China is the world’s second largest economy, soon to be the first. It holds a fifth of the world’s population and 6.4% of the earth’s land mass. The economy has been growing at an average of 9.3% for the past twenty years and the opportunities to do business are exceptional.
In order to approach this opportunity successfully, it is important to go about it in the right way. At China Driven, we believe in providing value to our customers and as such we have some complimentary advice to give away.
The best way to get started on opening up China is to follow this simple advice:
Do your homework. China is a large and complex environment. There is huge variation between regions in terms of the kind of market opportunities available, competition, demographics, geography, culture, and even language. On top of this, different market verticals will use different purchasing channels and have requirements. It is essential to understand which regions and verticals will hold the best opportunity for your products both now and in the future.
(Stand-by for another article on how to get detailed market info.)
When you have found a customer or supplier that you wish to do business with, make sure that you complete a thorough background check. Simple yet detailed info on the proposed partner will help you to avoid getting involved with the wrong company. The following points should be covered thoroughly:
- Year company was established
- Company reputation – Credit, previous customers, reliability, testimonials, references
- Previous deals and customers
- Current suppliers and customers
- Other business interests owners are involved in
- Any external partnerships or relationships
This info can be gathered through in-depth discussions with the customer and other players in the market. Obtaining copies of the Company Licence and Tax Certificates will also help to provide a check on how closely their claims match with the size of company. Your customer should have these available and they contain details of company capital.
Devise the appropriate sales & marketing strategy. Your sales and marketing strategy will make or break you. What works in Europe won’t necessarily work in China. Some questions that you need to answer before making tough decisions:
Direct sales vs. channel. How to negotiate with agents and ensure agreements are honoured?
- What are the routes to market? Which routes have been most successful for others?
- What are the legal and tax implications of exporting to China? Where can I find the most up-to-date info?
- Does selling through an agent offer the best solution? What are the risks? How do I find and negotiate with them?
- Will I need a direct presence in China? If so, what’s the best location to optimise penetration?
- What does my product bring that will encourage customers to choose it over a cheaper alternative?
- How do I ensure that my partners will honour all agreements?
Take a scientific approach: Always apply a step-by-step process to your project. A strong structure, with clear goals in mind will help you to stay on track and not lose momentum.
Obtain the knowledge of all the barriers and bureaucracy that you will need to overcome in order to successfully sell your product or service to Chinese customers. Dealing with everything can be daunting and off-putting yet it is easier now than it has ever been. Break everything down into simple, easy to manage steps and deal with them systematically.
Make and cultivate new relationships: As with all customer-supplier relationships, it is important to have mutual understanding, trust and respect in order for business dealings to go smoothly. Once you have found a suitable partner and have an initial deal in place, the next step to develop the relationship further. Some rules to follow:
- Keep constant contact with your partners. This will help to develop the relationship and provide greater visibility on future orders. Furthermore, you should aim to work with your customer to develop new products to suit their market.
- Demonstrate capability and reliability. Operating capability is becoming an increasingly important way of distinguishing yourself from the competition. The ability to give an immediate answer to your customers on new orders and fulfill those orders precisely, on-time, every time will facilitate continued cooperation. You can find more info on building these capabilities here.
- Ensure that relationships are maintained at a high-level. Buyers tend to job-hop, particularly in China, and should not be relied on to keep putting business your way. The owner or CEO of the customer organization is the only one to guarantee continued business. Get on friendly terms quickly and stay there by developing stronger ties. Gifts and simple favours can help to maintain strong ties and mutual respect.
- Expand your network of contacts whenever possible. The more high-level contacts you have, the more opportunities will open up to you.
Be prepared to be very flexible: Typically, introducing your product to the Chinese market rarely follows the original plan exactly. Having the agility to change approach and overcome unforeseen obstacles will save both time and money.
Pay attention to changes in customer behaviour and react quickly. Your sales and marketing strategy is likely to evolve rapidly. Don’t be afraid to try new approaches and experiment with innovative marketing techniques in order to get ahead.
Find a reputable facilitator to help with legal, tax and certification issues. Getting the correct certificates, licensing and securing intellectual property rights is often time-consuming and expensive. There are several ministries involved in the different aspects of these steps. Safety regulations have also become more stringent in recent years. Several high-profile food and industrial safety scandals have contributed to this.
Depending on the product, you may be subject to lengthy environmental assessments. There is often a lack of transparency when it comes to regulations and getting hold of accurate up-to-date information is absolutely key. Just because you had an understanding of the situation six months ago doesn’t mean there hasn’t been changes in regulation since. You can have a look at some of that info here.
When making any applications to government bodies you should be extremely conscientious. Applications are often held up and/or rejected due to small errors and trivialities that may seem unimportant at the time.
These are just a few points to get you started and by no means is a definitive list. Feel free to contribute any comments or advice at the bottom, all feedback is welcome. For more advice and consultancy on your attempts to do business with China, contact us.