SUCCESSFUL STRATEGIES IN CHINAQ: Are the government restrictions to distribution, particularly in the retail sector, a problem?
Agenand: “As with anything, these issues have a variable impact depending on the industry and business type in question. Being aware of the challenges and being realistic about one’s own business and industry as well as how it may be impacted by these challenges creates an opportunity to formulate new and innovative approaches to expand and grow.”
Chico: “Restrictions are always a problem!” Barbelas: “Groups such as the American Chamber of Commerce continue to report that getting the required licenses is still an issue.”
Tang: “We had a success story when the Brazilian instant coffee brand,’Pele,’ was introduced through a Chinese distributor without any problems.”
Hong: “No. I don’t think the government
restricts the distribution in the retail sector.
The market is pretty free unless someone
Q: What is a realistic time frame for success in China?
Barbalas: “New companies coming to
China can expect to invest for one or more
years before they start seeing results. It
takes time to build the China team, understand
the market and build the customer
recognition that a successful business
needs to take off.”
Q: Are joint ventures a viable alternative to direct investment in China?
Angenend: “There are quite a few things to consider when entering into any joint venture, in China or otherwise. Entering into a joint venture can be a viable strategic way to enter the Chinese marketplace, but, as with anywhere, it is essential to do your due diligence and understand the intangibles when embarking on this type of investment. For some companies and businesses this may be a viable alternative, and for others it may not be. Overall, when considering expanding into a completely new market, I believe there are universal principles for success: know your business, know your industry, gain a comprehensive understanding of the operating climate and external environment of business in the area of interest, be realistic, and strive for innovation and adaptability. This may take quite a bit of time and effort, and for some companies and entrepreneurs, expanding into China may not be the best decision at this point in time, but to those who can make it work, there is unquestionably much to be gained. “
Barbalas: “When you have joint ventures between companies from different countries, cultures and systems, I do not think that you can expect the success rate to go up. Making a joint venture work for both parties requires putting in the hard work up front to make sure that there is a long-term alignment of interests and then to put in the management resources that can manage the joint venture and relationships that make it work.”
Brutto: “A company’s goals and operational philosophies should be the key factors when deciding whether to choose a joint venture or direct investment structure. In general, a partnership with a Chinese enterprise can help a company overcome start-up difficulties, create distribution networks and attain vital market information.
There are challenges associated with a joint venture. These include an often complicated application procedure with approvals required from several government authorities. In addition, the foreign investor must be willing to share company technology, know-how, and sensitive business information with third parties.
On the positive side, joint ventures significantly reduce business risk to foreign investors. And a Chinese partner may be more familiar with dealing with Chinese authorities and bureaucracy, and offer advantages in terms of existing business contracts, product markets, distribution networks and business connections.”
Chen: “It depends on how a firm defines “success” in China. Different industries and different expectations all vary. Internet companies, such as Baidu, Tencent, and Alibaba, all become $30-$40 billion USD market cap companies in 10 years. Certain companies, with the help of venture capital, and private equity, went from nothing to a public companies in 2-4 years. However, in general, it takes about 10 years to build something meaningful.”
Cico: “Yes, they are, but you need to be very careful during the selection of the partner, the negotiation of the agreement and never think of your partner as one of your friend. Last , but not the least remember, to include in the contracts already a clear way out methodology, in case something goes wrong in the relationship. In China you will be always a guest: never forget it.
Many years ago, the CEO of a very important Swedish Industrial Group defined the joint venture with a Chinese partner as “..a marriage where you do not love each other but you’re forced to sleep together”. Twenty-three years later I think that this definition still stands.”
Homberg: “Joint ventures are always a viable alternative. EADS, jointly with our partners, manages numerous, successful joint ventures, comprising global leaders like ATR in turboprop aircrafts. One prerequisite for success in joint ventures is to carefully craft industrially roles and leadership, in order to enable dynamic business development and company evolution over time.
As I mentioned earlier, in the aerospace sector we are often obliged to establish joint ventures when entering new markets, given the nature of the business and existing regulations. In China, EADS found highly motivated and capable partners with which we have established very successful joint activities. One example in the Space segment is our joint venture “Bejing Spot Image” with the Chinese Centre for Earth Observation and the Digital Earth (CEODE) for Geo Information Services.”
Tang: “Joint ventures are a viable alternative to direct investment in China and some wholly owned foreign companies have also been successful in China.”
Nizami: “Definitely, joint ventures are the key to a secure investment in China, without local direct investment you will be lost and taking a big risk in the China market where language and introduction plays a viable role. I suggest finding the right joint venture partner is the key to success but the question is how to find the right partner in China as they all look the same.
Finally, I would say that we all should learn from the past to correct our present for a better future in the Chinese market.”
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