Unit 3: Emerging Markets: Strategies for doing business in China

The UKTI service is a superb support for businesses looking to expand into international markets, and they’ve just released a detailed guide to Doing Business in China. Its quite a detailed, 45+ page document, but it includes some expert guidance on factors for businesses to consider - particularly if they are looking to invest in China for the first time…


I have picked out some useful bullet points from the guide that might be useful for students preparing for the AQA BUSS4 (Jan 2010) exam on investing in emerging markets:

QUESTIONS A BUSINESS SHOULD BE ABLE TO ANSWER BEFORE ENTERING THE CHINESE MARKET FOR THE FIRST TIME:

BUSINESS RESOURCES AND CAPABILITIES

What are the unique selling points for your product or service?

Do you know if there is a market for your product in China?

Do you know if you can be competitive in China?

Do you have the time and resources to handle the demands of communication, travel, product delivery and after-sales service?

BUSINESS AIMS

Do you wish to buy from China, sell to China or both?

Do you wish to establish your own company presence in China, for example through a representative office, wholly foreign-owned enterprise (WFOE) or joint venture?

Do you need to be involved in China at all?
KNOWLEDGE

Do you know how to secure payment for your products or service?

Do you know where in China you should start?

Do you know how to locate and screen potential partners, agents or distributors?

IMPORTANT MARKETING QUESTIONS TO CONSIDER

Where is there greatest demand for my product?

Where is there greatest growth potential?

How easy will it be to market, distribute and sell my product in the regions I am considering?

Do I want to start in one of the rapidly growing coastal provinces of China, where there will be more experience of working with foreign companies, but also more competition and higher labour costs?

Do I want to start in one of the inland provinces, where there may be less experience of working with foreign companies, but also less competition and lower labour costs?

Should I enter the China market via Hong Kong, with its well-developed infrastructure and advanced financial and professional services sector?

Given that well over half of hi-tech related exports from China come from Taiwanese companies investing there, should I be looking to enter China via Taiwan?

What are the local/provincial authorities’ attitudes to international trade? Do they welcome it or do they have a reputation for bureaucracy and obstruction?

Are there any investment zones in the area and what benefits are on offer?

The guide goes on to provide a brief checklist for UK business people who are committed to investing in China:
- Leave your preconceptions at home.

- It’s all too easy to be dazzled or overawed by China, but keep hold of your business sense as tightly as you would anywhere else.

- Do your homework on the market and on potential partners.

- Patience is a virtue. Some things may take longer to set up than you think (especially if they involve bureaucracy), so allow for this in your preparations.

- Take a long-term approach, but don’t stick rigidly to your plans. Things often change rapidly and unexpectedly in China.

- Obtaining good quality independent legal and professional advice is essential.

- If your product is in danger of being copied or counterfeited, seek specialist legal advice on how best to protect your intellectual property rights (IPR).

- Don’t forget to carry out due diligence.