To Pastures New
For many years to come, emerging markets will continue to be the dominant drivers of global economic growth. To tap this potential, companies from classic industrial nations are particularly keen to gain a foothold in the so-called BRIC countries (Brazil, Russia, India, China). Boasting constantly high growth rates, a fairly functional infrastructure and more than a billion consumers, China has become the number one destination of western businesses eager to expand.
Notwithstanding occasional diplomatic discord, and despite the difficulty westerners may encounter in interpreting the behaviour of local business partners or officials, there are many reasons to set up shop in China:
- securing a share in Asia‘s fast-growing markets
- ever tighter margins of mass-market products made in developed countries
- cost advantages: lower wages, local procurement
- localization of research, development and production for Asian customers
- competitive edge through first-hand experience
When setting out to do business in China, western companies will have to deal with a plethora of cultural, administrative and legal peculiarities. From procurement through human resources to packaging a product or specifying a service, there is hardly any operational aspect that does not have to be tuned to local practice. The outcome of your venture onto the Chinese market therefore depends not only on the thoroughness of your planning and preparation, but also on your willingness to adjust and learn. Challenges and success factors to be considered by businesses ready to conquer the Middle Kingdom fall into three categories:
1. Public authorities, legal framework
Foreign businesses seeking to establish themselves in China need numerous licenses, permits, certificates. Subsequent project phases such as going into production, setting up a distribution network or even concluding a contract are also subject to far greater interference from government in the People’s Republic than in the west. To proceed quickly with their expansion plans, westerners need to be aware of all the dos and don’ts of dealing with public authorities.
2. Localization, adjustment of corporate culture
Localizing their corporate philosophy and culture right down to sales strategy is critical for western enterprises to succeed in China and other Asian markets. This entails appointing natives to the local management team as soon as possible. If cutting costs is among their motives for expanding into Asia, newcomers also must get their local procurement and production logistics up and running.
3. Human resources
Just as important as recruitment, education and training of local staff is teaming them up with specialists and managers from the company’s country of origin. As Chinese workers tend to be less loyal to their employers than, for example, employees in Japan, lack of unity among the workforce is likely to result in a massive churn of well-trained personnel in particular. To retain their overseas staff, it is imperative for foreign employers to promote personal identification with the company by following a credible corporate philosophy and by ensuring that executives lead by example.
By Your Side
Consileon and its partner network advise and support businesses interested in venturing onto the Chinese market. Our service portfolio includes:
- market analysis
- feasibility studies
- strategic advice on phased market entry: establishment, local sales, logistics, …
- organizational and cultural counsel
- finding local business partners
- participation in contract negotiations
- counsel on site selection
- legal advice, assistance with application for licenses and permits
Contact:
Dr. Joachim Schü
top