Manage Your Risk

Manage Your Risk

China is for many businesses the great big unknown. It seems to hold so much potential, it is powerful, it is the source of low cost manufacturing, and shouldn’t your company be looking at entering the Chinese market in some capacity? China is also a large market in its own right and this is another opportunity which you could take advantage. But how do you do it?

We have all heard the horror stories of business failure in China, or Intellectual Property being stolen and a product that is identical to your being launched on the global market place as a competitor. This is not necessarily how things need to be for a company looking to invest in China in any capacity.  It is critical for the success of any business venture for you to manage your exposure to risk, and with China, you may need to consider many more factors then those risk factors that are common in established ‘western’ markets. So how do you go about entering the Chinese market?

There are of course a few ways in which you can enter the Chinese market, those which are high risk, such as searching for manufacturers on the Internet. A simple search on www.alibaba.com will show you a plethora of manufacturers who can provide products to any specification required, and many will have pictures of their “manufacturing plant”.  Using this method of finding a business partner in China is rife with danger and risk. How do you know that the manufacturer is who they say they are? are they a middleman? or the manufacturer themselves? can you afford to take the risk? and are you getting the best deal possible? The answer to all these questions may indeed be NO!! The old refrain “buyer beware” is important whenever you enter into business relationships of this kind.

As in any culture and country, there are good people, and bad people, people who will do the right things and those who will try to take advantage of you and rip you off. But there are ways of offsetting this risk in China. The Chinese appreciate and treasure relationships, so you need to be aware of this with any business venture in China.  An alternative to the high risk strategy described above is to attempt to minimise your risk exposure by conducting research on the ground in China. If you want to succeed in business in China, then you need to get over to China and meet with business people who can help you, either with a joint venture, or who can help you establish a wholly owned subsidiary. It is important that as a western company that you engage good people and partners to investigate the Chinese market. Each market
opportunity is unique in China, and as a consequence any investigation needs to be unique. It is here that specialist “China” companies such as The Australia China Development Company (www.tacdc.com.au) can help. Companies of this kind specialise in investigating market opportunities for western companies looking to invest in China. They can find the
opportunities on the ground in China for your company, and perform a full time role that saves your company the time and manpower to fully investigate the Chinese market.

It is important to remember that this all takes time and there are no real quick deals to be made in China. If you want a good long lasting deal then you need to be prepared for the long haul. Ultimately however if you engage the right business partner to help you, your success in China will be for the long-term.

by Nathan H. Gray
Navigating a Multi-Cultural Globe