January/February 2012
Executive Corner

A China perspective for 2012

By John Erskine III

When the subject of China comes up, I often ask people if they remember that 1970's Calgon detergent commercial: Mr. Lee's customer asks him how he gets the laundry so clean; his sly reply: "Ancient Chinese secret!" The ad depicts stereotypes that simply would not get air time today. Yet, when reviewing recent publications or forums on doing business in China, one finds plenty of comments that sound less like actionable advice, and more like ancient Chinese secrets:

  • Discussion threads on Asia/Pacific business, where posts make mention of China's invention of the umbrella and gunpowder
  • Experts on China business who emphasize the country's 5,000-year history
  • And a favorite: The admonishment that Westerners must learn to discern "when yes really means no." Do Chinese authors warn their readers to "beware the Socratic Method?"

It is not that these observations are wrong, but I remain surprised at the relevance that gets ascribed to them in the context of doing business with Chinese companies today. For the executive whose managers travel to China for growing sales or for establishing sources of supply, a more practical approach is warranted. An approach focused on identifying similarities and aligned goals, tends to work in China as it does at home.

For a small or mid-size manufacturer, doing business in China today has never been easier. When we meet with dealers, it is more common to see a corporate mission statement in the office. Meetings are focused on sales development the way Western-trained managers understand it: where the dealer sees his role in the value chain as providing market data, appointing product champions, expanding geographic coverage, and investing in local service and support capabilities. Today, it is common to meet Chinese managers with business degrees from the U.S. or Canada. With a baseline relationship established with a solid dealer who truly speaks our language, it means we can focus energies on strategic goals-growing market share and offering a product suite with the broadest appeal to the local Chinese market.

Another observation: Today when visiting in China, we are not lectured on the "importance of guanxi." (Guanxi xue involves the exchange of gifts, favors, and banquets; the cultivation of personal relationships and networks of mutual dependence.) It is not that this idea has disappeared from Chinese culture, but perhaps more managers there have found other ways to grow their business. It is telling that a company like Taiwan Semiconductor (TSMC) has written in its corporate core values statement, a rejection of "connections or guan-xi" in its hiring and business practices. So things are changing-that's not news, but for those still contemplating working with Chinese companies, what used to seem like challenges specific to China, today seem much more like typical business challenges we face at the home office.

On the supply side, for companies who are not considering China-based operations, today, one finds many Chinese companies who will act as an intermediary between Western and Chinese manufacturers. These brokers will take a set of drawings and specifications, and find local vendors with the technical capabilities, quality control, and capacity, to fit their Western partner's requirements. They handle all communications and negotiations with vendors, monitor vendor on-time delivery and quality, and often have their own engineering staff and Q.C. labs. Companies like this come to the table with an answer to the negative perceptions of Chinese quality, and with a solution for companies lacking the resources to go it alone. The reality today is we get excellent quality from our Chinese sources-though as at home, the process requires monitoring and management.

For anyone in charge of international sales or sourcing, remember your managers still have a job to do: setting expectations with suppliers; finding common ground with sales partners; working a game plan. Consider, when it comes to China, are your managers at risk of perpetuating their own stereotypes? Is potential China business getting shortchanged at your company because of what managers think they know about it? In China, as in other overseas markets, insist managers remain focused on the business and business goals, and that they work at clear communications with their foreign counterparts. Know small and mid-size companies have more options than ever, to help ensure an investment in China pays off. In the long run, managers will tend to find that while some "secrets" may persist, they need not be a barrier to success.

ABOUT THE AUTHOR

John Erskine (johnerskineiii@racinefed.com) is a vice president at Racine Federated Inc., manufacturer of flowmeters of various technologies including ultrasonic, turbine, vortex-shedding, differential pressure, and variable area.