Have you flirted with the idea of taking your small business to China? With almost 1.5 billion people and an increasing desire for Australian commodities, the reason is obvious. The potential revenues are tempting but given some high profile failures, this market is not for the faint hearted.
To minimise your risk and avoid common pitfalls, here are five tips to help you understand some of the business and cultural differences between Australian and local Chinese businesses.
Establish a reliable and trustworthy reputation
In China, Australian businesses are known for their friendliness and informality. These qualities are generally attractive to Chinese businesses but it is a longer-term commitment that most Chinese businesses are looking for. Australian organisations are often focused on establishing their business quickly and trying to build profits.
This approach can sometimes be misconstrued as exploitative or opportunistic, thus creating tension with your Chinese business partners. When working with Chinese business executives it is very important to understand they will only do business with you if you have established a reliable and trustworthy relationship.
Relationships first, business later
Many of our Australian clients convey stories of being wined and dined whilst visiting China; being taken to fancy restaurants, having sightseeing tours and getting special VIP service. This confusion is further compounded when these Chinese clients don’t even discuss business. It is important to recognise that the Chinese custom is to establish a personal connection first then negotiate later. So be mindful that in China, relationships are the key to doing business.
Be aware you may need to be more flexible
Australia is a more structured and regulated business environment. Whereas in China there is generally some ‘greyness’ in understanding and interpretation of the local laws and policies. In the past, Chinese locals have tended to trust their instincts and their relationship networks to protect their interests and minimise the chance of losses. This means that many Australian companies get frustrated when contracts are being negotiated and developed as terms and conditions are often much looser in their definition. Chinese businesses tend to be flexible and adaptive whereas sometimes Australians can be too focused terms and conditions and not understand that a degree of flexibility is often called for.
Find the ‘big cheese’
Within Australian businesses, management structures tend to be clear, the roles and responsibilities defined. Everybody understands the hierarchy and knows the decision-making process, often quite transparently. However, in Chinese businesses the capacity of managers to make decisions is based on more than commercial decisions. If there is a strong view from the big boss, then this will override the line manager’s views. In Australia, it is important to find out who the decision maker is and try to understand as much as you can about them and their needs.
Respect local business etiquette
Australian small businesses need to take the time prior to arriving in China to understand how to greet your Chinese business partners correctly.
Some easy tips to ensure respect of business etiquette include:
1. Never publicly criticise anyone.
2. Business introductions are vital.
3. Chinese business hours vary so avoid scheduling meetings early or late in the day.
4. Ensure you have an ample supply of business cards. Then present your business card by holding it in both hands between your thumb and index finger at the top of the card.
5. Remember that with Chinese names the family name comes first (e.g. Zheng Li Li should be addressed as Ms Zheng).
China is many markets
Many Australian businesses will formulate a Chinese strategy on the basis of this being a single, unified market. This is far from the mark and Australian companies need to understand the impact of regional differences such as economic, social and even language and behaviour. The tier one cities (namely Beijing, Shanghai, Guangzhou, Shenzhen) may not be the right choice and on balance, second tier cities in China maybe the key to your China strategy.
Listen to your customers
It is a common mistake not to do this. Australian brands need to speak to their Chinese consumers. Often successful Australian company may need to modify their brand in terms of messaging, proposition and even corporate visuals. You can speak with your Chinese consumers in China through your distributor or partners. Another way might be to engage with the local Chinese community in Australia where access is easier. They continue to hold representative views that hold true in China. Daigou (Chinese buying agents) are also a great proxy to understand where they see value and positioning as they are actively buying Australian products and reselling back in China.
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