FREE REPORT REVEALS THE EIGHT FATAL MISTAKES MOST BUSINESSES MAKE AND WHY POOR COMMUNICATION IS THE BIGGEST PROBLEM FACING BUSINESSES
“We need to engage more on a person-to-person level with Asia and part of the solution will be breaking down language barriers,”
The Hon Simon Crean MP
AUSTRALIAN MINISTER FOR TRADE
The appeal of the China market is obvious: a population of 1.3 billion people and over 30 years of amazing growth so far equals a market too expansive to miss. The problem is obvious as well: aside from the numbers being skewed from the start, it doesn’t matter how large your market is, if you can’t close the deal or the deal is bad.
Doing business in China can open the door to amazing opportunities, but establishing your presence in China requires careful planning and a deep understanding of how the business culture operates in the Middle Kingdom. Many businesses, both large and small, make crucial mistakes when trying to break into the market in China, ultimately preventing them from laying the groundwork necessary to become a thriving business entity there.
There are eight primary mistakes that can put an end to your expansion into China practically before you ever get started. A failure to understand the history and culture in China, lack of planning, and language barriers are all common threads among failed attempts to break into this potential market. By understanding these eight mistakes and successfully creating solutions to them, your chances of success are much higher than trying to move forward without a strategic plan.
The First Mistake Businesses Make in Doing Business with China - Lack of Proper Planning
The first mistake that businesses make when trying to move into China is a lack of planning. Aside from the language barrier, there are so many different cultural subtleties that mean the absolute difference between success and failure, it is imperative to be fully prepared before you begin the cross cultural venture into China.
There have been many companies that relied on feasibility reports and market research provided by a Chinese counterpart, only to find the information wasn’t reliable. You need to do your own due diligence before entering into any type of agreement. Your strategic planning must consider local conditions, potential partners and assessments of subsidiary performance and look at competitors and consumers. Independently research the local infrastructure to determine for yourself the availability of local suppliers, networks for distribution, availability of a skilled workforce and a local market for your products or services. The availability of these local resources will determine your choice of location and the risk of relying on someone else’s information is just too large to take.
The planning phase should also identify that you and any potential partnership leaders share the same vision – short and long term. A great number of problems in partnerships within China can be avoided by carefully choosing your partners. Many Chinese partners are not nearly as interested in creating profits as they are in acquiring knowledge and securing continued employment for their existing workforce. In depth investigation of potential partners – whether they are government related or not, and reference to the many other mistakes made going into business with China identified from this report – will help you find the best possible partner for your desired outcome.
Due diligence into the financial and legal specifics of your business is extremely important. You need to make certain that the appropriate legal and financial structure is used from the outset or you will stand to lose huge amounts of time and money.
Australian architectural firm Woodhead International’s lack of planning for their China entry has had long-lasting devastating ramifications. Financial considerations – the huge cost of establishing a wholly foreign-owned enterprise and registering trademarks in every city/province targeted was an administrative nightmare. Instead, the firm relied on locally hired staff to operate the business to get around the bureaucracy. Neither did they enter any formal joint venture agreement as they felt they had established good relationships and goodwill and both the Chinese and Australian sides were benefiting. As success came, the Australian firm learnt the bad news that their Chinese name and brand had been stolen from under them by some of their local colleagues, offices set up in their name and many projects were being done under the Woodhead name (even for Australian organisations thinking they were being designed by the Australian company) without any knowledge by the real Woodhead at all. Worse, many of the projects had poor outcomes and further damaged the Woodhead brand. The firm luckily has recovered, but the legal wrangling over trademarks will continue. Planning, including partner choice and company structure, financial and legal advice might have prevented this drama which has been unfolding for almost a decade.
An Australian manufacturer set up a joint venture in a special economic zone attracted by government incentives and tax breaks. The location was not advantageous as it was far from distribution channels and skilled workers and difficult for its expatriate team to settle into. Furthermore competition was much tougher than their research had revealed and when their new, more expensive products replaced the old, trusted brands, they lost their existing market and the business failed.
An important part of planning is assembling a good team with suitable experience to advise on all of these issues. And top of the list is expert language support to ensure your interests are represented accurately, to independently provide translations of documents and all communications and to assist in negotiations to make sure you are abreast of all the relevant information to make an informed decision. Planning to do business in China without such expertise in your corner is risky business.
To read the rest of the report which reveals seven more key mistakes and how to avoid them, visit Free Publications on Doing Business with China
You’ll read real cases of where businesses went wrong and you’ll learn how to avoid making these mistakes.
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