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Business Tips

Basic China Entry and Operation Dos and Don'ts

 

 

 

Dos

1. Know Your Market
If you do not have the knowledge about the market for your products/services in China, you are not ready to enter the China market. Knowing your market will enable you to know:

a) Is there a market for your products/services in China
b) What prices you can sell at
c) Who the buyers are and what do they need
d) How to sell in this market
e) What kind of vehicle you should have as well as many other relevant issues

Entering the China market is essentially a mechanical activity. What matters most is what your market is in China, and how you develop it. Its also crucial be as informed as possible about current social, economic, and political aspects of China, especially for local market information.

2. Start Small, Then Grow Larger
Unless you're a large multinational company and able to allocate huge budget to build plants to attain scale, it's best to start small. Representative office(RO) is the easiest and quickest way to access your targeted market in China, which requires little investment and time. This will give you time to learn the market better, develop the market, and learn from your mistakes. If, after this time, you want to establish local production, this can be done without difficulty, and you should be able to do with greater success than if you did everything in the beginning.

3. Pay Close Attention to Channel Issues
China is a huge country with diversified regional markets. Develop a network of channel partners, typically distributors/resellers, are needed for effectively entering specific regional markets. This means that learning to develop the China market and its regional markets (sell products/services and grow one's brand) through distributors/resellers is a priority. Due diligence on your potential partners in China to evaluate their credibility and capacity is important for your business in China.

4. Protect Your Technology
Technology do get stolen in this market. Your staffs or engineers who know your technology well could (or informally transferred technology to) go to a competitor, or starting his/her own company. And your remedies to prevent this happening are few. The best thing is not to lose the technology in the first place. Evaluate what technology you most want to protect, and then systematically institute the means to protect it.

5. Get Out of Your Chair & Office
Some foreign executives in China can be too isolated to themselves and rarely interact with those outside the inner circle of their (English speaking) managers, and dependent upon this group. Those executives need to interact with parties throughout the organization and locals, even if communication is a little difficult. They could spend too little time with their local customers, or potential customers. Spending more time with local customers allows the executive to bypass the filtered information on customers they typically received, and gain their own first-hand insights. Furthermore, it shows customers that they are valued, and aids in their retention.

6) Build Your Contacts and 'Guanxi' - Connections and Relationships in China
Business relationship in China is quite different from the West. It more often is established based on personal relationship. So when doing business in China, it is of crucial importance to build personal contacts with your intermediaries, partners, government officials, customers and locals. This will bring about multiple benefits, as they can act as a reference and navigate the legal, political and local systems and local business networks.



Don'ts

1. Don't Manage From Long Distance
One common mistake too frequently made in this market is managing the market from a distance, including Hong Kong and Singapore. Managing a company of all but the smallest scale in China is a full time job at the executive level, and needs to be treated as such. This is not only because there are many challenges and potential difficulties in this market, but also because China is very much an "in person" business culture, which applies to employees as well as to customers. Some problems that poor-performing companies have in this market can be traced to absentee executives.

2. Don't Count on Short-term Gains
Some companies have the wrong expectations that they need and can achieve instant success right after they enter the market, while others get the idea that waiting 10 years to turn a profit is reasonable. In the first instance, the company is setting itself up to fail. This market needs to be developed, and Chinese end-users typically require a higher level of familiarity with the supplier before they will become customers. At the other end, with few exceptions, if a company has been here over 6-7 years, and has still not made a profit, then something is wrong. Some companies make the market work in the first year, some later, some never; 2-3 years is a reasonable expectation.

3. Don't Give your China Business to the Wrong Person to Manage
Find the right person to manage your business in China can be challenging. It is important for your business in China. A trial period, under supervision of someone from the home office, often makes good sense.

 

For more information about China, please contact us.


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