midwest international trade association-march 19th, 2009
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How to do business in China without risking reputation, consumer trust, or lives of customersTRANSCRIPT
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Midwest International Trade Association
March 19, 2009www.mitaonline.org
How to do business in China:
Without risking reputation, consumer trust or lives of customers
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Jason ChristieEducation• MBA Entrepreneurship (2004) – Leeds @ CU-
Boulder• BSEE (1997) – University of Nebraska – Lincoln• Mandarin Language (1996) – Beijing University
Career• AsiaPacific Access (2004 – Current) – Denver• Centurion Wireless (1997 -2002) - Shanghai
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AsiaPacific Access
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Most of Human HistoryChina was the wealthiest, socially most tranquil, scientifically most advanced and arguably the best governed society on the planet
China is determined to eventually restore itself to these heights
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Many China Challenges
AsiaPacific Access
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How to do business in China without risking reputation, consumer trust, or customer’s lives. AsiaPacific Access
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AgendaDue Diligence• The importance of due diligence in China
Relationships• Developing and maintaining relationships
Quality Ownership• Taking ownership of maintaining quality of your
product or service
Risks• Current business risks in China
Opportunities• Opportunities in China in 2009 and beyond
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Due Diligence
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AsiaPacific Access
doing business in China
China
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AsiaPacific Access
The Race to China
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Due Diligence Pitfall Example
“China Product Development”
• PD is too expensive in USA• Relied on “agent” to find
partner• Relied on “agent” as the
window
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Why is Due Diligence Important?
• So you don’t select the wrong partner
• So you understand local regulations• So you understand the hidden costs• So you understand core
competencies• So you know how to compare quotes• So you know expectations
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Lessons Learned
• Know the capabilities of your partner
• If you go in blindly, expect the cost/time to be 2-3 times
• Do some comparison shopping for quality, capability, and cost
• Plan for the “hidden costs”
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Relationships
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Working in China
You need to know where loyalties lie. AsiaPacific Access
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Relationships Pitfall Example
“The Agent Relationship”• Relied on agent to develop
capability• Never went to China• The agent goes to work for
the competitor
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Why are Relationships Important?
• So you know the people you work with
• So you can have open and constant communication
• So your partner can commit to solving YOUR problems
• So they feel comfortable telling you about THEIR problems
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Lessons Learned• Develop direct relationships• Get to know the people: employees,
managers, vendors, clients, etc. • Be patient! Don’t rush expectations. Take
time to develop the relationships.• Understand that there is a difference in
expectations. • Hire your own help to better understand
expectations, language and culture. The effort will be appreciated!
• Communication- Don’t assume you understand, OR are understood
• Commit to meeting with your Chinese partner often (in person and thru the phone)
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Quality Ownership
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Product & Food Safety
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Quality Ownership Example
•“The Mattel Issue”• Massive toy recall• Negative PR for “Made in
China”• Mattel VP makes public
apology in Beijing
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Quality Concerns“Made in China”
• Why is there an issue?– Excess capacity– Price pressures– Lack of expertise– Minimal enforcement
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Why is taking Quality Ownership Important?
• Product safety for your customers!
• So you know what the certification/compliance issues are.
• So you know what the design issues are.
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New Quality Controls• In 2007 China took drastic steps to
improve quality and protect consumers, including:– launching a landmark product-recall system
– introducing inspection labels on all Chinese food exports.
– new regulations for closer inspection of exports
– creating a “blacklist” of Chinese companies that violate quality and safety regulations
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Quality and China’sReputation
Following in the footsteps of Japan and South Korea, China is planning on a shift to higher-end exports to continue its economic climb and better the lives of its citizens.
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Lessons Learned• Pay attention to details• Negotiate a strong contract• Make sure your design is not an issue• Understand all compliance requirements
and make sure your partner does as well• Dedicate the resources to make sure
compliance is always being met• Be flexible and willing to adapt to changes• Performing due diligence and developing a
relationship will minimize your risk, not eliminate it.
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Current Risks
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Financial Stability
www.cleveland.com
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Exchange Rate• Since 2005, there has been
more than 12% appreciation
RMB/USD Exchange Rates
8.2765 8.0702 7.80517.2946
6.839 6.8
55.5
66.5
77.5
88.5
2005
2006
2007
2008
Curre
nt
2009
(For
ecast)
Year
Rat
e
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Labor
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Intellectual Property
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Environment
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Polluted Waters
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Silent Killer
Pollution causes chronic illness among rural Chinese
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Aging Society
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Who has all the chips?
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Current Opportunities
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AsiaPacific Access
China on the Move
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Opportunities
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Growing Middle ClassPopulation vs. Middle Class
1300
300200
0
200
400
600
800
1000
1200
1400
Billi
ons
China U.S.A China's Middle Class
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Increase in Foreigners
• 300,000 live in China • 25-30M per year enter
China• Many businesses cater to
only this market
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2nd Tier and the West
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New Industries• Service (Banking,
Financial, Consulting, etc.)• Hi-Tech• Agricultural• Environmental Protection• Energy Saving
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Thinking of creating new business or ventures in China?• Go there now• When there: listen,
observe and learn• When ready to do
business: form a network of trusted advisors to help you get things done there
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China: A Work In Progress
• Impossible to grasp the scale of the transformation without seeing it with one’s own eyes
• The physical, economic and social immensity of change is enormous
• Impossible to comprehend the vibrancy, energy and enthusiasm without experiencing it first hand
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Questions to Ask:• Are we committed to the
endeavor?• Are there regulations related to
my product or service?• What other legal regulations are
there?• How will I protect my IP?• How will I manage the people?• How will I manage the quality?AsiaPacific Access
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Q & A
Jason [email protected]+1.303.800.4542AsiaPacific Access
www.apaccess.com AsiaPacific Access