What Is Your China Strategy?

What is Your China Strategy?

 

The China market is something many multinationals find well worth pursuing as annual growth has outperformed many industrialized nations for several years. Since becoming a member of WTO in 2001, China has played an increasingly critical role in the global economy. Operating in China might be compared to doing business in the United States where distinct regional differences exist and a multi-tiered government structure has long baffled newcomers. However, unlike the U.S., China’s laws, policies and regulatory environment continue to undergo rapid evolution in response to a market economy operating under a Communist political system.

Some of the following questions reflect factual situations confronted by foreign company clients in China. You may wish to consider these in the development of your China strategy.

  1. Why are you going to China, what do you expect to achieve by being there and when do you expect a positive return on investment?
  2. Might other countries be more suitable for your purposes?
  3. What is the best way to nest your China efforts into the existing corporate matrix?
  4. If you are trying to sell in China, have you considered tailoring your product and plant locations to lower inventory, reduce costs and maximize sales?
  5. Have you considered coastal and in-land regions where Special Economic Zones may provide favorable tax treatment?
  6. Do you truly understand the capabilities of your JV partner and are your goals in harmony?
  7. Have you considered all of the ramifications of buying out an underperforming JV partner or privatizing a struggling State-owned Enterprise?
  8. Are you convinced that your cross-border national and local sales and marketing strategies are achievable?
  9. Are you certain that local management is in compliance with China’s National Labor Law or are you prepared for potential litigation that could destroy global marketing efforts and all of the company’s good will?
  10. Is your critical intellectual property completely outside China and, if not, are you sure it is secure?
  11. Have all of the local offices truly bought into the corporate China strategy?
  12. Does the China office have significant P&L responsibility for its overseas operations?
  13. Do your senior managers in China have direct ties and effective communication with the company’s global leaders?
  14. Which company personnel should negotiate with the Chinese government and why?
  15. If your client asks what you have done to prevent intentional factory production overruns and the piracy sales of its branded goods by your employees, what will you say?
  16. Is your China budget based on credible data sources?
  17. Is it true that Chinese officials could unilaterally undermine a profitable company despite sound business fundamentals?
  18. What if you want to re-invest profits but your JV partner turns out to be an ailing, cash-strapped State-owned Enterprise and disagrees?
  19. What will it take to convince your board of directors that the company’s China initiative is sound when many Chinese laws and policies are unwritten?
  20. How will you minimize the political, social, environmental, health, operational, and financial risks inherent in a significant China play?