Website design By BotEap.comThe Chinese philosopher Laozi said: “A journey of a thousand miles begins with one step.” The first step towards business success in China is taking the time to form a proper strategy.

Website design By BotEap.comChina is a huge market with great potential, but it can also be very complex and expensive. From my experience, when people ask me how to succeed in China, I mention 4 ‘P’s: planning, people, patience, profit.

Website design By BotEap.comAnother old proverb says, “Good planning is half the road to success,” and many business failures have been due to lack of planning and poor execution. Regardless of the size of a business, ask ‘How would you like to see your business grow in the next 5 years?’ and ‘What is the objective of your strategy in China?’ are the guiding principles for business planning to enter the Chinese market.

Website design By BotEap.comWhen I was working in Beijing, I met the General Manager of a large foreign company that was trying to establish a Western restaurant franchise chain, and I asked him, “What is your strategy in China?”

Website design By BotEap.comThe answer was vague, but he assured me that everything was covered and that he had Chinese friends with a lot of experience in the hotel industry to help in the execution of the strategy. Six months later, with no clear strategy and poor planning, the project was in trouble.

Website design By BotEap.comThe restaurant locations were not correct, there were numerous compliance issues and all of which were very costly to rectify. Six months later, the world headquarters lost confidence in the local team and shut it down. It was all a very costly learning exercise.

Website design By BotEap.comAnother client who started his business in China (without the proper legal structures) had trouble collecting money from his clients. His strategy was simply to sell more in China, but they had forgotten that foreign currency is controlled in China and that profits from sales can be trapped in China. Without a proper business model, even a successful sales model is no guarantee of profitable growth.

Website design By BotEap.comA China strategy requires more than an elaborate document. It requires ideas, experience, and commitment from top management, just like any strategy. It should include clear objectives, but it should be based on a real understanding of how China differs from your local market.

Website design By BotEap.comThe management team should use this to determine what research needs to be done, identifying the target market and what still needs to be learned about it. It is vital to realistically assess how well you know a potential business partner and how you can validate their strengths.

Website design By BotEap.comAn experienced CFO should be involved in planning a strategy, as compliance and structuring are very important to get it right the first time.

Website design By BotEap.comEach company needs its own tailored business model and strategy. Elements to consider when preparing a China strategy may include:
Market analysis
-Which geographic markets will you target?
-What are the regulatory requirements for your products or services in China?
-Should we go in? If so, what are the key success factors?
Competition evaluation
-What are your competitive advantages in China? Have you done a recent SWOT analysis regarding the China market?
-How much can you locate?
input options
-What are your short- and long-term goals for business growth?
-Can you do it alone or should you look for a local partner in China?
business model
– Do you know that China is a foreign currency controlled country? How will you get your profit/cash at home?
-Have you considered the relevant legal and tax requirements for each business model?
-Do you understand the financial implications of each business model?
Commitment
Do you have the patience and resources to implement your strategy in China?
-How long are you willing to wait for success and how much can it cost you?
– Do you have the necessary skills and competencies for implementation, eg do you have bilingual staff fluent in both English and Chinese?

Website design By BotEap.com‘People’ are critical to success. It’s not just about people in your business, but also about the right partners, including distributors, suppliers and business advisors. The bilingual employees on your team must also have the right skills and abilities. Trained and experienced staff can make a big difference.

Website design By BotEap.com‘People’ and ‘Patience’ go hand in hand in China: patience is vital to building relationships and overcoming the challenges of language, cultural and business differences. In China, relationships are more important than business, and getting the introduction right and building trust can be time consuming. Patience with a long-term investment strategy is very important and it will take time for this to pay off.

Website design By BotEap.comAnd lastly, if ‘Planning, People and Patience’ are carefully considered and executed well, ‘Benefits’ should follow!