Doing business in China takes more than business savvy. A successful venture requires not only a financial commitment but a personal commitment, as well. In a land where who you are is more important than reams of business data, all things hinge on the oldest business practice in the book: The relationship.
The Chinese rely more on relationships than on statistics and data, and that can cause problems for a company with limited international experience in Asia.
“The state of their legal system, securities system and their banking and financial reporting did not really develop until just the last 10 or 20 years,” says Kimberly Kirkendall, president of Bath-based Office Outsource Inc., whose China Sourcelink subsidiary advises companies on doing business in China. “They are not as reliant on that information to decide whether or not a company is a good customer or partner. We’ve had a 50- to 100-year buildup on those institutions here, and we have a lot more confidence in them.”
The result is a culture clash. American executives show up with data in hand to prove points and illustrate projections to get a project going, while the Chinese are looking to establish a basic relationship first. Kirkendall likens the difference in attitudes to a wedding.
“To them, it’s like us sitting down with a lady for the first time and talking about what you want at the wedding, who should be there, who will perform the service and whether you need a prenuptial agreement or not, then after that, saying ‘Let’s date,’ because that’s how we do business here,” says Kirkendall. “In China, they’d rather date first and find out who you are, what your goals are, whether you’ll be there for the long term and what your involvement and investment will be, then talk about the wedding afterward.”
You also have to be careful how you interact with the Chinese.
“You have to control your emotions,” says Anthony Yen, president of Tenax, a Cleveland-based firm that helps companies do business in China. “Don’t express your anxieties or stresses when dealing with the Chinese. Don’t get angry. Most important of all, you have to develop a mutual respect and trust.
“If you don’t have a certain amount of trust that develops, they will never do business with you.”
Also beware of playing the role of “big boss” when dealing with your older employees in front of the Chinese.
“You may be the boss, but if your assistant is older than you, you have to show respect,” says Yen. “In the eyes of the Chinese, the elderly should be respected. Too often, an American goes there and puts on a show of bossing people around. It decreases the chance you will get to do business with the Chinese.”
The other mistake made by U.S. firms is underestimating the amount of time and money it takes to establish a relationship with a Chinese firm.
“Getting to any kind of point in a relationship with a Chinese company where you really can place an order or start a joint venture takes a lot of talks,” says Kirkendall. “Many companies think they can just place a small order or go over and visit once. That really isn’t the case. You need to factor in six months to a year, and two to three visits by three to four executives is better than one. Companies underestimate the costs.
“We don’t like to spend on the front end until we are sure there will be a deal. Yet in China, you have to make that investment up front before you have any clear direction from a Chinese company that there will be a deal.”
Sometimes just finding the right match can be challenging.
“The best way to deal in China is in the Chinese fashion,” says Kirkendall. “Go to people that you know and look for leads and introductions. Find someone that’s already invested in China in a related industry and look for them to make some introductions.
“It honestly makes a significant difference in a long-term relationship you develop if you come through an introduction rather than a cold call.”
A good connection can be the difference between success and failure.
“When Americans go over there, they are better off having someone accompany them that has good relationships and a good track record,” says Yen. “In China, the way most business is done, you have to have some introductions or connections. You need that in this country, too.
“It would be like a guy from Cleveland going to Detroit to try to do business with General Motors. You can’t get in the door. You need someone that does regular calling on the company that knows who is who. It’s more important in China because of the different culture, language and business practices.”
A go-between serves three roles: A provider of connections to save you time and money when searching for the right business partner, a scapegoat for either side to blame to save face if something goes wrong and as an arbiter in any disputes.
“From a large project to a small one, you will always be saving time using this method,” says Yen.
The Chinese are more trusting of science or technology professionals than they are of salespeople.
“If you go in as a salesman, you will not be very successful. They have a long history of mistrust for the pure salesman,” says Yen. “They tend to think salesmen exaggerate too much.”
In all dealings, be very specific about everything. Lay out every aspect of a deal in as much detail as possible to avoid any misunderstandings.
“Be very precise,” says Yen. “It can be quite expensive if you make the mistake of thinking you are getting goods delivered to Cleveland when they think they are delivering them to a place in China.”
The best way to conduct business in China is the way the Chinese do.
“When we try to replicate our business model in their country, it is doomed to fail,” says Kirkendall. “We need to be more aware of where they base their decision-making, the way they process information and what their priorities are.
“We need to have a better understanding of how they do things and adjust the U.S. model to fit those.”
How to reach: Office Outsource Inc./China Sourcelink, (330) 659-0835 or www.officeoutsource.net; Tenax, (216) 221-0429
