What Does A China Ready Company Look Like?
The architecture of China’s dynamic and lucrative business landscape plays a big part in why a lot of players in the market want a piece of the China pie. Ranging from MNCs to SMEs, they all want to shoot their shot to establish their operations in China. From Smart Cities, to heavy use of Artificial Intelligence, Internet of Things, and advanced programs on E-commerce. One can argue that Chinese consumers are way beyond the technological curve in terms of advancement. China’s business ecosystem truly is a safe and prime space for experimentation and innovation.
This is why China’s market place shouldn’t just be viewed as a ‘huge opportunity’ but also as a conduit to forge your business to be more competitive at a global scale. Being a China ready company is everything in our ever changing business landscape.
These dynamics have put China on the map, and on the cross hairs of many western businesses, especially here in Switzerland and the EU. From large companies staying lucrative by lowering their manufacturing costs, and exploring uncharted markets, to start-ups continuously adapting to their ever-changing customer base— it’s almost impossible to heed the call of Chin. Specially in these strange times where everybody is looking for a springboard for a powerful entry to the year of 2021 and the post pandemic era.
I have seen the companies I have worked with in the past do really well just by being early, prepared, and willing to build new business relationships with China.
In this Three part mini-series scattered across the month of November, I will share what can be applied to Swiss companies eyeing to enter and expand in China. I will share what challenges may come your way, and what you should accomplish for your company to face those challenges. In this article, I am thrilled to paint you a picture of what a “CHINA READY” company looks like and what you can do to identify and foster these different factors before investing in China.
A CHINA READY COMPANY ACKNOWLEDGES CHINA’S POLICIES FOR MARKET ENTRY AND HOW IT CAN AFFECT THEIR PROCESS.
Their company’s product fit the vision of China’s development plans. As I’ve mentioned in my previous article: 5 Awesome Tips You Can Take When Doing Business With China expect a lot of politicization in this business landscape. To put it simply, your end product or technology should support the plans laid out by the Chinese government. China has a five-year plan, a ten-year plan, and even the 100 year marathon all directed for the country’s economic development. It’s almost a business hack, when the government supports, the likelihood of success follows. These companies are aware that the economy of China is profitable by design, they’re not the world’s second greatest economy for nothing; and they are at the long-tail end of the business journey.
In the grand scheme of things, China is no longer simply a resource of untapped potential, or a mere campaign initiative. A “China Ready” company understands that China IS the company’s global strategy. The opportunities are there for the taking, and only a chosen few have set out to sail for the long term. For some, it will be an absolute arms race, and for others, it will completely revamp their company structure and culture to the core as they refurbish their organization, discovering strengths, and solutions to problems they knew they never had.
For example, China has actively encouraged setting up industrial clusters in specific regions. That way, industry supply chains can be focused on specific cities. As a Swiss company, such clusters can help you where your customers are, which areas to focus on, and where to base your operations. Say that your company operates in the pharmaceutical industry— it would be wise to set up shop in Shanghai, Jiangsu, or Shandong. Although, all particular cities offer strong commercial opportunities across a wide array of sectors; Over the long term, this strategy can enable foreign companies to gain “first-comer” advantage and lead to greater long-term market success.
“China Ready” Companies know that the Chinese market is Switzerland’s most strategic market. With a wider market that opens a lot of possibilities for foreign investment, and a great deal of policies come with it too.
Which brings me to China’s new batch of policy terms to benefit their economy and of those outside of their borders, and how it can affect you.
China has come out with the idea of “dual circulation”. This system entails two circles of economic activity. The strategy? Dual Circulation aims to create a new balance away from global integration (outer circulation) and pave a way towards heavier domestic reliance (inner circulation). This move from China stems from their belief that China has entered a new age of rising global uncertainty, and an increasingly hostile external environment with new opportunities.
At the center, China’s dual circulation policy is a strategy to fortify its resiliency in their economy in the face of global waviness and general retreat from globalization among western democracies.
The Chinese economy will have a stronger and closer tie with the global economy. But what does this mean to Swiss companies eyeing to do business with China? The Dual Circulation Strategy tells us that it is a two-headed approach that aims to stimulate the Chinese domestic demand and to cater to export markets that will create conditions that allow domestic and foreign markets to boost each other. As a Swiss company, that puts you in the center of an internal and international circulation moving towards a demand and innovation-driven economy.
A CHINA READY COMPANY IS HIGHLY MOTIVATED AND HAS EXTENSIVE MARKET KNOWLEDGE
Successful Swiss companies or any other company hailing from other foreign countries often have a strong and diversified value proposition that is predicated on their technical competence in their niche market segment. Patented technology and process expertise can often be found in their arsenal.
A company’s motivation to expand to foreign seas often stems from different factors. So what are these factors that drive a company to expand and do business in China? Let me explain.
A New Playing Field:
These companies are aware of what China has laid out for them on the table. A new playing field means an attractive market opportunity, and it’s there to support the market development for entry and expansion. They scrutinize the market for the highest point of potential and where their company can make money.
Customer Needs:
For a Swiss company in an entirely foreign market, it is critical to invest time in key customer relationships. Customer probing proves useful when developing a clear and an on-point perception of why their customers/clients need them from a localization standpoint.
Lower Operating Costs:
This is one of the key motivators of why MNC’s and a few SME’s in the late stages of R&D go to China for; to reap the benefits of lowered operating costs. China ready companies have high respect on the evaluation of their structural options for them to get a hold of these benefits at the lowest possible risk.
I have had the painful experience of hearing the story of this one company wanting to expand and do business in China, but the company in itself is half baked, and not fully ready. What drove them are not the factors you have read above, but only the aspect of “minimizing their costs” and expecting the promise of having more profit. They failed to comprehend the basal factors of being motivated, driven, and for being a “China Ready” company. They failed to take into account these certain aspects, and in turn, management inaccurately weighed their financial investments, costs of market entry, and mismanaged IP exposure. This company basically took a one way ticket to their demise.
There are many risks that can prevent you while in the process of if all. One of the best things you can do as a Swiss company is to understand the right business formation will only present itself once a strategic base is in the right place.
