“Belt and Road”

Ms. Zhou Jingyu

Vice President of Arcplus Group PLC

Going Aboard, Fitting Ourselves

Driving In-depth Internationalization

H+A : The “in-depth internationalization” is an important strategy of Arcplus Group PLC (hereinafter referred to as Arcplus or “the Group”) in the “13th five-year plan”. Could you please tell us your understanding of “in-depth internationalization” and the timing that this strategy is put forward?

Zhou : The term of “in-depth internationalization” is defined in our “13th five-year plan”. In other words, we should take the opportunity of successful acquisition of Wilson Associates to deploy international market by steps as scheduled, form business collaboration and complementary advantages of international and domestic markets, and gradually realize four turns: turning from “project focus” to “market focus”, from providing service to domestic projects for overseas investment to actively bidding for international projects, from overseas technical service projects to comprehensive services of technology and management (EPC), and from service products providing to overseas investment and acquisition.

In my opinion, in-depth internationalization means to participate in global competition. We should not only focus on overseas projects or expand overseas market, but also participate in global resource configuration and realize global resource configuration and sharing in aspects of technology, talents, financing, service, R&D and brands. Our “internationalization” will be carried out in three stages, respectively going abroad, integrating to international development and stepping to a new level. After exploration and practices about going abroad for decades, we have built certain foundation and gained some accumulations. Now we are in a middle stage of in-depth international development: fitting ourselves. We should learn ways which can better adapt to and integrate to international development gradually from aspects of global company management, market operation, assets and talent introduction, and cultural fusion, integrate global value chain, and push technological upgrade and management integration through full-industry-chain overseas operation.

The age of Marketing 3.0 proposed by Philip Kotler who is known as “Father of Modern Marketing” has already arrived, while the essence of Marketing 3.0 is value-based marketing driven by humanistic spirits. When making decision on marketing strategies, enterprises shall not only consider commercial return, but also should take moral and social influence into account, and act on progress of human civilization with active attitudes. Therefore, today’s international development is more than market expansion, but more importantly, to affect a nation’s cultural depth. For instance, the Vietnam-based project remodeled the traditional house type of “Shop House”, and created a “three entrance floors” mode and the concept of “sky greenways”. The mature construction technologies and experiences in Shanghai are brought to local area in combination with innovation based on local climate, culture and habits to make the project refreshing. Our innovation in many design fields greatly improves comfort and quality of local house, as well as the level of their real estate industry.

Ms. Zhou Jingyu attended the “Belt and Road” Forum on behalf of Arcplus Group PLC

H+A : What is the objective of the “In-depth internationalization” strategy?

Zhou : The “In-depth internationalization” strategy aims to make top-level design of the group for its in-depth international development, make overall program design associated with the “Belt and Road” initiative and by virtue of Wilson Associates’ platform, deploy global markets by steps, and form business collaboration and complementary advantages of international and domestic markets. The final objective is to realize global market layout, global capital application, global talents configuration and global technology sharing.

In order to propel “in-depth internationalization”, four aspects shall be done well. The first is to accelerate global deployment and create an international platform. The second is to boost upgrading of overseas business. For example, we tried the Architect Responsibility System in a foreign-aid project for the first time; in the Alpha 3 office tower in Ho Chi Minh City, Vietnam, we brought overseas consulting services abroad for the first time. The third is to accelerate international talents cultivation, and integrate global branches and their resources to build a base for youths to grow and develop. The fourth is to improve brand influence. An enterprise is a complex ecological system. Especially for enterprises with certain historical and cultural basis, brand construction is not to only design a set of VI, or a slogan, or advertising, but to develop targeted influence in a planned way after comprehensively considering internal and external resources, as well as future planning of enterprises. It is necessary to put the brand to the level of enterprise development strategy, make plan for brand from such level, develop brand by an overall thinking, spread brand by an integrated way, and allow full staff to participate brand development and professional talents to manage the brand. Currently, the Group has finished brand reconstruction, which is the first step. Later, on that basis, the Group will combine brand with advantages to create brand currency so as to convert to brand value, monetizing brand influence and forming brand assets.

Step by Step

Building the “Belt and Road” Jointly

H+A : What are the opportunities that the “Belt and Road” initiative provides to Arcplus for its in-depth internationalization?

Zhou : The “Belt and Road” initiative makes countries along the route cooperate more closely, establish better relationship and push forward regional trade cooperation. Many countries along the “Belt and Road” are keen for cooperation with China through various modes, and wish to drive their own development by business transaction, joint construction and sharing.

We meet the following opportunities:

1. Becoming a Shanghai-based enterprise actively going abroad

The “Belt and Road” construction links development of China with that of other countries in the region, and turns opportunities in China to global opportunities. In the past three years after the “Belt and Road” initiative is proposed, Arcplus has driven some key projects to implementation with its “pioneering” creative spirits and active integration and advance.

As the “Belt and Road” development advances, Arcplus has realized its transformation and upgrading during implementation of “going abroad” strategy by virtue of opportunities offered by the “Belt and Road” initiative, and made the Chinese architectural design capacity attract global attention.

2. Becoming the pacesetter for the “Belt and Road” development

Architecture design is the key point for the “Belt and Road” construction, while Arcplus, as the “leading design firm in China”, has brought the leading role into full play and actively performed the “Belt and Road” initiative.

In May 2017, Ms. Zhou Jingyu, on behalf of Arcplus Group PLC, visited Thailand and Vietnam with Hong Kong and Shanghai Government Delegations for market survey and project negotiation. During the visit, Zhou was received by Prime Minister Prayuth Chan-ocha of Thailand and Prime Minister Nguyen Xuan Phuc of Vietnam. Arcplus said during the interview that it will give play to unique advantage, integrate various resources and make efforts for urban construction and development of Thailand and Vietnam.

Ms. Zhou Jingyu was received by Prime Minister Prayuth Chan-ocha of Thailand during visit on behalf of Arcplus Group PLC

In September 2017, Ms. Zhou Jingyu as Head of Shanghai Enterprises Delegation, organized by Hong Kong & Macao Affairs Office of Shanghai Municipal People’s Government and Hong Kong Trade Development Council (HKTDC), led enterprises such as Shanghai Industrial Investment (Holdings) Co., Ltd., Shanghai International Group, Shanghai Construction Group, Shanghai Tunnel Engineering Co., Ltd., Geoharbour Construction Group and Longyuan Construction Group to attend the second “Belt and Road” Summit co-organized by Hong Kong SAR Government and HKTDC. In the forum Shanghai-based enterprises displayed themselves and further expanded communication and cooperation with countries along the Belt and Road.

The “Belt and Road” initiative has switched from vision to action, and Arcplus has also fully shared and applied its abundant experiences in architectural design for over 60 years to “Belt and Road” projects. Currently, Arcplus has designed many landmark projects for countries along the route, such as Alpha 3 and the Golden River Complex in Ho Chi Minh City, Vietnam, and Drug Rehabilitation Center in the Philippines and other key foreign-aid government projects.

3. Establishing a “super team” and creating a win-win stage

The “Belt and Road” initiative enables countries along the route to cooperate more closely, establish better relationship and push forward regional trade cooperation. Many countries along the “Belt and Road” are keen for cooperation with China through various PPP modes such as EPCF, BOT and BT, and wish to drive their own development by business transaction, joint construction and sharing.

Centering at engineering design and consulting, Arcplus is an integrated service supplier providing high quality comprehensive solutions to urban construction. In future expansion for the “Belt and Road” construction, the Group will not only integrate internal business services, but also unite external participants and partners to prepare to create “Belt and Road Alliance” and exert flying-geese. We will, starting from front ends such as financing, planning and feasibility study, integrate domestic superior resources through financing + EPC construction mode such as EPCF, EPC and BOT, and combine the guarantee role of the Chinese government, dominant role of enterprise and supporting role of financial institutions to comprise a “super team”. The super team will provide unified negotiation and package solution so as to gain a large share of overseas market. Currently, Chinese design and construction enterprises shall take the opportunity to realize a leading development from “competitive” to “powerful”, and show the charm of Chinese enterprises in the international market.

4. Driving transformation and upgrading, and pursuing craftsmanship

Under the “Belt and Road” initiative, Arcplus has developed from “going abroad” to “integrating to international market”. It requires us to have a better international vision. We shall know international rules, business modes and international standards, and also consider changing project mode, and actively transforming to the universal Architect Responsibility System. In other words, we should turn single identity positioning of design person in charge in design enterprises to engineering dominant identity of general person in charge of design + project management and whole-process technology control, strengthen cultivation of architects in fields of engineering coordination, team leadership, procurement bidding, contract management, cost control and construction management, improve whole-process technology control ability and realize “The Future by Design”. Half of our enterprise culture is creative spirit of designer, and the other half is practical and efficient craftsmanship. In the “Belt and Road” construction, Arcplus bears sense of duty, and should sufficiently show historical inheritance and craftsmanship of China for five thousand years. It will carry forward the Chinese craftsmanship in the field of architecture.

H+A : Could you tell us regions along the “Belt and Road” that Arcplus plans to expand?

Zhou : Raymond Vernon, the US economics, once proposed the well-known “Product Life Cycle Theory” - after a product is created and grow in the original country, the domestic market may saturate after certain stages; in order to expand market, it is necessary to export to extend lifetime of the products. The Nobel Prize winner Stigler also demonstrated the existence of industry’s life cycle in 1980s. Vernon also studied marginal transfer theory of industry: industry may be transferred, expanded and differentiated in development.

I first talk about these two theories to find our orientation and direction for expansion in the “Belt and Road”. That is to say, we will output our core competitiveness, capacity and brand influence in the advantageous areas.

On that basis, the “Belt and Road” construction of Arcplus will be focused in four regions, respectively Southeast Asia, the Middle East, Africa and developed European and American countries.

1. Projects in Southeast Asia

As a great economic vision driving openness and cooperation among countries along the route, the “Belt and Road” initiative will provide an important opportunity for countries in Southeast Asia to solve difficulties of substantial reform. In recent years, Thailand, Vietnam, Malaysia and the Philippines have successively put forward construction planning for large-scale infrastructures, especially transportations, and expressed their active attitudes toward cooperation with the “Belt and Road”. Arcplus has done over 20 projects in Southeast Asia, involving office, sports, business, residence, hotel, theaters and industrial engineering. The services we provided are diversified, including architectural design and engineering consulting services such as urban planning, interior design, acoustic design, geotechnical design, engineering detection and project management. Arcplus will give play to unique advantages to integrate various resources, and make efforts for urban construction and development in Southeast Asian countries such as Thailand and Vietnam.

2. Projects in the Middle East

China and the Middle East are places of origin of two major human civilizations, closely connected by the Silk Road. Despite the unstable political situations in the Middle East, some major countries such as Saudi Arabia, Egypt, Kuwait and Turkey have increasingly stable politics and high level of economic development, and thus more opportunities. Arcplus has been doing projects such as the New HAHC Hospital and Asian Olympic Council Complex in Kuwait, Atlantis Hotel in the Palm Island of Dubai, and Park Hyatt Hotel in Abu Dhabi, accumulating some preliminary experiences.

New HAHC Hospital in AHMADI and JAHRA, Kuwait

New HAHC Hospital in AHMADI and JAHRA, Kuwait (Interior Design Rendering)

3. Projects in Africa

Under the “Belt and Road” initiative, China uses infrastructure connection and capacity cooperation to drive development of Africa, and particularly improve independent development ability, create job opportunity and increase tax revenue of African countries by direct investment. In Africa, Arcplus has been doing the Mauritanian Medical Team Dormitories and Outpatient Buildings for Infectious Diseases, and the Ben Arous Youth Sports Center in Tunisia. We will continue to actively participate in foreign-aid projects, and output Chinese services and design to Africa so as to strengthen friendly cooperation and benefit local people.

Mauritania Infectious Diseases Hospital

Ben Arous Youth Sports Center in Tunisia

4. Projects in developed European and American countries

Arcplus will, based on the overseas layout of Wilson Associates, further increase market share in the US and developed countries in Europe, improving service quality and brand effect in high-end fields. Wilson Associates owns branches in Dallas, New York and Los Angeles in America, and has formed market influence through many locally well-known projects such as MGM Hotel in Las Vegas and Four Seasons Hotel in Hawaii. In Europe, the Paris office established in 2016 has got a firm foothold in the city of fashion, and the London office is under planning. In the future, the Paris and London offices will jointly build the status of Arcplus in the Europe for products, talents and brands.

H+A : In 2017, Arcplus set up its Vietnam office and signed a landmark project. Could you please talk about development potential in Vietnamese?

Zhou : Since 1990s, the economic growth of Vietnam has been maintained around 6%. In 2016, the economic growth in Vietnam reached 6.21%, and the economic growth in 2017 may reach up to 6.7%. It is one of the fastest-growing countries in the world. As the economy in Vietnam revives and Government inputs more in infrastructure and housing construction and issues more construction permit, the building industry in Vietnam has kept soaring in recent years. As reported by Vietnam Economic Times, the output value of Vietnam’s building industry was about $40.4bln in 2014, increasing 10.3% y/y, while the growth rate in 2016 was 9.1%.

As predicted by Reportlinker, a well-known market research company, the building industry in Vietnam will grow rapidly between 2017 and 2021. Besides, as part of its 2016-2020 development plan, the government investment in public infrastructure and buildings for education and medical care will also boost development in the building industry.

Most of our projects in Vietnam are in the Ho Chi Minh City, which is a sister city of Shanghai. Their similar geographic features, human culture, and urban space and landform provides more conditions and opportunities for Arcplus to expand the Vietnamese market. Our projects signed in Vietnam have reached CNY100 million, and we have got preliminary understanding and summary in culture, laws and rules of Vietnam. Next step, Arcplus will “take root” in Vietnam, and turn the Vietnam office into a local platform for international market development of whole process, full industry chain and all business services through establishing local team or acquisition. In the meantime, we will summarize modes, form replicable business and management mode and apply to other markets such as the Philippines.

Borderless and Localized

Creating Cross-Cultural Management

H+A : How does Arcplus manage its overseas branches?

Zhou : Currently Arcplus has nine overseas branches, among which Arcplus Group (Int’l) Co., Limited in Hong Kong is directly governed by the Group, while Wilson Associates adopts a management level responsibility system under leadership of Board of Directors, and governs seven overseas offices in such as Dallas, New York, Paris and Singapore. In 2017, Arcplus set up the ninth overseas branch in the Ho Chi Minh City through its international company by means of joint construction and trusteeship. After the acquisition, we value the business collaboration with Wilson Associates, and make full use of shared operating information and client resources to realize “operating resonance”.

We now have nearly forty ongoing collaboration projects which have achieved remarkable results. We also signed a batch of projects successfully, such as Jinan Luneng Hilton Hotel, Xi’an Renaissance Hotel, Pujiang Crowne Plaza, Marriot Zizhu Hotel, Shenyang Forum 66, Shanghai Marriot Hotel Hongqiao Remodeling Project, and Suzhou International Financial Center Demonstration Zone, which drove our development in the field of high-end interior design. Young designers are assigned to different offices of Wilson Associates for short-term internship, communication and training. In this way, they improve their design, expand their vision, and facilitate fusion of company culture. In the meantime, we strengthen management on overseas branches in various ways such as operation collaboration, internal control management, budget management and brand management, and normalize it by means of monthly meetings and report.

H+A : How do you localize overseas work and truly integrate to local culture?

Zhou : The localization overseas mainly contains two aspects. The first is localized human resources. Arcplus now has over 300 overseas employees. Almost all overseas branches hire local employees. Except the key technical team, the new Vietnam office also hired local administrators.

The second is localized operation. Overseas branches mainly operate locally, and the statements about operation, finance and human resources are reported to the Group every month, to keep the Group informed of their operating situations.

After acquiring Wilson Associates, we realize continuous cultivation of overseas platform with its brand influence. We develop a platform once it becomes mature. For instance, in the Middle East and Paris, we hired local team to set up two substantial platforms - the Middle East Paris offices. These two overseas offices undertake local projects or projects in nearby countries. They have signed many influential projects and achieved remarkable results.

H+A : How do you enhance international talent team building?

Zhou : In order to realize in-depth internationalization, we should to gather and use global talents. As a matter of fact, talents supply for China’s transnational enterprises can only meet less than 1% demands. Talents become the largest barrier for Chinese enterprises to go abroad. An international talent shall be good at foreign languages, skillful in professional knowledge, and able to make innovation and communication. Except that, he/she should have international knowledge structure and market concepts. In general, they should be good at technologies, business, foreign language, communication and management.

To enhance international talent team building, we can set about from the following aspects:

Firstly, we should apply dual mechanism of external introduction and internal cultivation, and the latter shall be perfected so as to cultivate many local international talents and improve core competitiveness.

Secondly, we should set up “International Talent Pool” and manage international talents in a “reserving” way so as to continuously find and absorb various high-end international talents. Elimination is a method to offer pressure and motivation for talents to keep learning and racing to the top.

Thirdly, we should cultivate “entrepreneurs” rather than just “managers”. Through international training courses, practices and exercise in overseas projects, and short-term communication by taking a temporary post in overseas branches, we will provide post training and promotion channels to overseas talents, improving their international capacity and vision so that they dare to think, work and venture.

Fourthly, we should establish global human resources system. As the saying goes, an army marches on its stomach. An enterprise cannot link all regions closely, flexibly deploy resources, exert synergistic effect in each region, and reach the effect of 1＋1＞2 without a globalized human resources system. To establish such a system, it is necessary to focus on organizational structure, talent cultivation, cultural communication and fusion, payment and welfare.

Fifthly, we should strengthen management on overseas talents. To turn overseas talents - such as employees stationed overseas - into pioneering elites, an enterprise must pay attention to talent selection, designation, application and retention. We need to first grant more authorities to front-end personnel, and shorten process and decision-making chain. Next, we should offer competitive package and welfare, set up comprehensive allowance and welfare system according to local conditions, improving employees’ perception of payment, and meanwhile take balance and fairness problems of different regions into account so as to better inspire and retain talents. Then we need to design clear career path for talents assigned oversea, and communicate with about the plan during dispatching period and after returning to China distinctively and in time. Lastly, we should provide humanistic concern besides competitive package. Through talent and technological upgrading, Arcplus will finally carry out a perfect transformation of “Chinese Design”, and show confidence and strength of Chinese design to the world.

H+A : How do you apply the “general operation” management mode of Arcplus to overseas projects under the “Belt and Road” initiative? Is there any experience of practice that you can share with us?

Zhou : We practice the ideas of “general business, global market and extensive cooperation” under the guidance of the “Belt and Road” initiative and our “in-depth internationalization” strategy to explore integrating business chain of each branch and subsidiary. The Vietnam project is another case, after the Disney project, showing the common future of branches and subsidiaries in the Group. The case shows the following points:

1. Composition of forces: All branches and subsidiaries of Arcplus reached consensus under the overall planning from the beginning when they got the business information - to realize key breakthrough among countries involved in the “Belt and Road” initiative by composited forces of the Group.

2. Talent cultivation: Arcplus has built a project team with those born in 1970s as core, those born in 1980s as backbone and those born in 1990s as new blood. They went through trials and learned from each other when cooperating with business management personnel and consulting companies from dozens of countries, becoming talents with international mind and capability.

3. Resources integration: Internally, Arcplus have built a community with a common future, sharing resources and success. Externally, Arcplus united Chinese enterprises and strategic partners to go abroad together representing China to maximize resource agglomeration effect brought about by collaboration, and meanwhile minimize risks of going abroad.

4. Brand publicity: International brand recognition not only indicates value of enterprise and right of speech in the industry, but also reflects cultural confidence of Arcplus as a Chinese enterprise. The Arcplus logo is displayed in drawings, project advertising video, construction site and office, and corporate culture publicity. As an international brand, Arcplus is taking root in Vietnam with the establishment of its Vietnam office and completion of future landmark projects.