China Prime Blog

Websites are the preferred method for Chinese businesses to learn about potential partners.

Since China has more internet users (298 million) than the U.S. has residents, it should be no surprise that Chinese business executives turn to the web first.

When it comes to proactively looking for business partners and suppliers, almost half of all Chinese businesses rate Websites as the most preferred method, followed by Conferences or Trade Fairs.

These results show that nearly 1 out of every 2 Chinese business executives turn first to the Internet for learning about new partners, vendors and business suppliers. Although in-person events rate high, Executives clearly prefer online methods of information gathering.

Can Chinese business executives find you on the web? (Not if you're only in English!)

In China as in the rest of the world, the internet is the core of any integrated, cross-media marketing, sales or promotional campaign. Search engines (including both organic and paid search results) are the preferred method of finding partners like you, followed by a read through industry publications.

It should be no surprise then that when Chinese executives want to either find you, or learn more about you and your firm, that they turn to the Web.

Questions for your organization to ask:

• Does your organization have a Chinese version of your website?
• Are your key marketing materials (corporate and product overviews, for example) downloadable in Chinese?
• Do you have access to a reliable list of contacts - including phone numbers - of potential customers or partners?

The Trouble with Contracts

You may have heard horror stories about contracts not being honored by Chinese partners. Has this scared you off of doing business in China? Don't let it.

Let's start with the obvious: contracts are a problem everywhere in the world. Even in the U.S., breach of contract is notoriously difficult to sue for. There's just something that makes human beings nervous about putting commitments in writing.

That said, is there anything to the claim that "the Chinese don't value contracts like Americans do"? Per usual, the answer is yes and no. We've covered the ‘no'; now to the ‘yes.'

It's true that the legal document known in English as a "contract" is seen differently in China than it is in the U.S. To a "typical" American a contract is a set of legal obligations. If you don't fulfill them, you can be sued. The contract serves the ultimate purpose of getting something done, regardless of who the parties are and what feelings they might have. Only the task at hand matters. The contract is a way of saying: "We all know what there is to be done. Here is a breakdown of who's responsible for what. We know we may want to change things, but we know we can't, because this is what has to be done, and since we're all strangers here we're not really sure we can trust the other guys, and we need a guarantee that they'll uphold their end of the bargain."

The last piece is the key to the whole deal. And it's perfectly fine in American culture. But not in Chinese culture, which is much more focused on relationships, and on maintaining good feelings towards those we work with. A Chinese "translation" of the above statement would go something like: "We all know what there is to be done. Here is a breakdown of who's responsible for what. We also know that this is an agreement among people, and as we get things done together we want to be sure we don't ruin any relationships. So if we run into trouble we may have to reconsider what we write down here. These are guidelines; what's more important is that we work together when there are problems and make sure that relationships stay intact."

One crucial thing to see about this is that it has nothing to do with what we call "honesty." Nothing whatsoever. Both views of the contract are perfectly "honest" in their own ways. But because of all the cultural baggage Americans bring along with our views of contracts, it's very easy to go from "my Chinese counterparts want to rework the contract" to "the Chinese are dishonest."

Will your business have to deal with cultural differences when it comes to contracts and their enforcement? Most likely. But it doesn't have to go down the familiar and unproductive road of finger-pointing and crying foul. Know what you're dealing with. Expect it and understand it. If you do you've got a leg way up on your competition. While they're busy complaining, you're working things out and moving forward, solidifying your partnerships, and laying a foundation for future business.

 

Product quality and brand strength are essential to winning business in the Chinese market.

Can you prove product quality and superiority?

Price aside, product quality is by far the most important thing Chinese businesses look for in potential business partners - nearly 4:1 more important than the next most important quality (which happens to be Strength of Brand).

As learned through a recent China Prime marketing research report, all other categories fell short. Product quality is rated as most important (at 60 percent), followed, as mentioned above, by Strength of Brand was (15.2 percent), Industry Experience (11.2 percent), Professionalism (10.3 percent), Personal Connection (2.5 percent), and Other (0.8 percent). Although interpersonal elements (personal connection, professionalism, and even strength of brand) are of importance, product quality is of notably higher importance in doing business within China.

If you're selling - or trying to partner with - Chinese business to Presidents and CEOs, then you'd better hone your brand image as well.

B2B oriented businesses are slightly more likely (61.9 percent) than B2C companies (53.8 percent) to indicate that product quality is most important in the evaluation of potential vendors, it remains the most important factor across segments and titles.

Overall, strength of brand is of greater importance to Presidents and CEOs (20.6 percent) than of Managers (15.5 percent), Legal Representatives (13.4 percent), and Vice Presidents (8.8 percent). Companies with a B2C focus report that strength of brand is of greater importance (24.7 percent) than those companies with a B2B focus (12.9 percent).

For B2B firms, the importance of brand strength is much lower (12.9 percent) than for consumer facing firms (24.7 percent). Interestingly, industry experience (11.2 percent) professionalism (10.3 percent), and personal connection ("guanxi") rated significantly lower across all segments and titles.

Questions for your organization to ask:

• Can you claim - and prove - product quality and industry expertise?
• Can you present your company in a way that supports these key points? Professionally, with a strong brand?

Want to sell to or partner with Chinese businesses? Then you’d better understand their customers, as well as yours…

The competitive battleground of the next decade: Who can do a better job understanding real customer needs – and addressing them?

At China Prime, we talk with Chinese business executives on a regular basis – for ourselves, as well as our clients and corporate partners. In one recent survey we conducted, when asked to rate various factors for their importance to successfully marketing and promoting their companies, (50 percent) of all Chinese businesses surveyed report that "a better understanding of their customers" is the most important factor to their future success.

Of interest, this does not vary to a meaningful degree by business focus or job title. The next most important success factors cited are better or more effective marketing and promotion (30.2 percent), better or more effective branding (12.7 percent), followed by a better understanding of our competition (6.7 percent).

In China as everywhere: The stronger your brand and the better your marketing, the farther ahead of the competition you’ll be.

Next on the list of priorities? Marketing and branding. In fact, just under one-third (30 percent) rated having better or more effective marketing or promotion of the company as most important, followed by better or more effective branding (12.7 percent) and a better understanding of the competition (6.7 percent).

While this does not directly translate to views of the West, the implications are significant. First, for those Western companies that can prove marketing prowess or brand building skills, the potential to position with Chinese partners is obvious.

And for all companies, the recognition that a better understanding of customers is so important means that you’ll need to do your homework as well. Any organization that can prove their expertise in these areas will be well ahead of the many competitors – both international and domestic – with whom you will compete.

Questions for your organization to ask:

•    Do you have a strategy for understanding the Chinese market?
•    Can your expertise at marketing or branding help to win over Chinese partners or customers?
•    Can you offer insights to your prospects that will show your understanding of the market and its needs?
•    Can you leverage Western marketing and research skills to offer insights to Chinese customers?

Growth within China is the most important future success factor for Chinese businesses.

How can you help Chinese business compete and grow at home, and abroad?

In China Prime's second quarter 2009 survey of Chinese business executives, about 60 percent of respondents rate expansion within China and access to Chinese business partners as the most important factor to future success. Unsurprisingly, the majority of Chinese businesses are looking to their own robust economy as the primary source of future growth for their business.

While access to partners in the West rated significantly lower (15.7 percent), these findings are still impressive. Combined with those who rate expansion in the West as most important (10.4 percent), that's 26.6 percent of respondents - or nearly 3 million companies in The China List database alone - for whom access to partners or expansion in the West is believed to be the most important factor to their future success.

Expansion in the West is important, too. But Western companies can help Chinese company's success no matter where they are.

Expansion within China is rated the most important (33.6 percent) to future success of Chinese businesses. Access to Partners in China is rated second (26.8 percent) most important. Nearly 16 percent of respondents surveyed reported access to Western business partners is the most important factor in their future business growth and success. Access to Capital (11.2 percent) and Expansion in the West (10.9 percent) were rated of great importance to future growth and success within Chinese businesses.

B2B oriented businesses are significantly more likely (17.7 percent) than B2C companies (8.9 percent) to indicate that access to partners in the West is an important factor in their future growth and success.

Gaining access to Western business partners is of notable importance to Vice Presidents (21.1 percent) and of slightly less importance to CEOs and Presidents (15 percent), Legal Representatives and Managers (15.7 percent).

Questions for your organization to ask:

• What can you offer Chinese businesses interested in moving West?
• How can your product or service help a Chinese company to better compete on their home turf?
• What questions might you ask to better understand what needs exist that you can serve?

Interested in marketing to Chinese businesses? Start by sending them an email.

Email is the best method for initially contacting Chinese business executives.

In a recent China Prime research report, nearly 1 in 2 Chinese executives surveyed (44.9 percent) rate email to be the best way of initial contact. The next highest reported method of preferred initial contact is by telephone (27.7 percent), comprising under one-third of respondents.

As there are literally millions of businesses in China finding the right partners, customers or contacts can be daunting. Email is clearly the best - most preferred, most targeted and most cost effective - way to get in front of those you're trying to reach.

Picking up the phone and calling is second-best; and don't bother with direct mail to reach businesses.

Nearly one-half of the Chinese businesses surveyed (44.9 percent) report that email is the best way for interested parties to make initial contact. The next highest reported method is by telephone (27.7 percent), comprising less than one-third of the results.

Traditional in-person methods of initial contact including In-Person Visits (15.3 percent) and Conference or Exhibitions (6 percent), were rated much lower, followed closely by Mail (5.7 percent).

B2B companies are more likely (46.4 percent) to prefer email as the initial contact method than companies with a B2C focus (37.3 percent). Companies with a Government focus followed closely behind B2Bs, with 44.7 percent preferring email over all other methods.

By title, CEOs and Presidents are slightly more likely (59.8 percent) than others to prefer initial contact by email, followed by Vice Presidents (45.6 percent), Managers (44.1 percent) and Legal Representatives (42.9 percent).

Questions for your organization to ask:

• Do you currently market your business by email?
• Do you understand your market? (Email is a good method for conducting research, as well)
• Do you have access to current data lists for Chinese businesses?

Yes, China is different. But it’s not as different as you may think.

Most Western Executives have preconceived notions of some sort, when it comes to doing business in China. But where does perception end, and reality begin?

 

For centuries Western businesspeople have dreamed of the riches to be had by “tapping into the Chinese market.” And while there are riches to be had, your organization stands little hope of success if you don’t follow the same business basics you’d follow anywhere.

 

It’s easy to get caught up in the “China hype.” But it’s critical to recognize that many sound business practices transcend culture. If you don’t have a good product or service to sell at a reasonable price – and know what your customers want – then you’re probably not succeeding on your home turf either. China is a rich opportunity. But it is the ultimate capitalist market. Losers go home, often with significantly less cash and several hard-earned lessons in humility.

 

It doesn’t matter where in the world you’re doing business. If you’re not offering quality and value to people that want what you’re selling, you’re sunk.

 

While Guanxi are important, that is step two – step one is to find prospects, and prove the worth of your product or service, and that of your organization.

 

In our recent China business market survey, Chinese executives ranked product quality as far and above the most important factor as they consider potential business partners and suppliers. That shouldn’t surprise, but given all the talk of the importance of guanxi, or relationships in China, it’s easy to forget that while guanxi are important, they’re useless unless what you’re selling is what the market needs.

 

Chinese buyers – business and consumers – are famously demanding and nearly impossible to fool. Don’t even try. Instead, find out what they want. Listen to the market.

 

And recognize that in China, as in business everywhere, a clear understanding of your market and your competition is the foundation for any successful venture.

 

Chinese Car Owners: A Growing Consumer Market

For most of us in the US, cars have always been a part of our lives. Wegrew up with the family station wagon, or perhaps with a minivan, forthose who are a little younger.

Heck, even our grandparents had a car.

It's a different story in China, where nearly every driver on the road is a "first generation driver" - with less than 10 years of driving experience. And In the last six years, China's car ownership has reportedly grown a whopping 300%!

While the US is currently the world's largest car market, China is closing in on that gap: Passenger car sales in China rose 10% in March 2009, thanks to government subsidies and tax cuts.

And here's what's happening in rural China:

"In farmlands throughout China, the vehicle of choice appears to bemicro-minivans such as those made by Wuling and Changan. Sales of thesevehicles, called mianbao che because they're shaped like a loaf of bread, rose 60% in April and are up 40% for the first four months of the year.

Starting at about $5,000, these boxy vans, with tiny engines buriedunder the front seat and small wheels, are to Chinese farmers whatpickup trucks have long been to Middle America."

Even General Motors optimistic about China. CEO Fritz Henderson said that GM's business in China continues to grow at a "torrid pace."

"After GM China hit a monthly sales record in April, of 151,084 units,increasing 50 percent year-on-year, its market performance hit a newhigh in May with a 75.2 percent jump over last year, to 156,363 units."

And now that many Chinese are experiencing the fun of "pleasure driving", there are even hundreds of car clubs in Beijing.

Since the majority of people don't usually care for their cars alone,businesses tailored to car owners may present new opportunities forserving the needs of Chinese consumers:

• Car wash
• Tire rotation
• Oil changes
• Engine repair
• Collision repair

The bottom line is that for businesses planning to expand into China,car-related enterprises could be a new frontier.

Chinese Entrepreneurs: A Community Eager for Products and Services

There's a new generation of Chinese who are becoming entrepreneurs by choice, instead of necessity.

In a recent article on Alibaba.com, it was reported that at Tsinghua University, the "fastest growing academic program is in innovation and entrepreneurship."

Calling this new trend "the entrepreneurship of opportunity", ZhangWei, professor of entrepreneurship, noted that previous Chineseentrepreneurs "were entrepreneurs out of necessity" who came frommeager economic backgrounds. But this is no longer the norm.

Tsinghua is also working with Goldman Sachs and HEC in Paris as part of Goldman Sachs' "10,000 Women" initiative. Over 450 new women entrepreneurs are expected to graduate from this program over the next five years, and the first one is under way with 50 students.

Seasoned entrepreneurs are in learning mode, too

Now in its fourth year, Cheung Kong Graduate School of Business' CEO and CFO programs continue to attract Chinese entrepreneurs and managers in a wide variety of industries, in the state and private sector.

This year's courses included:

> China’s Economic Adjustments amid the World Financial Crisis
> The Future of Chinese Capitalism
> Transforming a Start-Up to a Professionally Managed Company

Cheung Kong GSB is China's first private, non-profit independentbusiness school, offering MBA, EMBA and Executive Education programs.

Entrepreneurs have their day in China

Since 1994, entrepreneurs in China have been recognized annually by "National Entrepreneurs Day. " This year's conference was recently held in Kunming,Yunnan province from May 17-18.

Featured entrepreneur forums:

> Trend analysis
> Industry revitalization and opportunities for the west
> Win-win situation for employers and employees in crisis and corporate social responsibility

Getting to know Chinese entrepreneurs

To find out what matters to entrepreneurs in China, you might want to check out NextStepShanghai.com, a networking hub for entrepreneurs in China.

NextStep has attracted thousands of members since its founding in March of 2007:

"NextStep provides a forum for like-minded entrepreneurs to collaboratein building new businesses and also helping one another navigate themany pitfalls of conducting business in China. As entrepreneurs, we allunderstand the importance of a strong support network in pursuing oursuccesses."

NextStep's entrepreneurial "support system" features monthly business forums, as well as a monthly social networking event.

The entrepreneurial spirit is alive and well

Like entrepreneurs the world over, small business owners in China areeager for tools and knowledge to help them grow and reach their goals.If you are considering marketing to Chinese businesses, you may want tothink about products and services tailored to the needs of this livelybusiness community.

Microblogging for Business in China

Companies planning to do business in China or who wish to expand theirChinese presence would do well to take notice of microblogging'spopularity in that country.

With several microblogging platforms currently available in China (inaddition to Twitter) and new ones continually emerging, microbloggingis a business communication tool that makes sense.

There are reportedly more than 50 million bloggers in China, a number that continues to grow because "more and more Chinese want to express their own views about local ...

Several Chinese microblogging platforms appeared after Twitter, sharinga close resemblance to Twitter in appearance and functionality.

Although Twitter is "the choice of China’s more internationally-oriented digerati", there are several popular homegrown platforms:

taotao

fanfou

jiwaide

zuosa

douban broadcast

A group of less well-known contenders includes:

ilaodao

komoo

byuu

wulog

fish

laigula

And then there is digu (reportedly still in Beta).

The Chinese government has taken notice of microblogging, too. Plurk, "a social journal for your life" has apparently been blocked by the authorities.

If that's not enough to convince you that microblogging is big (and getting bigger) in China, it seems that yet another platform is emerging:

"In reports on CCW.com.cn, quoting an unnamed insider Sina(Nasdaq:SINA) it was said that Sina was planning to offer a servicesimilar around the June timeframe called 'Sina Friends' "

Today, the question for companies doing business with China is not "if"your business should implement microblogging in China - it's a matterof "when."

And the answer seems to be "not soon enough."