Don’t Bite Off More Than You Can Chew
I am often approached in my consulting practice by small companies that want to export to China. Too often, these firms have never or rarely exported and have little or no experience in Asian markets. But China is in the headlines and is the sexy place to go, and they want to be there, too. I do my best to talk them out of it, usually losing future fees for my efforts. For those that will listen, I start them off first in Hong Kong or Singapore (where newcomers have a chance of understanding what is going on), maybe moving them on to Taiwan. Then they can think about China.
Bound For China?
A recent report by the Hong Kong Trade Development Council, “Impact of the Current Global Financial Crisis on World Trade Structure”, confirms my thinking. HKTDC surveyed Hong Kong exporters to find out what difficulties they find in trying to do business in China. If Hong Kong companies, steeped in the culture, based next door and with a handle on the language, are having trouble – what can the rest of us expect? Let’s see what they are running into.
HKTDC’s technique was to ask Hong Kong exporters what difficulties they experience in China that are “serious” or “very serious”. I’ll combine the two. Whether it is a “serious” or a “very serious” difficulty, I don’t want any part of it.
The “winner”, i.e., the biggest problem, reported by 76% of the companies, is inadequate protection of intellectual property rights, usually meaning that products or trade-names were being copied. Tied for second greatest difficulty, at 69%, are fierce competition from Chinese firms (I can live with that) and a high risk of not getting paid or getting paid late (a definite no-no). Next up was inadequate knowledge of legal issues (67%), cumbersome procedures (66%) and unclear legal rules governing sales (62%). They were followed by a heavy tax burden and lack of local sales experience (51% each). There’s more, but you get the drift. If the Hong Kongers are having these problems, how can the rest of us hope to avoid them?
All these difficulties can be coped with, and that is part of the charm and opportunity of international business. But that does not mean that neophyte exporters should start out in one of the toughest markets in the world. Learn the ropes elsewhere. Besides, the real fear may be that you succeed in China. What is a small company going to do if it receives a single order larger than its annual output?
