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Find partners and consultants who have Specialties in China – not China as a specialty
By andrew | July 5, 2007
China’s markets have become much more sophisticated and complicated in just the last few years. That improved sophistication is a double-edged sword for new market entrants. On the one hand, localization of products and services is getting easier as market research becomes available. Quality levels are rising, the regulatory environment is becoming more transparent, and the market has become educated about a wider range of potential purchases. The downside? Your costs of doing business are skyrocketing, and the degree of competition for both market share and mindshare have intensified.
Unless you plan on investing in a mainland HQ, you are going to be running your China operation through a network of partners and consultants. The range of potential service providers and reliable partners has never been higher in China, but you can narrow your search considerably by make a few decisions about your China business before you conduct a single interview. You should decide on what SPECIALTIES and CORE COMPETENCES you will need.
There are 3 kinds of specialists in China.
1) Industrial or business specialists.
A sourcer who is an expert in the textile industry.
A business entry consultant who specializes in software or marketing.
2) Client specialists.
A logistics consultant who speaks Chinese and Spanish specializes in helping Spanish-speaking clients.
A project-management firm founded by German and Chinese engineers works with German electronics companies to supervise OEM contracts.
3) Geographic areas.
A real estate developer specializes in Yunan Province properties.
A supply-chain expert who specializes the in the Ningbo market.
NOTE: Shanghai, Beijing and Shenzhen are not appropriate places for a geographic specialty. They are too big, too diversified and too competitive.
Why do I need a specialist?
Many newcomers to the China market feel that they are better off with a generalist that they can trust to get them pointed in the right direction at the beginning. This strategy may still have some life left in it, but you are going to run into some limitations very quickly. Your best bet is to use the generalists to find more specialized service providers right away.
To see why, turn the situation around. You are sitting in your office in NY or Chicago, and you get a call from a lawyer in California representing a client from Beijing. The lawyer in question doesn’t understand your business, doesn’t understand his client’s business, doesn’t understand the industry drivers or the market, but wants to chat with you about the potential to set up a JV at some point in the future.
You are going to have one of two reactions to this encounter. 1) It is a waste of your time. 2) This Chinese client must have lots of time and money to burn if he is taking such a scatter-shot approach to business. Maybe you should take the meeting and see what you can get out it.
You don’t want to be THAT client in China, where you can spend 6 months of back & forth just to find out what the company really does! It makes much more sense to take the time to find an expert in your business challenges. In China, the ability to access a useful network of contacts is one of the most important value-added skills that a consultant offers. (And don’t be taken in by big-name international firms that offer to open doors for you. Yeah, you’ll get great meetings – but the counterparty may be more interested in meeting your expensive consultant than in doing business with you!)
Another reason for dealing only with specialists is that it helps you do your due diligence on potential service providers. Shanghai and other major Chinese cities offer you access to a wide range of competent, reliable, experienced consultants who can help make your Chinese business a huge success. But for every honest professional there are dozens of charlatans, con-men and incompetent novices. Screening out the winners from the losers is much easier if you are discussing business specifics. True, you may not know anything about business entry regulations in Shanghai. You will, however, know a lot about your potential clients or operating conditions. If your consultant has never handled a client in your industry before, you are best off continuing the search until you find someone who has more experience that can help you. As always, get references from international clients, and check them out carefully.
Topics: Business Entry, Due diligence |
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November 21st, 2007 at 10:22 pm
[…] excellent article for “newbies” which I felt really does a good job of explaining why this “oh, […]