Conducting Business in China - 6 Expert Tips for SMEs
By FXcompared
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China’s economy is one of the largest in the world, second only, in fact, to that of the United States. With a population over a billion strong, the Chinese market presents some serious opportunities for SMEs. But where should British entrepreneurs start when looking to break into China? To help get you going, World First have asked the experts for their top tips.
1. Do your homework
“You have to look beyond the newspaper headlines,” explains David Martin from the China-Britain Business Council. “With a country of 1.4 billion people, a single figure for GDP is almost meaningless.” It’s therefore better to break your research into well-defined sectors or regions. For starters, check out organisations such as the recently launched Department for International Trade (the new UKTI), Chambers of Commerce in the UK and of course Martin’s organisation. And, don’t forget to plan a trip to visit China in person—it’s the quickest way to learn the ins and outs of the marketplace there.
2. Next, dive in
Shaun Pulfrey’s hair product, the Tangle Teezer, was denied investment on Dragon’s Den back in 2007 but is currently being sold in an impressive 60 different countries around the world. His advice: “Do not let any negatives you may have heard put you off at first base. China is the most exciting consumer market that we are working in. By the end of 2017, it will be our biggest global market, and it has also helped make us more dynamic as a business – sharper, agile and more focused.” So, in the process of bringing your business to China, you could ultimately gain insights which will improve your results in the rest of the world.
3. Build a profitable partnership
Local people on the ground in China can be a fantastic asset. “No matter how much research you do or how many times you visit, you will not understand China’s market like the Chinese,” say Pulfrey, who explains that his business’ knowledge of local consumer behaviour was limited when they initially ventured into China. However, it’s not as easy as making a local contact, cautions David Martin. It’s a smart idea to develop a relationship in which payment is formally tied to the success of the business.
4. Don’t rush things
“Deals go at different speeds,” says Martin, “so be prepared for the ebb and flow. The decision-making process is different, the hierarchy is different.” “Haggling is important,” adds Michael Greene, vice president of product strategy at AudienceScience, a digital advertising management firm. “Chinese people like to feel that they have done something important for their company and are going back with a good deal.” It can also be useful to bring senior stakeholders on board to help progress slow, complex deals and sign them off at the conclusion of the process.
5. Be agile and ready to adapt
A business model which is highly profitable in one market may not always translate to China. Michael Greene cites the example of Uber: “Uber is dominant elsewhere, but in China it struggled against a larger rival, Didi.” To get around this, you need to be prepared to re-asses and re-shape your product offering to maximise business potential. David Martin points to Jaguar Land Rover as a prime example, where they made longer wheelbases and larger back seats to accommodate for the large proportion of Chinese car owners with a driver.
6. Embrace brand Britain
“We make much more of our Britishness in China than anywhere else in the world,” shares Pulfrey. “Take every marketing opportunity to stress you have a British brand, are made in Great Britain, or have British heritage. To the Chinese, ‘Made in Great Britain’ means design, quality, cool, expertise and trust. It opens doors, it gives you a competitive advantage and it supports a premium proposition.” When bringing your brand to market, you must also beware the ‘great firewall of China’ cautions Greene, which can block sites on social media and even disable e-mail attachments.
Article contributed by Edward Hardy, corporate market analyst at World First.With a background in economics, fundamental and technical market analysis, Edward Hardy works with World First’s Economics and Currency Strategy team to assist and advise clients on transactional FX strategy and currency solutions. Over the course of the EU Referendum, Edward and team have advised clients large and small on the use of structured hedging products to help secure returns and accelerate performance.
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