Easier China market entry - through the back door
From Philip Bell from CME Associates (China market entry specialists)
This week, in an interview with Vish Iyer, president for Asia region for Tata Consulting Services, India’s largest software and outsourcing exporter, Mr Iyer said that sales in Asia (driven by China, the biggest spenders) will exceed sales of the Americas this year. Having recently reported growth of 7.4% and an optimistic outlook in line with the “re-balancing” of its economy, it is not surprising that China is the largest spender or that the region around it is in buoyant mood.
But what does this mean for business in UK and, in particular, us here in Yorkshire?
In addition to his comments about the Asia region, and China’s economy in particular, he also mentioned a useful insight, one which could prove very beneficial to those ambitious Yorkshire companies wishing to enter the China market but concerned about the competition to do so. Economic performance aside, he noted the competition between China’s cities themselves and the fact this in itself presents “immediate opportunities” for would-be market entrants – an opportunity perhaps better described as a competitive advantage, but why?
The fact is, on the one hand, SME companies around the world looking to enter China tend to follow a well worn track, starting at the top and working their way down. By that I mean they tend to straight to the obvious (and to an untrained eye easiest) entry point, entering through the ‘front door’ in the form of the biggest tier one cities such as Shanghai and Beijing, forgetting or not realising that there are 30 provinces in China, each one the size of an average EU nation and a whole market in its own right. Each of the provinces has major cities and, importantly, all are now competing with each other for inward investment, showcase projects, technological advantage and, of course, political influence.
Fronting this city competition are (usually) Mayors, hoping to gain an advantage over their ‘competitors’. All highly motivated and highly incentivised. Looking down the list of major cities, into tier 2, 3 and beyond gives an indication of the options available and often over-looked. Yorkshire companies, with help, can leap-frog many of the issues related to China market entry, gaining China government (province or city level) support and essential introductions through the established and private networks (guanxi) which dictate success or failure in China along the way.
Taking advantage of the competition between cities, by knowing city authorities and the way they work, is vital. More importantly, being able to leverage it by having a personal introduction through established relationships is vital, and this is where specialist services such as new Chamber members, CME Associates, is well advised.
It would be normal to assume that the best way to engage with city authorities in China would be through our own civic and government departments; UKTI or CBBC for example. But this is often not the case and, in many regards, can actively work against you.
Not surprisingly, Government (ours) supported market entry is often seen as a gravy train in China; there to be taken advantage of. The attitude of the China business community first encountered in this instance can be pre-disposed to exploit rather than embrace the market entrant i.e. it’s an opportunity for local self-serving intermediaries to cash in long before genuine (if ever) businesses or strategic partners are actually met.
The fact is China is a growing and maturing market, where opportunities for Yorkshire’s (quality) companies exist in abundance. Much of the hunting ground is still relatively untried – the lower tier cities in less developed provinces for example – the back door – not that a well worn track isn’t one to follow, it often is.
The competition between Mayors and cities for personal kudos, economic success and social development creates real opportunities if approached the right way, lower down the city (size) order the opportunities can be greater and entry easier though no less nuanced. Knowing how to enter correctly is the missing link but care, as ever, should be taken to do it properly, with patience and a personal touch.
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