How to make it in China
So often when companies are developing a China strategy they focus on the "window of opportunity".
While they’re not wrong to do this, what many are forgetting to do – or don’t know to do – is to first look in the mirror.
What do they see? Do they have the resources, the people, the time, the funds, the commitment, the product or service? The question really is: does their company have what it takes to meet the China challenge?
This needs to be examined from both directions.
They first need staff who are from mainland China who speak English and who preferably know about their sector or industry and have the networks and understand their business environment.
Companies can’t just rely on someone’s language ability. This market is far too complex to base a strategy around interpretation and translation.
New Zealand is fortunate that over the past 10-12 years we’ve had more than 300,000 Chinese graduates from our institutions, so we have a ready-made pool of people with strong links to New Zealand.
However, hiring bilingual staff and management is not the only key to long-term success.
There is also a need for commitment from the management and others based in New Zealand who will be involved in, and with, China. It is about learning some of the language and pronunciation, and understanding business customs and the regulatory environment.
They need to know what their Chinese staff know.
Regular visits to China or, even better, posting senior management there also helps. Development of the business will be positively impacted by the support the China-based team gets from senior New Zealand-based management and specialists.
When it comes to a China strategy, companies also need agreement among their management on the development of a “one-China policy” so that all the board and/or senior management understand the strategy and the operational plan.
Also, bring them together in China for management or board meetings, and don’t just take them to five-star hotels but help them to understand the "real China" and what the business operations have to deal with every day.
It will help them make even better decisions once they get back to the paradise we all know as New Zealand.
Resources and finance
Companies need to work out approximately what their China strategy is going to cost, how much time they’re going to put into it and over what time period to operationalise. Then triple it and they might get close.
It surprises people that professional labour is not cheap there and that it is not a cheap place to do business. The regulatory environment is more complex now than in the previous 23 years I’ve been going there. It is also more time consuming and expensive.
So companies need to do their homework to ensure they don't make unnecessary mistakes along the way.
They must make sure they have a decent war chest and get expert advice on issues such as tax, customs, legal, contractual and IP – preferably from China-based law and tax firms.
Expert advice is not sought often enough because of the cost. But the cost of not getting it is potentially far greater.
Product and service customisation
Many companies take the approach that “my product or service is world class”, and they’re probably right – in New Zealand.
However, what do their Chinese customers think of that product or service? They are probably being asked to pay a premium, so they are going to ask for their preferences to be taken into consideration.
They will want supporting material in Chinese. If it's a software or engineering product, are the manuals in English? How are companies going to support it in China? Do the support staff speak Chinese, or is there a help desk in China?
Consider colours, too. Kiwis love black, and rightly so. But Chinese sometimes look at our branding and packaging and think it’s too dark. They want to see gold and red, with vibrant greens – although not green hats, Google it! – and piercing blues.
Even in relation to the packaging, New Zealand companies can be fairly austere, and this should be expected in relation to the environmental impact. But is there a point of adaptation where standards can be maintained and consumer expectations met?
This is not about advising New Zealand companies to become Chinese companies in the way they operate and present themselves.
They should preserve the core of their business and not cross the line in the sand. But they should customise the parts of their business that will make them successful there.
As they say in China: eat the fish and spit out the bones.
Pat English is New Zealand Consul General and Trade Commissioner in Guangzhou. This article is based on a speech he gave to this week's China Business Summit in Auckland.