Top ten reasons why Chinese companies fail in America
Top ten reasons why Chinese companies fail in America

Way back in 2010, I wrote an article for Forbes, entitled, Ten Reasons Chinese Companies Fail In The U.S. My top ten list in that article was as follows:

1. Chinese companies focus on a Chinese consumer, not an American one.

2. Chinese companies fail to realize that one reputation-damaging mistake in the United States could doom them forever here.

3. Chinese companies fail to realize it will take time for them to make an impact in the United States and they are unwilling to spend the time and money necessary to do so.

4. Chinese companies focus too much on the end result (making money), and by doing so, they sacrifice the professionalism that would allow them to achieve long- term success.

5. Chinese companies tell users what they want instead of listening to users.

6. Chinese companies focus too much on making money in the short term, rather than on building the quality necessary to sustain themselves in the long term.

7. Chinese companies fail to understand how beauty and design might distinguish their product from that of their competitors.

8. Chinese companies rely too much on phone calls and face-to-face meetings instead of e-mail.

9. Chinese companies fail to use “simple and elegant designs.”

10. Chinese companies fail to realize their need to hire MBAs and those with local knowledge.

The other day I received an email from a reader explaining why he liked this article so much and then proceeding to list out exactly how so many of the above things apply to the Chinese company with which he works. The below is the email, doctored to avoid his company ever being able to recognize him or her.

 

Dear Dan:

I’ve never felt compelled to email a blogger privately but your article was SO spot on I simply had to reach out to you. Let me first introduce myself.

I am in a high level marketing related position for a Chinese company with a U.S. office. I have decades of high level marketing experience, some of that with Fortune 500 companies. I am proud of my experience and my contributions. This Chinese company presumably hired me because of my experience and my past accomplishments.

I took my current position to enhance the sales side of this Chinese company. In my first year at the company I quadrupled the sales of one division. Despite this I’m constantly being told that sales in this division should be considerably higher and they consistently forecast those higher sales even though we don’t have the product in in our warehouses to accomplish that. The high level Chinese executives at the company simply do not understand the concept of “American end users aren’t going to wait 6 months for their product for the boat to come from China.” How can any CEO project such a forecast without the inventory? It makes no sense and I reiterate this to management till I’m blue in the face.

When it became clear that I was instrumental in increasing sales by leaps and bounds, it was deemed “luck” by the Chinese execs, including the CEO. My morale is, well, virtually non-existent.

All the points in your article I have fought about ad nauseum. I don’t believe I’ve ever felt so frustrated at any job. The lack of designated responsibilities and titles to employees, the built-in cultural (and bluntly hinted at) expectations of working over 40 hours a week, “Chinese style,” a not-so-subtle reference to Americans being “lazy,” and furtive “Chinese meetings” are all aspects of working for Chinese employers that leave us American workers less than motivated.

I know that my situation is hardly an isolated one. I have a European friend who got fired at his large Chinese company for trying to update the customer service policy to be more friendly to buyers (they misrepresented their products and did not grant refunds) and another who was terminated after taking a stand against a fake product they were selling  as real. There is a bizarre mindset amongst some members of the Chinese business community here that US law is irrelevant, an inconvenience.

Your point about the Chinese coming here thinking the US market is like the Chinese market hit home with me. Chinese tastes are quite different from American – we like different colors of products, for example. When I continually point this out, it falls upon deaf ears. We lose our shirts rolling out a product, I utter “I told you so” under my breath, and continue to beat my head against a wall.

I’ll bring up salient points and provide marketing direction and he’ll ask me a question that makes me want to pull my hair out, strand by strand. #1 and #5 go hand-in-hand, as I’ve also brought up the “Shouldn’t we be telling China what to make, instead of China sending us product we can’t sell?” question. Recently, the CEO asked the same question, as if it were an original thought, of course.

I do believe, like the commenting consultant on your blog, that these businesses have a tendency to devalue the “soft” competencies such as marketing, despite a solid marketing strategy being pivotal to business success. At one point early on with the company, I unveiled my thoughts on forming the company’s future marketing strategy. After my sales team added its contributions, the CEO appeared dismissive of the proceedings, as if a couple of know-nothing Yanks were telling him how to run his business.

Well, we were. We’re in it for the long term. We want to build a good brand with a good reputation. Most importantly, we are the ones with knowledge of the American market and presumably that is why we were hired and that is exactly what we were supposedly tasked to do.

By the way, Point #1 made me laugh out loud, because it reminded me of conversations I’ve had with the CEO.

BLOG NOTE: The below are typical conversations our China lawyers have had with Chinese clients and were what made this person laugh from Point #1:

Chinese clients have driven me nuts by asking my views on things that I know nothing about, and then completely ignoring my advice when I try to hook them up with real experts. The following are typical conversations:

Chinese client: How much should we pay for that U.S. trademark?

Me: I have absolutely no idea. I just do not know your industry well enough to be able to help you at all on this. But, we have worked with a company that does nothing but value IP and I would be happy to give you their name.

Chinese client: But what is your best estimate?

*     *     *     *

Chinese client: Should we start out selling our product just on the West Coast or should we start out nationally?

Me: Good question. Difficult question. It seems to me the answer to this will hinge greatly on the costs involved and on your ability to set up distribution networks. My firm does not handle questions like this (and even if we did, I do not think it would make sense for you to pay law firm rates for this information) but I would be happy to refer you to top notch business consultants who do.

Chinese client: Should we start out in Los Angeles, Chicago or New York?

What are you seeing out there? No really, what are you seeing out there in terms of Chinese companies figuring out how to make it in America? I realize that the above is just one company and I’d love to hear from what people are seeing and hearing out in the field.

  • Lucas Blaustein

    In my industry there are an unending number of small and medium size Chinese enterprises. They are nearly always run by Chinese immigrants that have no grasp of the industry, no understanding of the complex nature of agriculture, and an unabashed carelessness for what they are selling – food safety, consumer protection, the farmer – none of this matters. I have never met a single one of these firms led my an American. All of these firms are led by individuals usually shipped in from China working illegally on a business visa, or Chinese Americans. The Chinese firms do this because it is cheaper to employ Chinese workers, and they are also less likely to run afoul of ‘American’ sensibilities like following the law and not selling dangerous products.

    What is interesting is to compare the strong Japanese presence in the industry to the more recent Chinese presence. The Japanese entered America during their boom in the 1980’s in the exact opposite way, they worked with Americans, keeping in place existing management structures and allowing the Americans to run the business. The Japanese still have foreign staff working in the United States, (as should any multinational for reasons of language/culture barriers and just to insure the business is being run properly), but these staff are few in number and act largely to observe and facilitate communication with the home office. Once a Japanese manager told my team in a high-level management meeting, we employ Americans because no one can work in this field but Americans. Asians cannot work with the farmer, the farmer will not even talk with them, and will view them with distrust. While that is the industry norm exaggerated to the extreme, the reality is all agriculture is local, and if you do not work with the local population you will completely fail.

    What most concerns me about the vast number of Chinese firms operating in the U.S. though, is that a lot of them are involved in money laundering and other illegal business practices. It is very easy to launder money in commodities, by buying at one price and then selling the same product internally at another, and because of the size of these companies they nearly all fly under the radar of the FBI and Commerce Department. However, consider that COFCO USA’s number one investment in the United States is real estate, as are most of the large and small Chinese agricultural companies, and you begin to wonder what they are trying to do: move money out of China or procure healthful, safe, and wholesome food for the Chinese consumer…?

    Ultimately, if Chinese firms do not learn how to operate internationally it does not bode well for their long-term profitability. The other problem is quite honestly, while suffering from the ten points outlined above, Chinese firms also open themselves up to substantial risk for litigation, criminal investigation, and extortion from US counterparties – sometimes the Chinese firm is just trying to grow without any malicious intent, but because of Chinese business practices, ignorance of the locality, and by not hiring Americans they expose themselves to enormous risks. It is not just bad for American consumers, and our business environment, but good and hard working Chinese people are being hurt too. Chinese companies in America must change.

    Read innocent Chinese immigrant caught up in allegations of spying:
    http://www.nytimes.com/2015/05/10/business/accused-of-spying-for-china-until-she-wasnt.html?_r=0

    Read wife of former Sinograin CEO charged (now dismissed), husband still on the run for money laundering and theft, with whereabouts unknown:
    http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=newssearch&cd=4&ved=0CCwQqQIoADADahUKEwj82PS_tovHAhUMkA0KHaeJDbQ&url=http%3A%2F%2Fwww.desmoinesregister.com%2Fstory%2Fnews%2Fcrime-and-courts%2F2015%2F03%2F29%2Fseed-corn-theft-plot-national-security-fbi%2F70643462%2F&ei=w5a-VbzrMIygNqeTtqAL&usg=AFQjCNHSe6QnlrEHCkNFN0UR5S_f9oyKyg&sig2=iMZeR79EYSg2fbsBL-hDww&bvm=bv.99261572,d.eXY

    Read BYD failure in America:
    http://www.huffingtonpost.com/2014/04/01/byd-china-electric-car_n_4964233.html

  • Ward Chartier

    In the context of this blog and what has been written here many times before, it interests me to read the letter writer’s comment about his/her bosses opining “…US law is irrelevant, an inconvenience.”

    It occurs to me that the letter writer, if fluent in Mandarin, could develop a successful and potentially highly profitable presentation about the Ten Reasons… and deliver it to large audiences in the major cities in China.

    On the other hand, I can easily imagine executives in China saying, “We don’t need to waste money attending that presentation. We know what works.” Those are the very same words spoken by some executives in North America hoping to make their mark in the economy in China without educating themselves first.

  • Rob Schackne

    Ha. True that you can hear when you’re just listening to yourself.

  • Rob Schackne

    Ha. True that you can’t hear when you’re only listening to yourself.

  • John Niggl

    Points #7 and #9 really resonated with me. No where have I seen more of a disregard for design aesthetics and user-friendliness than with Chinese websites. Most Chinese websites look like they were designed in the mid-’90s. The lack of care for updating websites is also staggering.

    In response to the reader that emailed Dan above, overall marketing strategy also seems to be a faculty which Chinese companies seem to be missing. A friend of mine works on the web marketing side of a company that sells consumer electronics in the U.S. and elsewhere. He’s basically said that sales staff have no concept of lead nurturing. As an example, marketing might receive mild interest in the form of a visitor to their website that has downloaded a case study. Then sales staff immediately contact the prospect and try stuffing product down their throat – usually with the predictable result of scaring the person away.

    I totally agree with the frustrations expressed by this marketer that emailed in.