Emerging Markets Provide Opportunities for Business Growth | DOING BUSINESS IN CHINA

Doing Business In China with Dan Paulson

When expanding into China, look no further than... Hangzhou, Tianjin, Xian...

With China now occupying second place behind the US in the world economy, its no secret that opportunity exists there. Upon traveling to China in 2009, I witnessed tremendous growth. I would often joke that you could walk atop the high rise cranes from Beijing to Tianjin and never have to touch the ground. That is as true today as it was then. China has been going through a period of dramatic growth. Companies that are well positioned and intelligent about their approach stand to significantly increase their revenue through international expansion.

Often companies look to the power markets in China when they enter the country. Some believe their greatest opportunities are in Shanghai or Beijing. The truth is these markets represent a very small part of a vast and rapidly growing economy. In a recent report on China's Emerging Markets put out by the US Department of Commerce, it is important to note that the key to China's economic growth aren't the most recognized cities. Instead, 53% of China's total imports comes through "second-tier" cities. Shanghai, Guangzhou and Beijing represent the megacities with enormous populations while other cities such as Tianjin are smaller. Of course smaller is a relative term considering Tianjin has a population greater than 11 million people.

The truth is these second tier cities have a lot going on. They are centers for trade and logistics. Some even are centers for tourism (such as Xian). What's important to remember here is when it comes to trade in China, everyone thinks of Beijing or Shanghai. The numbers speak for themselves. Not only is it much more difficult to get things going in these mega-cities, it is also easier to get lost in the shuffle.

Consider Tianjin for a moment. Most people wouldn't know where to look on a map to find it. Yet it is one of the largest port cities in China and provides a direct line of supplies to the northern cities including Beijing. The TEDA (Tianjin Economic Development Area) is home to most of the Fortune 1000 companies and works aggressively to bring business into the country. This provides much greater opportunities than Beijing.

Since opening my foreign office a few years ago, I have been impressed by the willingness of these second-tier cities to facilitate business growth. When people ask my "why Tianjin?" I have plenty of reasons to share. For those seeking to grow in an emerging market such as China. The opportunities exist if you know where to look.

www.growinchina.com

For more information, please visit Dan's TNNWC Bio.

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Emerging Markets Provide Opportunities for Business Growth | DOING BUSINESS IN CHINA

DOING BUSINESS IN CHINA: Opportunities are Everywhere. Just Make Sure They are the Right Ones.

Doing Business In China with Dan Paulson

Many companies are looking to expand globally. While this could create new sources of revenue, it is important to understand what you are getting into first.

Over the past few years I have met with several business leaders who either have expanded internationally or are seeking to. Some have been very successful in making the move and others struggled spending valuable time and money with no results.

A few months ago a colleague of mine contacted me about formulating business in China. As it turns out, they were actually contacted by a Chinese company and asked to collaborate on several projects coming up in the near future. This Chinese “partner” even paid to fly a delegation from the US company to meet and discuss these plans.

The company I am talking about has a very unique set of talents in their industry. In some cases they were pioneers for what they did and opened up a whole new market for their service in the US. Now they got the attention of a company in China and it seemed like a match made in heaven. The Chinese told them how great they were and how they needed their expertise. They conducted several meetings where a lot of questions were asked ideas were discussed and concepts were shared. After a few months, my American colleagues made their way over to China for the signing ceremony and the deal was inked making for a storybook ending… Or so they thought.

The executives returned from the signing ceremony excited to start on this new venture, which looked to be profitable. Their initial investment of time was going to pay off. After all, this Chinese company sought them. Days went by. Then a few weeks after not hearing anything, the US company reached out. The response they got was shocking. They were told that the Chinese company chose a different direction and they would not need the Americans’ service. What?!? Just a few weeks ago everything was a go. Now all their efforts were wasted.

We often hear about stories of deals in China going bad. Many times this happens because of a failed understanding of how to do business in China. The good news is there are ways to prevent you from getting burned. What it takes is a better understanding of the culture and how you approach business there. After all, we only seem to hear about the times where the venture doesn’t work. We fail to find out all the times that the deal does close without issue.

First let’s look at our scenario above. There are some critical things to watch for here. First off, why the sudden change? One reason is being over-zealous to share information. In this situation, an outsider reaching out to do business flattered the American company. In the US, we wouldn’t think much of it. If we are perceived as the experts, we can often readily share information and it actually helps close the deal. In China, until a trusting relationship is established, you may just be a source of information. That’s what this US company was. They were wined and dined to get information. The Americans had no skin in the game and once they shared their knowledge, they were left out of the picture. Knowing who you're doing business with is very important, and it is often necessary to move slower than you may want to in order to be successful.

Here are some tips to be aware of if you wish to have success in China:

· Have a very clear plan – Strategy is key anytime you expand internationally. China is no exception. Know your moves and what relationships you will have to build before getting started.

· Begin building relationships – Get to know the business climate. Do more than just research online; actually visit the country you are looking to do business in. China is very much a relationship culture. Build those relationships early. Find people who can help connect you.

· Know your investment and milestones – Have a budget and timeline (back to strategy). Have steps along the way where you can stop and re-evaluate each investment point.

· Seek out resources – Companies like mine are structured to help you increase your chances of success in China. Meet with other trade groups and organizations as well to learn about their experiences.

· Keep the interest – When working in China, you need to bring value. Avoid sharing too much. Peak their interest. Let them know what you bring to the table but maintain your value position. If you share too much, your connection may try to copy your work and remove you from the deal.

· Understand Intellectual Property – If it is an issue, know what you need to do to protect yourself. IP is a challenge, but not impossible to overcome. Work with an experienced legal team to protect your rights.

· Be willing to travel – If you are going to have an international operation, make sure you are willing to spend some time on a plane. Remote management is possible, but travel will be necessary periodically to keep up on the operations. Having talented people in China (and the right people) will also avoid some headaches.

· Be willing to walk away – If the deal doesn’t seem right, be willing to walk away. Especially if you do not have an advocate working on your behalf and assisting you. The costs of going through with a bad deal could be much greater than if you get out when you can.

· Get good talent – Besides lawyers, you should have a good accountant, logistics, or other third party advocates that will work on your behalf.

· Learn all sides – What I mean here is get all the information. Popular media will share all the horror stories. Those things do happen, but there are still many companies that can tell you about the successes. Seek to learn and seek to understand.

Remember, growing internationally can be a wonderful experience. It is just a matter of you taking the right steps. Now go out, grow and prosper!

http://www.growinchina.com/

For more information, please visit Dan's TNNWC Bio.

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DOING BUSINESS IN CHINA: Opportunities are Everywhere. Just Make Sure They are the Right Ones.

DOING BUSINESS IN CHINA: Never Assume Anything, Part 2: When “Yes” Means Something Else…

Doing Business In China with Dan Paulson

I grew up and have lived in the Midwest my entire life. Often I hear from others how nice Midwesterners are. We are polite and courteous. We respect others and it’s still possible to get a wave from a total stranger when you are out and about. Even in the US, there are cultural differences when you compare the perceptions of people from the south, either coast or the heartland.

In some cases our nice guy reputation can get us in trouble. Throughout my travels and through my work with different businesses here, I found that one of our challenges is dealing with conflict. Here in the Midwest, we often try not to hurt anyone’s feelings. In some cases we may say yes when we really don’t mean it then disappear when the person we said yes to tries to contact us. Other times we may not commit and string the person along until they are frustrated with waiting. And there are still other times where we may nod our head and smile without having a single clue to what the other person is talking about. Anyone in sales would tell you this is extremely frustrating.

While I am sure many of you have run into similar circumstances throughout the country, it is often perceived as a cultural phenomenon of the Midwest. Internationally we can face similar challenges as well.

I know a company that was looking to source materials from China. They had a project coming up that required the product to be of a specific design and needed it within a few weeks. A company in China was contacted and the management told the management from this company that the products they needed would meet specifications and be delivered by the time required. After many promises and past deadlines, the products were shipped. The cost savings for manufacturing abroad were lost through expedited shipping costs, increased labor for checking products in the US, and a damaged reputation.

In China, it can be said that yes can also mean no. As a foreigner, knowing the difference can be difficult and failing to understand can be costly. We can take it for granted that what is said will be delivered but this isn’t always so. In some cases, you might get what you ask for. I heard a story of a company that wanted to produce a product similar to a brand name competitor. They took the product to an importer and asked them to make the same item. The importer delivered on its promise and produced the same item… exactly as what was given to them… logo and all! You can imagine the impact this mistake had on that company’s business.

The key to understanding when yes means no isn’t always easy, but there are a few steps you need to take to protect yourself if you wish to do business in China.

• Outrageous claims are a good warning: Unbelievable costs followed by incredible turn times should serve as a warning for you. If you are promised something at a marginal cost to the nearest competitor, it is an offer that is probably too good to be true. I would question the quality of the products you would receive. You might be setting yourself up for a future recall. If it’s outrageously cheap, there has to be a reason why.
• Room for interpretation: Multiple meanings can create multiple outcomes. Make sure the meaning you wanted is the same one that is interpreted. Approach communication from that of a thesaurus. Provide analogies relative to the culture and allow your contact to “visualize” your meaning.
• Saving face is important: Your new connection in China may want to build confidence with you. They wouldn’t want to jeopardize their relationship with you. A sign of a strong relationship is when your Chinese contact is willing to tell you no.
• Have a Chinese contact involved: Having a good Chinese contact that has a very good English vocabulary and knows what questions to ask YOU so the information can be accurately interpreted is very important. Spending a little money and time here can save you costly mistakes down the road.

A few simple steps goes a long way to preventing big mistakes. Whether you are exporting to (or sourcing goods from) China, you need to know that what is meant is understood. It is possible to grow your business successfully in China with the right understanding, the right relationships, and the right know how. Invest wisely in your time and your money and you will find success.


For more information, please visit Dan's TNNWC Bio.

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