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China Business Strategy Basics: What do you NOT know?
By andrew | February 24, 2007
What do you know?
What do you know you don’t know?
What do you NOT know you don’t know?
Sounds like a word game, or a hippy philosophy discussion. In China , though, figuring out what you DO NOT know is your top priority for surviving your first year. Before you start doing RESEARCH on the China market, you have to INVESTIGATE the China market.
Rule #1:
The China market is a work-in-progress. The ground is shifting beneath our feet. No one really knows what the situation will be tomorrow. Tracking changes to regulations and laws is the easy part. At least they get published. But YOU are responsible for tracking changes in attitude, custom, fashion and business methods.
Rule #2: Everything you’ve ever heard about China is a misconception, a mistake, a lie – or at least out of date.
If you want to make a room full of Chinese professionals laugh, read to them from Time magazine, or a 3 year old marketing textbook, or yesterday’s New York Times. Tell a 26-year-old professional woman in Shanghai that “brand awareness isn’t too strong in China ” — she’s likely to point out that your own ensemble is two years out of date. Mention to a local associate that China ’s infrastructure and distribution network are under-developed, and they’ll show you a subway system that makes New York ’s seem crude and primitive.
Rule #3: Understand the Hardware - Software dichotomy.
First the shiny new buildings go up, and then they figure out how to fill them. A lot of bad decisions have been made by westerners who believed that the guy in the nice Shanghai office actually knew what he was talking about. In China , the infrastructure tends to outpace the business practices.
Rule #4: China experts like to fill in the gaps with easy-to-digest cultural punditry.
Giving face. Building relationships. Market opening. Cultural difference. These phrases sound great and make newcomers feel like they are making progress demystifying China . The only problem is that these words don’t really mean anything. People who live and work in China don’t really talk this way. Spend a little time saying “so what?” or “what does that mean?” Ask naive questions, and make NO assumptions.
Rule #5: Due diligence is more important when you don’t know what’s going on.
Get specific fast. Price breakdowns, itemized costs, references, partners, length of time in the business – you know the drill. Yeah, right – that’s not the “Chinese way”. But you’re not Chinese. There is only one constant in China – no one gets more cooperative or transparent after the funds have been transferred. Your pre-deal conversation is your one and only shot at getting answers to the hard questions. Oh – and don’t be afraid to ask the same question several times. If you get a variety of responses, then you’ve just heard your first alarm bell.
Topics: Business Entry, Due diligence |
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