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Are You China Ready?

Posted in China Business

I spent all day yesterday co-chairing a Doing Business in China Seminar and I suspect that I will be doing a number of posts on that over the next week or so. I’m starting at the start though, with who should be going into China and why.  Ben Shobert of Rubicon Strategy Group gave a fascinating and highly informative talk on China healthcare/China senior care.  At one point in his talk, Ben went into MBA mode (he has an MBA from Duke, so this is excusable) and talked about the analysis companies should use to determine whether they should be going into China.

Before he talked of this, however, Ben attributed at least some of his thinking on this to a book, The China Ready Company, by Steven Ganster of Technomic Asia and Kent Kedl of Control Risks.  Ben called that book the best he had read in terms of determining whether it makes sense to go into China, or not.  I read that book many years ago and I wholeheartedly agree.

Ben had this to say about what it takes for it to make sense for a company to go into China:

  • China should be a strategic, not purely opportunistic, pursuit.
  • The decision to go to China should reflect a holistic appraisal of internal capabilities, financial resources, and risk appetite versus other domestic or foreign investment opportunities
  • The process of choosing should allow key management team members and other stakeholders to ask questions, raise concerns, and feel their input has been sought and incorporated into the final decision.
  • If a decision to go forward in China is made, your management team should have several different market access strategies presented with a comprehensive analysis of each, along with an idea on how to properly market your services to the Chinese consumer.
He went on to say that the analysis should consist of the following four “distinct questions”:
  • Question 1: Do we, as a company (management team & ownership) have the bandwidth and cultural DNA to export our business model to China’s emerging healthcare economy?
  • Question 2: If yes, what is it going to take to export our business model? This is a resource and process question that isn’t specific to China
  • Question 3: Could we more easily export our business to another country versus China? Here, the analysis begins to get China- specific, but also is looking at opportunity costs for China.
  • Question 4: If China is the right choice, what will it take to successfully export our company to China? What should we be prepared for, what can we do to avoid the typical China market entry errors specific to the healthcare industry?
Our seminar focused on the “new China,” where opportunities for foreign businesses are just as likely to be on the selling of products and services than on the manufacturing of products.  Just as ten years ago, there was the idea that “we have to start manufacturing in China now or we will fall behind,” the idea that “we have to start selling in China or we will fall behind” is pretty prevalent now.  Though it is certainly true, that many companies should be (and are) looking at China as a market for their goods and services, it is also true that going into China to sell those goods and services is not the right thing for all companies right now.  Some should sell their products or services into China using a distributor relationship.  Some should profit from their goods or services by licensing some aspect of that to China.  Others should just stay in their home country and sell direct from there.  And for still others, China may make no sense at all.
When it comes to China there is obviously no one size fits all.  I take it you-all agree?
  • markkolier

    Excellent post Dan and for a short one you covered a lot of ground. And yes I agree.

  • Galina Vishnevskaya

    Totally awesome post I don’t think anyone is covering this kind of stuff Dan is the best for US China trade law and statistics. Noone else comes close.

  • http://www.procurasia.com/ Etienne C.

    I often say that any company with business going beyond a pure local scope needs to have a China strategy, even if this means NOT to come to China.

    But this needs to be a conscious and explicit decision, including some actions to counter some consequences of not coming when relevant.

    This posts allows many company top discuss the topic without spending lots of time and money, I think.