Planning your China export strategy
Planning your export strategy to China can be fun, exciting, and good for your company’s bottom line. But if not done carefully then it has the potential to put a stress on your bottom line. Some experts even advise that China should not be the first country you start your export strategy with. Why? Because it takes considerable time, human resources, and capital investment to build the types of credibility and relationships needed to succeed in China’s complex and multidimensional landscape.
With that being said, if you’re currently planning exports to China then this information can certainly be a very good reference point. And if you’re already exporting to China then this can serve as a very good check point. In order to provide our clients and potential clients the most useful information, we made sure that the information comes from official organizations who have a solid grasp of China’s economy and business environment.
“Small and medium-sized enterprises (SMEs) are the leading exporters to China, representing 92 percent of American businesses exporting to China (35 percent of value), with overall export product categories led by machinery, computers and electronics, chemicals, transportation equipment, and waste and scrap.”
- Your credibility with potential customers will depend on your grasp of local market realities, so do everything you can to understand them before you go to China. China is regionally diverse, so it’s not enough to know broad generalities about the country; you must be acquainted with the particular region in which you’re interested.
- Be aware of the government’s economic and social priorities at the national and regional levels, and of the regulatory environment as it pertains to your sector. Since China’s accession to the WTO, government officials have had a lesser role in determining the business scope for foreign companies, but it’s still important to develop a good understanding of local and national policy trends.
- Establish a range of contacts relevant to your market segment. These might include potential customers and suppliers, local government officials, Chinese competitors, western firms, industry experts, industry association officials, regulatory officials and Chinese consultants.
- Investigate and understand the strategy, strengths and weaknesses of your major Chinese and foreign competitors, and be sure you understand the potential competitive advantage that your product or service may have in China.
- Be aware that Chinese firms are tightly focused on price and value, and if you show a similar concern with the price-value relationship, they will be more receptive to your approaches.
- You’ll need staff with cross-cultural experience who already know or can quickly learn how Chinese business people negotiate. If needed, EPIC Translations is able to put you in touch with contacts in China who are associated with your industry.
- Negotiations can be lengthy. Potential Chinese buyers or partners much prefer to deal with senior management, so face-to-face senior contact is a necessity. You may lose a great deal of credibility if you negotiate through a lower-level employee who has to refer all decisions to your head office; at worst, the Chinese may decide you’re not serious about doing business with them, and will decline further contact.
- The emphasis on high-level negotiations may mean that your CEO will have to be extensively involved.
- Gaining an adequate share of the large and complex Chinese market can require substantial, up-front investment. Be sure before going in that you can raise the capital resources you’ll need.
- You may have to operate at a loss for two or three years before your Chinese business begins to turn a profit, so your company will need the financial capacity to sustain operations during this period.
- Be sure the relevant people in your firm are prepared to make trips to China as frequently as necessary to provide training, service, marketing and sales support. Be sure you have enough such people.
- Become very familiar with Chinese labor laws and be sure to consult a law firm familiar with China’s labor codes. The degree to which the labor force plays a role in your Chinese operation’s decision making can significantly affect the growth and direction of its activities.
- Make sure you have the people and the communications capacity to service your Chinese market. Also, don’t become overly dependent on a single employee; be sure you have properly trained backup who can communicate effectively with your customers.
- Some communications needs can’t be adequately met with email or on paper – only talking will do. Consequently, you’ll need Chinese-speaking staff or external interpreters/translators who can work with your Chinese customers, partners and suppliers.
- Potential Chinese customers will usually be concerned about doing business with a supplier on the other side of the world. Be sure you have credible answers for these concerns, and that your people know how to communicate with them.
- Providing solid after-sales service and continuously building your business relationships are critical to winning contracts and sustaining success in China, so be sure to plan and budget for both.