Jun 08, 2017
Make Our Country Great Again: A Case Study on Fuyao Glass


By Prof. Hugh Thomas, Associate Director, Center for Entrepreneurship, CUHK Business School

A Chinese billionaire is one of the people who are really making America great again.

The billionaire is Mr. Cho Tak Wong. A Hong Kong citizen, Mr. Cho uses the Cantonese spelling of his name and is also known as Cao Dewang (曹德旺,). He recently made news by expanding his glass empire, Fuyao Glass, “…making overseas investments this year in Germany, the United States and Russia, with the total set to reach US$200 million…” creating 3,000 jobs in America at his state-of-the-art factory in a former Ohio General Motors plant.

Cho grew up in poverty in the countryside of Fuqing County, Fujian Province of China and became an entrepreneur in his youth during the Cultural Revolution, a time when capitalism could be life-threatening. Forty years later, he won the title of the EY World Entrepreneur of The Year, the first Chinese entrepreneur to receive that high honor.

So how did he do it?

Working within the System

We answer the question in our teaching case “Dividend Policy at Fuyao Glass[1] and its accompanying video by looking at his management principles. Cho has worked confidently to provide valuable service within the system, as he put in his book Heart of a Bodhi, “I would do what the government permitted and learn how to make money from it.” [2]

He started before the reform and opening of China by trading agricultural produce, repairing road carts, swapping production plan quotas and running the commune’s water meter glass factory, with an eye to benefiting the local community and its government while seeking profit. Today, he runs the largest auto-glass manufacturer in China, Fuyao Glass, which is the second largest, and by far the most profitable, auto-glass producer in the world.

Knowing the Customers

Leading auto-glass manufacturers are highly integrated into the global supply chains of the world’s major automobile manufacturers. None of Fuyao’s customers -- Volkswagen, Toyota, Daimler, GM, Ford, Fiat-Chrysler, Honda, Nissan, BMW etc. -- make their own glass but all require their suppliers’ windshields to fit perfectly, just in time, into each automobile’s final assembly. An automobile model takes years of joint engineering between suppliers and the automobile manufacturer, raising formidable barriers to entry to competing suppliers. Whereas major auto-glass competitors Asahi Glass and Nippon Sheet Glass of Japan also produce construction glass and whereas Saint-Gobain of France is more devoted to other construction materials as well as ceramics, chemicals and electronics than to glass, Fuyao is laser-focused on auto-glass: it wants to be number one in the world. It knows its customers and strives to serve them well.

To secure suppliers, Fuyao has integrated upstream into float glass, not only in China, but also abroad constructing two float glass production lines near its Oblast Russian auto-glass facility and retrofitting and upgrading its two float glass production lines in the US.

Proximity to the customer also matters. Fuyao probably reduces its selling costs for automotive glass by 3 to 4 per cent by producing in the US while increasing its sales revenues in the US market [3] . Fuyao reduces risks of rising protectionism, providing thousands of jobs for the local American and Russian economies while generating profits. Fuyao’s technology, too, is global with two R&D centers in China and research centers in Germany and the US.

Serving the Society

Cho is a conscientious Buddhist who believes in serving the society, and has contributed millions of dollars to temple construction in his home county. Our video interview illuminates his philosophy:

“Whether making a living in a company or doing charity work, you have to be respectful of society. When you achieve your goals, you have to do so within the context of doing what is good for the society and the country.”

He set up the Heren Foundation to which he donated in 2011 just over 14% of the shares of Fuyao - a donation valued at over USD 500 million that made him the foremost philanthropist in China[4]. And he reflects, “Nothing is permanent, yet we find meaning and value in following our ancestors pursuing development and helping the world.”

Understanding the Principles of Finance

Our case study requires students to take the role of Cho’s Chief Financial Officer to decide Fuyao Glass’ dividend policy in light of its ambitious investment plan, charitable pursuits, anticipated initial public offering in Hong Kong and philosophy. Students must make cash flow forecasts. And they must take Cho’s views, as expressed in the video, into account. On capital structure, he opines, “I think that if you are running a company and don't use debt, you are a fool.” On dividends, he confides, “I also like money. I work myself half to death, but if I don't declare dividends, where can I get the money from?”

Building Mutual Trust

Cho asserts that he has built his success on trust. “Trust is a belief and a confidence. Not only self-confidence, but trust in others - mutual trust. If you believe in nothing, you will accomplish nothing. It was because of my belief in the consistency of government policy, and in my own abilities, that today's Fuyao was built.”

But “trust” to him is different from uncritical acceptance of government policy. The Economist recently reported his complaints about the Chinese government. Cho thinks that today’s China is, in some ways, more difficult to do business in than the China of his youth, as he reflects, “Today’s problem? Far too many taxes, regulations and fees[5].

Is it also time to make China great again?

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[1]Thomas, Wang and Wu, “Dividend Policy at Fuyao Glass”. Harvard Business Review, November 09, 2016. Video available on YouTube: https://www.youtube.com/watch?v=vKlpK3pNu8A.

[2]曹德旺,《心如菩提》, 人民出版社,北京,2015, 第26页。

[3]Nick Lai, Leon Chik, Rebecca Y. Wen, and Liwen Yin, “J.P. Morgan: Fuyao Glass Industry Group – H, Crystal Clear Future – Initiate with OW,” Asia Pacific Equity Research, 2015.

[4]Lydia Chen, “Charity receives massive donation,” Shanghai Daily, April 14, 2011.

[5] “Making China Great Again” The Economist 422:9023, January 14-17, 2017 page 69.



Please add your comments, insight, questions to further discuss this topic



K. Si
7/27/2017 3:42:33 PM
I agree that building mutual trust is extremely important for the success of modern business. It may have some costs in the short-run but its long-run benefits will outweigh.
K. Si
7/27/2017 3:40:05 PM
As globalization brings all the companies to China or other places where labor price is lower, Fuyao moves its factory to the U.S. where its suppliers are closer and thus gains a unique advantage.
K. Si
7/27/2017 3:37:39 PM
Concentration of resource and technology is importance. Fuyao's success may in part depend on its positioning, in that it focuses on glass and wants to be no.1 in the world.
7/6/2017 1:35:58 PM
I always have difficulties understanding in what way a corporation should serve the society and what corporate social responsibility should include. Nowadays, it seems easy for a corporation to claim that it has achieved social responsibility, for example, by just paying the employee on time.
7/6/2017 1:23:45 PM
It’s a trend that more and more Chinese companies will invest abroad. I wonder in addition to complying with the local rules and culture, whether Chinese companies can also cultivate and spread a specific Chinese corporate culture oversea.
7/6/2017 1:15:14 PM
It’s even more interesting to know how Chinese entrepreneur build mutual trust with the government official. Government policy in China could become inconsistent when new responsible officials are appointed and how an private entrepreneur deals with it.
6/26/2017 4:30:35 PM
I am more interested to learn challenges the company is facing now to continue its business in foreign countries and possible solutions available to the company.
6/26/2017 4:30:16 PM
Although the management principles of the founder or CEO are important for the success of the corporate, however, what other companies can learn is mainly from those experience that can be summarized and spread.
6/26/2017 4:29:57 PM
We all proud that a successful Chinese corporate can open factories in Russia and US. It indicates that the techniques and management of this corporate have reached the world class.
6/25/2017 10:26:37 PM
But we still need to see the positive side of this event. Almost every big companies in the US have been sued by their employees. Fu Yao Glass is not the single case. Apart from the negative comments, there are also some positive comments which are the proponents of the outbound investment.
6/25/2017 10:23:24 PM
However, there is a potential political risk for Fu Yao Glass to invest in the US.The recent debate of the news that Fu Yao was sued by the employees in the US indicated the cross-cultural challenges for the company. The company have to learn to better localize their institutions and strategies.
6/25/2017 10:20:15 PM
Fu Yao Glass made a wise decision to invest in the US and took the advantage of the low taxes, regulations, and fees in the US comparing to the situations in China.
Ran AN
6/25/2017 12:40:24 PM
It might be too early to say too many taxes, regulations and fees in today’s China. A good institution should be built based on justified regulations and how to make these regulations realizable in fact. In this sense, China is still far behind.
Ran AN
6/25/2017 10:45:23 AM
Recent years, there are indeed more and more Chinese firms investing abroad in various forms. However, it needs more thinking whether these high-profile investments are driven by rational economic factors or other considerations.
Ran AN
6/25/2017 10:26:23 AM
It is not bad that entrepreneurs undertake certain social responsibilities and contribute to its operating environment. However, it is controversial how enterprises and entrepreneurs fulfill the social responsibilities; one of such debates is focused on Mr. Cao’s some aggressive behaviors.
Ran AN
6/25/2017 10:19:53 AM
Cao Dewang and his Fuyao glass empire indeed do a very good job “within the system”. However, when the empire begins to go outside of the system, i.e. the Chinese market, it needs to learn how to work in another system. Considering the recent disputes occurred to Fuyao factories in U.S., it is really important for domestic entrepreneurs to learn how to run business on the international stage.