Tracing the Path to Success

China is certainly not for the fainthearted. Many businesses over the years have tried and failed. Some foreign investors have failed more than once! The good news is that we know of many success stories in China, too. You can find the path to success — you just need to know where to look for it.

What this book can deliver is a great deal of hands-on experience and know-how about doing business in China. You need nerves of steel, the patience of a saint, and the cunning of a fox. But your company can win in China. We’re here to guide you down the right path.

Getting the right knowledge of China under your belt

Before you get started in any new market, you need to get the lay of the land. Finding your way through the maze takes time. China’s certainly like no market that you’ve ever done business in before.

The best way to look at the situation is to consider yourself a really big sponge. Soak up as much as you can find out about the China marketplace. Squeeze as much information out of good sources as possible. With the knowledge of what the business environment is like, how the government gets involved in business, and some of the market challenges you’ll likely face, you’ll be much better prepared for the journey ahead.

Don’t believe just anyone who says he or she is an expert on China. The China market is way too complicated for anybody to be a true expert on business. (And because the market moves so fast, becoming out of date very quickly is easy.) We’re here to serve as your guides, not your gurus.

To get a head start figuring out China and how to develop the right business plan for the market, check out Chapters 2, 3, and 4.

Starting your engine

Visit China a few times before you start making any decisions. The best information and advice in China comes from people who’ve done what you’re trying to do — especially if they’re only a little further along than you are. Put your feet on the ground just to do some networking. Take people out to lunch and pick their brains. Then start thinking about making some decisions. The more slowly you go and the more patient you are, the more information you’ll collect and the better your chances of success. See the following section titled “Taking the first steps: What you can do today.”

After you’ve broadened your knowledge of China, you’re ready to get your business started. Some companies plunge right in with a real physical presence in China; others do business from a distance. Still others go halfway by setting up in Hong Kong. You have to figure out the right approach for your situation.

For newcomers to China, organizing a new company can be a real challenge. You’ll soon be asking yourself what kind of company structure you need for your company’s business in China. You have other considerations, too, such as geography.

And getting the right people in China can be a difficult task. You may encounter a shortage of talented managers with the right mix of skills and abilities. All this startup activity comes at a cost, too. If your company needs to be physically present in China, see Part II.

Getting down to business the Chinese way

When you first start doing business in China, you may think you’ve landed on another planet! But armed with an understanding of how business really works over there, you’ll find it’s not as hard as it seems. For information on the how the Chinese go about business, go to Chapter 11.

The hard part comes when your company starts to negotiate with the Chinese. They’re tough as nails when bargaining, and they have a reputation for being some of the hardest-hitting negotiators around. Cunning is probably the best way to explain their style, which is very well developed but can seem outrageous and unprofessional to foreigners. To find out what you can expect when you sit across the negotiating table from the Chinese, go to Chapter 6.

Organizing your team for China

Putting a good team together in China is a balancing act. Many successful investors do well in part because they make sure their top one or two China managers are long-time company employees from home markets. If you’re going to succeed in China, you have to ensure that your company’s culture in China is foreign yet respectful of Chinese culture.

One must for attracting and retaining talent in China is to make sure you have a clear idea of how you can help your Chinese employees develop their skills and careers. You may find that Chinese employees are hungrier to learn than any other employees you’ve had. If you don’t feed that desire — even for unskilled laborers — you’re going to have problems with retention. To find out more about organizing your team, go to Chapter 9.

Remaining flexible while staying the course

Advising you to keep your eye on the ball with China would be wrong — you have to keep your eyes on a number of balls at the same time. Don’t fixate on any one thing (such as minimizing taxes) while ignoring others. Don’t marry yourself to any one strategy or plan, either.

You’re learning, and you’ll make mistakes. Don’t be afraid to recognize and correct mistakes. Your operating environment can change at the drop of a hat, too. Be ready to make large and fast changes to keep up. Even though you likely have to change quickly and often, stay committed to China. Don’t expect overnight success — you’ll get there eventually.

Respecting the country for what it is

China can look modern at first glance — glass skyscrapers, Chinese with Western MBAs toasting fine wine at Jean Georges restaurant, and glitzy neon displays in downtown shopping districts. This setting may be interesting, but it’s not China.

China was isolated from the Western world for the better part of three decades. It’s an old society with an old culture. Although it’s changing, the vast majority of China hasn’t been transformed yet. Don’t ground your expectations on your experiences in the West. Some things are easier in China, but many aren’t.

You should give the Chinese some credit where it’s due — dragging millions out of poverty and overhauling a plodding centrally-planned economy. Chinese society today faces many strains and has plenty of growing pains. Don’t hold this against the Chinese — they’re doing a pretty good job when you look at the challenges they face.

Staying on the lighter side

Keep your sense of humor about you. If you can’t laugh at yourself when you’re doing business in China, you’re going to go crazy! Doing business in China may be the most challenging thing you’ll do in your business career — humor helps to keep things in perspective.