, ``It's going to be a rough road to hoe for about two years.''
Hotaling, who co-founded Hong Kong-based consulting firm Global Diligence Ltd. with partners Gary Nightingale and James King in 2002, offers the advice partly in jest. But he said he learned that lesson when he was involved in a factory startup in 1998 in the interior of the country, west of Shanghai.
It proved very difficult to attract management talent to the factory without paying them a huge premium to live away from China's Westernized coastal cities. Not coincidentally, the town didn't have a burger joint or other emblems of U.S. pop culture.
``If you want to save a lot of time, do the McDonald's test,'' he said. ``If you go there, and there's no McDonald's, forget it.''
Hotaling's firm advises U.S. companies interested in entering China's market or seeking sourcing partners there. Hotaling and Nightingale spoke at the Plastics Encounter design and management conferences, held March 23-24 in Charlotte.
The issues are much more complicated than checking for fast-food restaurants, of course.
China's economy is very dynamic and has changed a lot, even in the last half-decade, he said.
It's growing quickly, of course. China's officially reported gross domestic product growth of 8 percent annually is too low, he said, with the actual figures probably closer to 12 percent.
Automobile output in 2002 jumped 55 percent to 1.09 million units, and domestic sales soared 56 percent. Automotive production capacity in China is expected to more than double, to nearly 5 million units, from 2003 to next year.
Nightingale, who deals with a lot of Chinese molding, tooling and industrial design shops, said companies there are eager to pick up insight into the U.S. market and American consumer preferences. But that does not mean the Chinese market is easy to work with. It has complicated legal structures, and ``everything takes more time in China,'' according to Hotaling, who is based in Naples, Fla., when not traveling through Asia.
He stresses the ``three C's'' as key to success when outsourcing from China - communications, capability and capacity. It's vital to identify and use the right supplier to meet your specific needs, since the quality and sophistication of Chinese suppliers varies widely. And then you must work hard at managing the project and related communications. You must develop communication tools and not just rely on e-mail, he stressed.
One also needs to take great care when sourcing molds from China, both men said. Lower-cost tooling may be made from poor-quality steel and should be avoided unless the application is for a simple part with generous tolerances and a relatively low production quantity, Hotaling said.
He suggested that a good outsourcing strategy is to use three to five midsize China suppliers that have excellent toolmaking skills with in-house or partnered injection molding capacity, and value-added capabilities. Even then, continue to look for other suppliers, as a hedge against possible cost, production capacity or responsiveness issues.
Nightingale, who also manages global sourcing and international market development for design firm Ignition Inc., in Plano, Texas, said that companies such as RadioShack Corp. are trying to help their Asian suppliers develop designs that are more appealing to North American consumers.
Ignition, for example, has set up an office inside RadioShack's Fort Worth, Texas, headquarters, and is working with the company's Asian suppliers to improve their designs.
In the past, Asian suppliers would approach RadioShack's purchasing department with new products and ask if they were good enough. But a lot of times those firms do not have a good understanding of the North American market, he said.
Now, RadioShack wants to beef up product design and communication with those Asian suppliers, Nightingale said.
``They're essentially pushing us to work with their Asian manufacturers to come up with new ideas and new products,'' said Nightingale, a Chinese American who also previously worked for Flextronics in China and who keeps an apartment now in Shenzhen.
``They want that model to change so that Ignition will drive down to that manufacturer - `Here is the new style of clock radio you should be producing for next year,' '' he said.
Building such relationships take time.
Hotaling said doing business in China requires an understanding of the culture, or at least a willingness to learn. A lot of time must be spent cultivating relationships, even before any real business is discussed. Ties to the government are important, particularly with customs and local officials, and you need solid relationships with suppliers and partners, he said.
``Often as Americans we think we know everything there is to know about business,'' Hotaling said. But in China, he said, you have to put that aside, and not always order the Big Mac: ``If you think American and act American, you will not have a pleasant time.''