Doing Business in China Jireh’s point of view

China is the fastest growing economy and market in the world. However, it is not always easy for non-Chinese companies to make a profit there. Native Chinese companies have the so called “home court” advantage; including language, culture, brand/name recognition, marketing and distribution.
Still, most western companies look forward to be able to successfully participate in the China market. On the other hand most of the public dialogue is inundated with stories that focus on the negatives of doing business in China such as, the prevalence of piracy of intellectual property or the inability to carry out plans, projects and contracts that were negotiated and drawn in many months of intense discussions and negotiations. Every western client that we have talked with has this concern near the top of their list of fears.

So, with this being the environment that exists, how can western companies make money engaging in the Chinese market whether as a supplier to such market or sourcing product and or services in China? If you listen to the media you would tend to believe that China is only interested in selling to the west. Do companies from the west even stand a chance at all of making money in China’s rapidly growing market?

Yes there is hope.

In fact, what is required to do business successfully in China is not that much different from what is required in the U.S. It all boils down to how you develop and structure your business relationships. Most U.S. companies enter the Chinese market looking through rose colored glasses. They become deluded with thoughts of rapid success when they hear about the 1.3 billion consumers in China. Many times they lose site that some elements of basic business practices must be transplanted but other essentials should experience a necessary transformation. .

Applying a symmetrical pattern of business in a very asymmetrical environment like the Chinese where there are great initial demands fro resources, both time and money can bring companies to a point of absolute frustration and unsatisfactory results, those companies resign themselves to failure and leave complaining that the China market is unfair because of piracy and/or lack of law enforcement. Most Americans and Europeans think that the Chinese companies get preferential treatment from the government and thus it is impossible for them to be successful in China.

In reality, this is not the case. As a matter of fact, every major western company now has a significant manufacturing, sales and marketing presence in China. The numbers are growing monthly. If you followi the China related news reports you will frequently hear the names of prominent, well known European and U.S. companies that either entering or expanding their China based operations every week.

This suggests that these companies are making money in China. No publicly traded company would continue to invest in a market that is continuing to lose money over an extended period of time.

It is a fact that China has long had a reputation as a difficult market to conquer. Difficult yes, but not impossible. As China continues to plug into the global economy and its economy continues to be the leading major world economy, other global businesses simply cannot afford to ignore the China market and not become a participant.

Most of us know China as an exporter of cheap goods to the rest of the world. However, it is also a major importer of goods and services. Since joining the WTO China has opened its markets to other countries. This was inevitable if China wanted to be able to trade with other countries. China recently made an effort to improve its trade relations with the Americas. This has led businesses which had never previously thought of selling to China to start thinking of it as a major market.

Three key factors to doing business successfully in China:

1. Think long-term, not short-term. Short-term thinking only, simply will not work successfully in China. Operating in this manner is inconsistent with the business culture in China. Although, from your initial engagements with Chinese companies, you could be left under the impression that the “business is here and now” and immediate decisions ought to be made. The companies that have been successful in China have spent considerable time and effort in building up their network of business partners and relationships. Horizontal and vertical ground work needs to be done before moving forward. You need to know who you will be dealing with before getting into a long-term business relationship.

Chinese at their core routinely think long-term when it comes to business relationships. If you go in with the same type of approach you will be perceived differently. They will take you more seriously and will see you more as a potential business partner.

Since China is a new comer to the west, most western CEOs do not much Chinese experience, which is why they are reluctant to enter the China market. They are accustomed to the traditional short-term relatively fast pace American thinking pattern. This frequently leads to short-term tactical moves which breeds disadvantages in working with the Chinese governmental official or entrepreneur.

2. Become more knowledgeable. Just as when doing business in the western world, it is very important to know the local market. It is no different when doing business in China. No matter what products or services you will be marketing there are already other local companies already marketing those same products. This means that you will not be able to compete on prices and distribution. So why get involved? What are your company’s strengths, and how can you leverage them and be successful in the China market?

The key to your being successful is to get someone on your side who knows China… both the language and the culture. Knowing the language alone is not enough. They need to have knowledge of the local culture as well. It is best for you if these folks also have a successful record selling products and services in China.

3. Find a local trustworthy partner. If you want to be successful in the China market it is not wise to go after it alone. The most successful companies get a Chinese partner and develop joint ventures to conduct the business. This type of structure allows the Chinese partner to share in the earnings. They are not just a marketing or distribution channel, but now they share in earnings and have a profit motive to push your products in the market place. At the same time you gain access to a low-cost, high quality labor pool and a growing consumer market.