[Note: below is Chapter 21 from Great Wall of Numbers]
Now that you have seen a snapshot of the mainland economy and have had a chance to become acquainted with a number of industries, it is time to figure out how to transform this knowledge and information into a practical business plan.
After you begin to do your due diligence by conducting market research and performing a SWOT analysis (strengths, weaknesses, opportunities and threats), the very next step you can immediately take is to set up social media accounts as described in Chapter 12. If you are unable to read Chinese, there are a number of free online tutorials that will guide you through a step-by-step process. For example, it is highly recommended that you create a Sina Weibo account because it is the 2nd largest microblog (with over 500 million accounts) and also because Twitter is currently blocked on the mainland.12 And even though it is more person-to-person (in contrast to the mass publication ability of Weibo) because of its rapid adoption, foreign firms are also encouraged to set up a WeChat (Weixin) account due to the huge penetration rate (300 million users just over 2 years).3 In addition, you can download and use the English version of QQ instant messenger.4 As I noted in Chapter 12, QQ is the world’s largest instant messaging tool, with over 700 million users.
Once you have these two tools, you can begin to communicate with an entirely new customer base about your goods and services. And as I detailed in Chapter 12 your marketing team may even be able to utilize other sites like Youku (the leading video streaming site) as well as Pinterest (and its many clones) to help promote your brand and wares.
In addition, for other perspectives, there are several resources published the China-based foreign business community, including the American Chamber of Commerce in Shanghai, the American Chamber of Commerce in Beijing and the European Union Chamber of Commerce.5 Each of these organizations publishes insights, surveys and original research that helps illustrate the market conditions – the opportunities and challenges – on the mainland.
Questions and answers
The very first question at the beginning of this book was, should you and your company come to China?
While your own perception of the mainland may be influenced by both bullish and bearish commentary, the real answer to this question differs from case to case. There is no a priori answer for entrepreneurs. In addition, there are several other questions that you should ask before you and your company make any significant decisions.
For instance, what goods or services does your company produce that someone in China would want? What is the return-on-investment of opening a hotel, restaurant or retailer on the mainland? What are the licensing requirements for foreign businesses?6 What are some of the legal risks and uncertainties that foreign firms commonly face?
And again, while I provided a number of statistics, stories and anecdotes to address these questions, I would encourage all foreign companies to also consider these Do’s and Don’ts.
– If you hire outside consultants to conduct market research on the mainland, do your own in-house-based research as well. You do not get heart surgery without a second opinion, nor should you invest capital based on one report.
– Do not invest in China just because you heard an analyst on TV or the radio tell you too. Many analysts “talk their own book” and have other interests at play (e.g., cui bono). Wishful thinking can be a powerful opiate; and those predicting absolute certain futures would be wise to pay heed to what Niels Bohr once quipped: prediction is very difficult, especially about the future.7
– If you plan to actually do anything on the mainland that involves contracts, technology transfers or corporate structures, be sure to consult with a legal expert (see Chapter 10). Do not risk losing your assets or being cut out by suppliers because you think you understand the Chinese legal system.
– Do not invest on the mainland simply because you want to diversify due to recessions in other parts of the world or merely because hope it will be better elsewhere. Your ventures and stakes are not a guaranteed success merely because the geographical location is different. Why risk your capital without doing the due diligence first?
While you may feel the urge to jump headfirst into this new marketplace, recall what the late Coach Wooden said: failing to prepare is simply preparing to fail. And if you recall the first story in Chapter 1 from Jim Chanos, even with due diligence and cultural fluency you may run into challenges that are seemingly insurmountable. While there may be any number of other cliché truisms to repeat, there are arguably no long-term downsides to being over prepared – better safe than sorry.
You and your management team can, in the space of an hour, put together a simple step-by-step guide to moving into the Chinese marketplace. Below is an example of commonly asked questions and answers that based on several chapters of this book. The numbering and order is entirely arbitrary and will change depending on each company and market segment.
There can be any number of other questions and decision trees. This is merely an illustration of the thought processes you and your colleagues can consider as you put together a China strategy.
And finally, recall the Voltaire quote at the beginning of the book, about “the best.” You and your company do not have to be the best nor do you have to create the best business model. In some cases you can just be good enough. After all, your new local competition has succeeded and they did that without – by and large – attending professional Western business schools. If they can do that, perhaps you can too.
Takeaway: With the information, cases and examples provided in the preceding chapters, the transition from knowledge to practice is now paramount. And while there any number of ways to practice and implement a plan, fully understanding you and your company’s comparative strengths, weaknesses, opportunities and threats in a new marketplace is both risky and potentially rewarding. Tempering your enthusiasm with not just statistical facts but also advice from experienced professionals should be part of the strategic plan of any firm wanting to do business in China.
- For a step-by-step guide to setting up a Sina Weibo account for your brand, see: Creating an account on Sina Weibo and How to sign up for Sina Weibo blog [↩]
- Monetizing your companies fan base from social media sites like Sina Weibo is a challenge recently discussed by Ken Hong, the general manager of the Sina Weibo platform at Sina. See Turning Brand Fans into BFFs from Thoughtful China [↩]
- See Tencent’s WeChat messaging app passes 300m users, adding its latest 100m in just 4 months from The Next Web, Tencent: WeChat App Set to Surpass 300 Million Users Next Month from Tech In Asia and Weixin Users Exceeded 200 Million from China Internet Watch [↩]
- The default language is English: QQ international [↩]
- For references see: AmCham Shanghai, AmCham Beijing, EU Chamber of Commerce and Are You Ready for China? from the EU SME center [↩]
- For a step-by-step procedure, see Starting a Business in China from the World Bank. See also New Path for Trade: Selling in China from The New York Times [↩]
- See The perils of prediction, June 2nd from The Economist [↩]