A privately held Consumer Goods Manufacturer (CGM) was a Top 15-ranked business by Forbes in 2009. Despite the comparatively scant amounts of data due to CGM’s corporate financial structure, TSC has identified several potential vulnerabilities with significant potential impact. Open-source documents reveal that the CGM has a varied and expansive business footprint. It is within that footprint that TSC analysts found several key potential vulnerabilities that exist in a Chinese joint venture and website security.
This CGM has been in high-growth mode in locations outside the United States to take advantage of economically advantageous manufacturing, and new markets for their products. Like many organizations doing business in foreign markets, however, the CGM is unclear on whether its relationships and strategies in some markets are proving to be detrimental to overall market share and opportunity.
As most organizations do, CGM has established trade agreements, put in place non-disclosure agreements (NDA’s), and uses typical security technology solutions. They considered this satisfactory to protect their processes and market share.
Tailored Solutions and Consulting analyzed the problem using a small team of employees, each with a background in identifying security vulnerabilities, protecting national interests, and commercial security protocol. One team member is a fluent Chinese speaker who analyzed Chinese-language websites, a key component of this report.
The Chinese language has more than 80,000 characters, with approximately 4,000 of them the most actively used. Such an expansive language allows for native speakers to choose combination of characters that very distinctly describes something with little to no room for ambiguity. It is important for the reader to understand the precise nature with which a native Chinese speaker would choose their words when saying anything, let alone publishing a document to the Internet.
Joint venture assessment
Chinese Ownership: CGM entered into a Joint Venture (JV) with French Company (FC). The JV is called PDQ Co. Ltd (PDQ). Statements on various Chinese and English language websites indicate that it is a 50-50 JV with no Chinese ownership stake. Further research indicated that FC first initiated its venture into China in the 1990s as a sole-foreign owned enterprise.
Typically, the lack of Chinese ownership is a warning sign for TSC analysts. While it's true that many U.S. and European giants were compelled to seek local JV partners, FC set up shop following the Chinese “economic development” charter; where the Chinese government permitted foreign companies to be wholly foreign invested, meaning they could do business without a Chinese partner.
As background, even large corporate giants such as McDonald’s, KFC, DANONE and Coca-Cola were only allowed into the Chinese market as part of cooperative relationships with Chinese counterparts. McDonald’s partnered with the Beijing Agricultural, Industrial, and Commercial Federal Corp. Coca-Cola established JV’s indirectly through Hong Kong-based companies Swire Beverages and Kerry Group. They also have a beverage concentrate company that is a JV with a similar facility in Tianjin. Coca-Cola’s first bottling company in China was a JV in Zhuhai with the former Ministry of Light Industry (now State Light Industry Bureau/SLIB under the State Economic and Trade Commission). KFC set up in China via ties with the Ministry of Light Industry and the Beijing Corporation of Animal Production, a Beijing city government-controlled producer of chickens. DANONE Group of France was a 51percent owner with a Chinese company in Wahaha Group, a large juice beverage maker.