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China in Spotlight

 

SUCCESSFUL STRATEGIES IN CHINA

 

Q: An often-overlooked issue for companies to consider is intellectual property protection. China’s software piracy rate has been reported as high as 92 percent. What’s your view on this issue?

Angenend: ”For some industries, the state of intellectual property protection may not matter as much; however, for many industries it certainly serves as a deterrent to entry into this marketplace. Before entering the Chinese market, it is essential that an entrepreneur or company realistically visit this IP protection and enforcement issue, understand if and how it could impact their success, and formulate a dynamic plan along with strategies for actively addressing it. For some, this may mean fundamentally altering the way they do business relative to other regions. We are all moving forward into a more global marketplace, and I believe that there are always solutions to any challenges or problems that may arise; awareness of these potential challenges is key to ensuring potential success in this or any other business climate.”

Barbalas: “China has been putting in place the legal system needed to protect intellectual property including patents, trademarks and copyrights. It is important for new companies coming in to use the legal system to protect their intellectual property in the same way and to the same extent they would do in their own home market. Beyond this, business associations from both the US and Europe continue to highlight intellectual property protection as one of the top 10 issues for companies doing business in China. Within your own company there are many practical steps you can take to protect your intellectual property while you build your business in China.”

S Roy, Founder & CEO, Asean Affairs, (Centre), chairing the session with Daniel J. Brutto, President, UPS International (R) and Alan Hassenfeld, Chairman of the Executive Committee, Hasbro (L) at Horasis Annual Meeting January 2010, Zurich, Switzerland

Brutto: “China’s software piracy rate has decreased to 79 percent .” Chen: “Depending on the industry, things have changed quite a bit, and Chinese government start to get tough on piracy. For instance, a few years ago, a lot of TV videos could be downloaded for free, and each episode was sold for 2000 RMB on line. Now, companies who bought the legal rights of the TV series, such as Sohu, are suing those who pirated it. Thus, each episode now is sold for 20,000 RMB online. So things are improving quite a bit. An advice to foreign companies is that they should treat the Chinese market differently than European countries or US, where the GDP per capita is many times higher than that of China. They should lower the price of the software for China market. As China is huge, they can then sell more copies and actually get more revenue and profit. Autodesk did this, and is very successful.”

Homberg: “For every company, IP protection and technology transfer are of the highest importance everywhere in the world. Consequently, it is encouraging to see that the Chinese government continues to improve intellectual property protection. This is essential for China’s industry in order for it to be a reliable business partner, and to engender trust between investors and Chinese companies.”

Barbalas: “China has been putting in place the legal system needed to protect intellectual property including patents, trademarks and copyrights. It is important for new companies coming in to use the legal system to protect their intellectual property in the same way and to the same extent they would do in their own home market. Beyond this, business associations from both the US and Europe continue to highlight intellectual property protection as one of the top 10 issues for companies doing business in China. Within your own company there are many practical steps you can take to protect your intellectual property while you build your business in China.” Brutto: “China’s software piracy rate has decreased to 79 percent .”

Chen: “Depending on the industry, things have changed quite a bit, and Chinese government start to get tough on piracy. For instance, a few years ago, a lot of TV videos are can be downloaded for free, and each episode will be sold for 2000 RMB on line. Now, companies who bought the legal rights of the TV series, such as Sohu, are suing those who pirated it. Thus, each episode now is sold for 20,000 RMB online. So things are improving quite a bit. An advice to foreign companies is that they should treat the Chinese market differently than European countries or US, where the GDP per capita is many times higher than that of China. They should lower the price of the software for China market. As China is huge, they can then sell more copies and actually get more revenue and profit. Autodesk did this, and is very successful.”

Homberg: “For every company, IP protection and technology transfer are of the highest importance everywhere in the world. Consequently, it is encouraging to see that the Chinese government continues to improve intellectual property protection. This is essential for China’s industry in order for it to be a reliable business partner, and to engender trust between investors and Chinese companies.”

Q: Starting “small” is often suggested as a good way to start, do you concur?

Cico: “Small” related to China is always a relative term! No matter what you are doing in China, in which industry you are in and what are your objectives : it is always money and time consuming. I think that what is important is to decide in which part of China you want to establish your presence, if you are a new comer. Now days the location is very important and considering the extension of the Chinese market and the difference among the local markets and customers behavior, this aspect needs to be considered very carefully.”

Nizami: “In China small is big as the market is growing tremendously with over 1 billion people. So be prepared to expand your business much before than in your business plan especially if you are moving from the west. In China the demand of International brands is growing the fastest in the world.”

Barbalas: “Starting small is a good strategy to minimize your risk and build up your knowledge and experience. Staying small is not a good idea though. One secret to success in China is to grow fast. It may take a while to find the right strategy and approach for your business in China. Once you do, however, it is important to grow as fast as you can.”

Tang: “Depends on the business one intends to start. Sometimes one must start with sufficient scale.”

Brutto: ”To many foreign businesses, China is still a new and untried market. So starting small and growing organically often is the most solid path to long-term success.

Starting out with smaller projects, finding the right local employees and partners, and verifying the quality standards of local suppliers are important to establishing a strong foundation in China and developing the expertise needed to grow over time.

Some of the world’s biggest companies grew in China by starting small. UPS first began modest operations in China back in 1988. Through organic, steady growth, we now serve 330 cities and operate 198 flights every week that connect China to the rest of the world. “

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