Through a special arrangement, presented
here for discussion is a summary of a current article from Supply Chain
Digest.
Navigating the complexities of buying from or selling into China has never been easy, especially as the pace of change there is almost mind-boggling. Still, the companies that have been doing business in China for many years have learned a number of lessons that can benefit others that have more recently made the move or are considering expanding their buy or sell efforts.
Many of those lessons were discussed during a recent conference at Arizona State University and co-sponsored by AT Kearny, including a panel discussion that featured executives from Motorola, Emerson Electric, Harley-Davidson, ON Semiconductor and TPI Composites, as well as ASU faculty members. Those lessons are summarized below:
Leave Your "Cutting Edge" Technology Behind: "Hit-and-miss IP (intellectual property) regulation is a significant inhibitor to development in China," said W. P. Carey School supply chain management professor Philip Carter. But companies shouldn't ignore China due to the IP risks, but rather go into China with older, "second best" technologies that present lower risks to the company if the IP is ripped off. It is worth noting that IP protection in China has become better and likely will continue to improve.
Focus on Recruiting and Retaining Management Talent: Finding basic factory and unskilled labor in China is easy. Supervisory and management talent is a lot harder to come by, yet that management talent is obviously key to success.
Understand the Importance of Relationships: Relationships are different and arguably more important in China than in Western economies. The Chinese term guanxi, meaning "connections," is indicative of the role that relationships play in Chinese business. That includes relationships with the Chinese government.
Think Sell, Not Just Buy: While making products in China either directly or indirectly for export back to Western markets can dramatically reduce costs, companies must really look at entering the domestic Chinese market as well, despite the challenges, those with experience there say. This is again where relationships with government officials is key, as it may smooth the way to joint ventures and even 100 percent ownership by Western companies of businesses in China, as Motorola was able to achieve with its operations there.
Be Careful with Joint Ventures: While, in many cases, a joint venture with a Chinese company may be the only path into China, such moves have to be done with care and the right strategy to avoid creating a competitor and losing IP.
Look for Win-Win: Companies likely will find more success in China if they look for opportunities that are not only good for their companies, but also good for China. That's a different approach than is needed in the West - but may be the key to building relationships with government officials and accelerating official approval for new plans and development.
Discussion Question: What do you think of this list of smart practices for doing business in China? Which ones are more or less important? What would you add?