SCDigest: Global Supply Chain – Keys to Succeeding in China
By SCDigest
Editorial Staff
Through a special arrangement, presented
here for discussion is a summary of a current article from Supply Chain
Digest.
Navigating
the complexities of buying from or selling into China has never been
easy, especially as the pace of change there is almost mind-boggling.
Still, the companies that have been doing business in China for many
years have learned a number of lessons that can benefit others that have
more recently made the move or are considering expanding their buy or
sell efforts.
Many of those
lessons were discussed during a recent conference at Arizona State University
and co-sponsored by AT Kearny, including a panel discussion that featured
executives from Motorola, Emerson Electric, Harley-Davidson, ON Semiconductor
and TPI Composites, as well as ASU faculty members. Those lessons are
summarized below:
Leave Your "Cutting
Edge" Technology Behind: “Hit-and-miss
IP (intellectual property) regulation is a significant inhibitor to development
in China,” said W. P. Carey School supply chain management professor
Philip Carter. But companies shouldn’t ignore China due to the IP risks,
but rather go into China with older, “second best” technologies that
present lower risks to the company if the IP is ripped off. It is worth
noting that IP protection in China has become better and likely will
continue to improve.
Focus on Recruiting and Retaining Management
Talent: Finding
basic factory and unskilled labor in China is easy. Supervisory and
management talent is a lot harder to come by, yet that management talent
is obviously key to success.
Understand
the Importance of Relationships: Relationships
are different and arguably more important in China than in Western
economies. The Chinese term guanxi, meaning "connections," is indicative
of the role that relationships play in Chinese business. That includes
relationships with the Chinese government.
Think Sell,
Not Just Buy: While
making products in China either directly or indirectly for export back
to Western markets can dramatically reduce costs, companies must really
look at entering the domestic Chinese market as well, despite the challenges,
those with experience there say. This is again where relationships
with government officials is key, as it may smooth the way to joint
ventures and even 100 percent ownership by Western companies of businesses
in China, as Motorola was able to achieve with its operations there.
Be Careful
with Joint Ventures: While,
in many cases, a joint venture with a Chinese company may be the only
path into China, such moves have to be done with care and the right
strategy to avoid creating a competitor and losing IP.
Look for
Win-Win: Companies
likely will find more success in China if they look for opportunities
that are not only good for their companies, but also good for China.
That’s a different approach than is needed in the West – but may be
the key to building relationships with government officials and accelerating
official approval for new plans and development.
Discussion Question:
What do you think of this list of smart practices for doing business
in China? Which ones are more or less important? What would you add?
This list is sound advice. Relationships are key and it’s also very important to find a trusted someone or partner that is connected to the main network of families. Anyone that has experienced the development of a supply chain methodology in China will have a list of the must do’s and the don’ts. To avoid a major catastrophe and to protect your company, it’s advisable to do much research.
As the president of a global company with operations in China, I travel to China every other month and spend 35% of each year there. Some of these statements are a bit dated, since China is less and less focused on its government “relationships” and more on its economic position. Face to face negotiations, management and information is critical. Having an ex-pat presence is key to managing interpretations, prioritization and communications.
However, China is a rapidly changing, booming economy that is focused on economic growth more than ever. Don’t worry about protectionism; instead, focus on maximizing quality, on-time fabrication and accuracy. Manage the deliverables to the smallest detail, improve logistics and operations and everything else becomes a second priority.