DiligenceChina

I recently sat down with a very ambitious young American who helps international investors execute their China plans. Dan Turgel, Director of WAT Property and Investments said one thing that really stuck with me. “Sometimes Americans don’t do China well on a small scale.” It reminded me of something a European HR consultant told me: “large multinationals have the resources to build their own HR environment, but small and medium sized operations need to accommodate the local environment”.

Many commentators have recently started to notice that the Americans are coming late to the China game. That’s not a really a problem – US companies tend to be better at operating in relatively developed markets as opposed to building markets. But now that the big companies seem to be mobilizing their China plans, smaller and medium sized companies are going to have to follow suit. As the market in China develops, opportunities change. For those who have been waiting for the China business environment to stabilize, this is the time. Next year’s headlines may be about “Shanghai’s Overcrowded Markets”.

What can small and medium sized US operators do to get into the game?

Learn the market. Familiarize yourself with the customs. China has been accessible for years, so there’s no excuse for basic lapses in knowledge. There’s a large body of reliable information out there. There are books, movies, websites, magazines and people you know who have been here. You don’t have to be an expert, but you can take the time to familiarize yourself with the basics of the culture. Shanghai, Shenzhen and Beijing are quite developed, the countryside is not. People really use chopsticks. Most really don’t speak English. Compliment people. Be polite. Make an effort not to be condescending. Nice small gifts are appreciated, but make them unique to your company, town or some group. Chinese markets offer just about everything regular US markets do, so go with traditional or unique.

Visit. Visit BEFORE you get too far into your China planning. I’ve known guys who speak perfect Chinese and worked in Taiwan and HK for 15 years who were completely shocked by their first visit to China. Whatever you expect, it will be different. Get a feel for what’s going on here, and then attack your business plan for China. Nothing takes the place of a 30 minute walk through the downtown business district of a big Chinese city. And make sure you get to a smaller city, an industrial park, and maybe the countryside.

Plan. Find people who can help. This website gets emails and questions that only a lawyer could answer. There are lawyers and business entry experts who can help you get started. If you’re cheap (bless your hearts brothers), then do the research yourself. There are books and sites . A reasonable plan should be at least 5 years. The market is huge and tricky. Manufacturing is getting easier and better, but more expensive. It’s competitive and difficult, but the rewards are going to be tremendous. You do not want to be unprepared for China.

Execute. Plan on being here a lot, and working very closely with your senior managers here. If you are hiring a country head, work out a good system of communication and reporting. Manage much more closely than you would back home. Develop multiple sources of information. Plan on visiting often. Assume nothing. Good luck.

If you are too busy to learn about China and set up a solid base, then you are definitely too busy to be successful here. China planning begins with a calendar, not a calculator. You need to develop a system for running an operation in a very different, very distant place. It requires huge amounts of money OR huge amounts of planning to be successful here. Planning is a lot cheaper.