Getting ready for China

I recently attended a China Business Training course hosted by NZTE. The programme is composed of eight modules, two per day. I signed up for the first two modules which focused on China Readiness and Market Entry. If you are looking to possibly do business in China or are already then I thoroughly encourage you to register for this course. At only $50 a day it is outstanding value. Although I currently do business with other Asian nations, particularly Japan, I was still blown away by the amount of useful insights I received from this course.

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Below I have mentioned ten takeaways from the day.

  1. Read the NZ Inc China Strategy and China’s 2011-2015 5year Plan
  2. Targeting Cities. It’s common knowledge now that you don’t just talk about China as a whole market. It is made up a number of cities all with their different characteristics. Beijing is known for tradition, government, large universities and tourism, Shanghai as a modern, trendy, financial capital and Guangzhou as the main port of S.China, Cantonese dominated, great food. It is likely that your competitors are already in these three cities so why not target a second tier city. For example Ningbo (lots of NZ interest in this city), Qingdao (has a port), Wuhan and Shenzhen. Many of them still have 10s of millions of consumers. Your first entry should be a pilot in one of these smaller cities or regions.
  3. Companies who fail in China try to cut corners, hire and overpay an unqualified local to run their China operations at arms reach.
  4. China is modernising not westernising. China is not a developing economy it is a re-emerging economy. In the 1800s China produced 25% of the world’s industry output. The rise of communism and wars had a detrimental effect on the economy. However, now it is re-remerging at a rapid pace and will soon overtake the US as the largest economy. While you still might consider China as being a communist nation it is more accurate to described it as ‘socialism with Chinese characteristics’.
  5. Reported statistics about annual incomes in the Western world often don’t reflect the truth. This is typically because job classifications or titles can be quite different or the full income is not reported. GMs can earn well over $300k. In addition, annual incomes are rapidly increasing for the lower end of the spectrum. The minimum wage is rising at 15% per year (more than inflation and economic growth).This is driving the movement of the poor into the middle class. They save 40% of their disposable income.
  6. ‘It depends’ is the answer to most situations. While there are rules, it is the ‘rule of man’ that dictates whether they are implemented or not. Contracts are regarded more as guidelines rather than a legally binding document. Terms are frequently changed following signing. It is not about right or wrong, just good and bad outcomes. Relationships are the basis of business.
  7. Buy a flash pen. Hierarchy and status are critical to relationships in China. Sometimes its not what you’re saying that is important. Your might need to change your title for China business (Executive, director, vice president, global are favourably viewed. Everyone is a manager in China), upgrade your phone, buy a flash pen just for trips to China and be aware of seating (back to door = low in hierarchy).
  8. Never cause someone to lose face. This requires a lot of self control and awareness of what you are saying. Simply asking someone ‘ do you understand’ can have negative implications. Never put a senior person on the spot in front of their colleagues. If something is difficult in your business with your Chinese partner, something may have gone wrong with the relationship, they will not tell you. Focus on solving the problem not asserting blame.
  9. Negotiations & Communications. Take people outside of the business and share your life to build trust. Chinese are more likely to have a more open discussion about the business details over dinner. Several meetings rather than one are favoured. Decisions are unlikely to be reached in the meeting. Bring gifts. Both companies need to win at the same time.
  10.  Packaging. 50% luxury goods are purchased as gifts. Chinese pay premiums for top in class packaging. Colours, letters, numbers, brand name are all important. Some wine actually retails for 4x normal price due to packaging..

 

graeme@graemefielder.com

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