Building low-risk sales channels in China, and Chinese business culture

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Knock at the DOOR
of China

By Yanhong Xi
- Researcher in University of
Oulu
- Lecturer at Oulu University Lewelgroup.com
© Lewel Group Finland Oy | Confidential |
of
Applied Sciences

Building Low-risk Sales
Channels for Chinese Market

© Lewel Group Finland Oy | Confidential | Lewelgroup.com

Approaches for SMEs to
China

Highlights:

• Partnerships with local enterprises
• National trade bodies
• Partnering with a Chinese industrial park
• Strengthen the ties with multinational buyers
• Leverage on Chinese distributors


Partnership with Local
Enterprises

Partnerships with local enterprises? JVs?

This strategy works for some, but very challenging.
• Identifying a trustworthy partner thousands of miles away may be an enormous
drain on management time and firm resources.

• When partnerships or JVs get under way, small and midsize foreign firms often
find that their views on essential concerns (like governance, equity participation,
and operational manage) differ from these with the Chinese.

Partners

National Trade Bodies

Belong to effective national trade bodies.
• Aid you brand collectively and share resources;
• Produce a shared sourcing center to screen possible Chinese vendors;
• Offer you experience in locations, e.g. contract negotiations, monitoring
suppliers, assess to business networks and good quality assurance.

National trade bodies
• Hyperlink up industrial parks for SMEs


Partnering with a Chinese
Industrial Park

Multiple benefits:

Once a member firm had built a sufficiently big business, it could move to
its own facilities in the very same industrial park.


Strengthen the ties with
multinational buyers

Having a little assistance from their industry peers or
multinational buyers, they may possibly realize that they're able
to accomplish far much more in the Chinese market than they
ever would by going it alone.


Leverage on Chinese
Distributors

First step is to select the right distribution partner.
Sourcing for potential distributors through
• Recommendations from another firm already established in China, trade shows
in China, established matching websites or through Chinese market
research consulting firms.
• Appoint Hong Kong distributors?

Notes: most distributors do not have nationwide distribution coverage but rather on a
regional basis with Bohai Gulf, Yangtze River Delta and the Pearl River Delta as the
commercial regional centers.


Leverage on Chinese
Distributors

You can use the following factors as a reference for a good
distributor:

• A strong and stable financial background
• Quality sales staffs/English speaking staffs
• Shows enthusiasm for your products
• Having assess to the customers
• Right business direction for its distributorship
• Appropriate storage of your products
• Share the same business goal with you


Leverage on Chinese
Distributors

Check out the type and the number of distribution points or
outlets it covers, their marketing abilities and their after sales
service support.

Consider having a different distributor covering each region
with different marketing strategies.


Leverage on Chinese
Distributors

Most important: distribution contract is detailed and
understood due to a lack of Chinese law in relation to supplier
and distributor partnership.

Contracts signed in China are often in Chinese. It is safer to
have a qualified law firm review any translated documents and
have the English version of the contracts.


Leverage on Chinese
Distributors

Contracts should have the following aspects:

• Guard against exclusivity
• Agreement on the volume targets
• Good exchange and payment terms
• Escape clauses based on performance reviews
• Cover intellectual protection


Coping with Chinese
Business Culture


Interested in Doing Business
in China?

Culture facts have certain influences on business culture and
etiquette. Some highlights:

• Confucianism
• Face
• Meeting and Greeting
• Building Relationships
• Giving Gift Etiquette


Confucianism

Harmonious relationships.

• Aversion to conflict
• Maintenance of proper demeanor
• Preservation of ”face”


Face

Means ”good reputation”, ”respect” and ”honor”.

There are four categories of ”face”.

It is critical that you give face, save face and show face when
doing business in China.


Meeting and Greeting

Preparation for the meeting

Business cards are exchanged in an initial meeting.
• With Chinese on one side
=> your company, rank and qualifications you hold

• When receiving a card, place it in a case rather than in a wallet or pocket


Building Relationships
”Guanxi”

”Guanxi” includes

• Relationship with the government body, learn to coordinate with the
Chinese government
(Seeking a suitable local partner may be a shortcut and helping hand in developing
your business in China.)

• Investors
• Partners
• Your own staff


Giving Gift Etiquette

When Chinese want to buy you gifts and ask what you would
like. Don’t be shy to specify something you desire.

Business gifts are always reciprocated.
• Seen as debts that must be repaid.
• Don’t be frugal with your choice of gift otherwise you will be seen as an
”iron rooster”.


Further Discussions –please join discussion tables
Table 1 Building low-risk sales channels for Chinese market
• How to attract Chinese individual consumers to Finnish products/services?
• How to attract Chinese organizational customers to Finnish products/services?
• How to find right partners in China?
• How can Finnish companies use Finnish/Chinese government’s help to reach Chinese customers?

Table 2 Coping with Chinese business culture
• How to make a good impression on a Chinese customer from cultural aspects?
• What values Chinese emphasize that are different from Finnish ones, and how are they applied in the
business world?
• What manners special to Chinese culture that Finnish business people have to keep in mind?
• How to build right relationships with the right people?


Thank You!
谢谢！


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