Understanding cultural difference is the key in building lasting relationships with your business partners abroad.  China has a long and rich history and culture that has built a business environment that is markedly different than U.S. business culture:

1.  Relationship-based versus transaction-based

Relationships come before economics in China whereas in the U.S. economics generally take a front row seat to relationships. Chinese people do business with people they know and trust.

Rather than getting into business discussion immediately once you meet, take time and get to know your potential partners abroad; invest now for payoff later. Once trust has been built, Chinese business people will gladly share their thoughts with you and will give you honest feedback. One way to build the trust and rapport is to hang out outside the office hour, for instance, invite them to lunch or dinner.

2.  Face to face interactions versus doing business without meeting in person

Most of Chinese business activities and deals are made through face-to-face interactions. To successfully launch in China, you will need to visit China and build relationships with your partners through frequent face-to-face interactions. To accommodate Chinese business culture norms, many American companies have opened offices and hired locals in China to facilitate business in this foreign market. Other American companies form partnerships with local companies to bypass the need to establish a branch or office abroad.

3.  Negotiations: prepare to haggle

There is a huge difference in the way negotiations take place in the U.S versus China. Chinese people tend to haggle and to believe that there is room for negotiation on every deal. U.S companies need to make a padded proposal. Always start with a reasonable proposal regardless and expect multiple rounds of negotiations.

4.  Entertaining is a part of business

In China, entertaining (hosting) is an integral part of the business culture. In most instances, inviting potential partners or employees to dinner is appropriate and considered an informal meeting. A dinner with potential business partners may be used as a way to build trust and deepen a relationship. It may be used as a way to solicit feedback that you may be unable to obtain during the standard workday or in the typical work setting. A dinner or other social outing is also an appropriate way to follow up with deals informally agreed upon.

5.  Communication style

Chinese people tend to be quiet and reserved in business settings while Americans tend to be outspoken and eloquent. This cultural difference may make it challenging for U.S. companies to obtain the information they seek such as concerns, feedback, outright rejections, etc. Many times it may take a series of formal and informal meetings to reach your desired goal.

6.  Closing a deal

Unlike in the U.S., in China the signing of a contract does not mean immediate business.  After a contract is signed, understand that this is the beginning of the arrangement; follow up with your new partner and look for actions.  Actions taken on the Chinese company’s or partner’s parts indicated commitment.  Do not hesitate to suggest specific actions such as having a detailed discussion on next steps or suggesting a trial purchase order.

7.  Gifting

Exchanging gifts has a long history in Chinese social and business culture. The good gifts include something representing the city or state you are from or things with your company logo. Gifts do not have to be expensive. It is something special that this person may not have. When you present a gift to an individual, it should be done privately. You should state that this gift is a gesture of friendship rather than business. When you gift to an organization, it should be presented to the leader of the organization. Gifts to avoid include scissors, clocks, handkerchiefs and others with negative meanings in China. Please run your gift ideas by several Chinese friends, family members, or co-workers before sending them to your current or potential business partners.

** The above content is prepared by Casey Xiao-Morris at Leverage China, LLC, a specialist in China market entry service. Contact casey@xiao-morris.com for any inquiries you may have.

China is one of, if not the, most exciting emerging market in our world today. Several industries have taken hold in the Chinese market including automotive and telecommunication products and services. While China presents U.S. companies with many great opportunities, it also presents challenges that can make or break the success of a company’s entry. Common misconceptions and mistakes U.S. companies make in moving into China include:

1. Targeting China as one big market
One major error many individuals make is to assume that China is one market; China is NOT one big market. Why not? For 3 reasons:
I. It has over 600 cities. The existing distribution network and infrastructure do not support a product launch simultaneously cross the country
II. The living standard varies from city to city. The average per capita income is about USD 6000. A premium price product seems too expensive in a small city, but it does not seem too expensive in mega-cities like Beijing and Shanghai with much higher per capita income
III. There are distinctions in its culture, cuisines, dialects, climate, buying habits and more

When you introduce a premium product, targeting China as one market will dilute your efforts, if not drain you of resources altogether. You must first identify where viable markets exist within China. For example, you may need to focus on the upper-middle and upper classes of China with larger disposable incomes or perhaps you wish to target a segment of the population who consumes more of one good or product (e.g. a tomato-based food product will perform better if targeted to northern China given that the cuisine in this region uses significantly more tomato-based products in its dishes).

2. Implementing a U.S. marketing strategy in China’s market
One of the most common mistakes U.S. companies make is to take their U.S. marketing strategy and use it cookie-cutter style—copy and paste the strategy into the Chinese market. Big mistake. Different markets, different strategies. One example may be a U.S. company attempting to distribute spirits through grocery stores in China may have little to no success (versus wild success here in the U.S.) given that most spirits in China are consumed in restaurants. Understanding the context of our industry across cultures is crucial to developing a sustainable and effective marketing strategy.

3. Acting without market research
China is a very different market than U.S. in that your success in China depends on your understanding of your unique market. You must first thoroughly understand your market in order to develop a full marketing strategy. Competition in China may look vastly different from your competition here in the states. Marketing across regions in China should vary to match the unique culture and focus of that particular population. Stepping blindly into the Chinese market can be a major downfall for many.

4. Being unwilling to localize the product
It is rare that a product appropriate for U.S market is perfect for a new market; you must modify a product to make sure you’re serving your new market as best you can otherwise your success may be short-lived. Moving your product or service to China is much more than a simple re-packaging process. In China, most, if not all, companies would benefit from localization. Understand your local Chinese consumers and they will value you. For example, Hunt’s spaghetti sauce is sold in 26.5 ounce jars in the U.S. In contrast, this same product is sold in 4.4 ounce jars in China which accurately reflects the smaller family size of Chinese households.

If you exhaust your U.S. market opportunities and feel rushed into stepping into a new market simply to churn sales, slow down and complete your due diligence. Doing so will save you money and time and will produce greater success in the long run.

5. Failing to clarify and verify validity of your reasons to export
A high-end skin care company has an excess of inventory. They never export in the past, but they are looking for ways to liquidate their products by exporting to China. They begin investing money and people resources to making the shift; however they fail to realize that imported beauty products are highly regulated in China and no buyer in China is willing to move through the compliance filing for one-time transaction. Clarify why you wish to export, what your goals are in exporting to China, and how you might handle any bumps you may anticipate in exporting your product or service.

6. Plan to do everything on your own
If your organization has never exported and worked with companies in foreign countries, there is a huge chance that you will make costly and irreversible mistakes along the way. Map out your critical unknowns and the potential impact each might have on our success. Make sure to speak with a sufficient number of individuals regarding your decision such that you are prepared with knowledge and resources required to succeed in a foreign market.

** This above content is prepared by Leverage China, LLC (http://leveragechina.com/), an import and export management consulting firm. We are committed to assisting you until you are successful in Chinese marketplace. Please contact us at casey@xiao-morris.com

Every entrepreneur contemplating entering the Chinese market should be well informed. After taking a few “Chinese Culture” classes, one may learn of such cultural intricacies as Not giving clocks/watches as gifts, or not giving pears as gifts, etc.

But besides these what does it take to be succesful at doing Business in China? Many people who have been doing business in China for a short-while might think it involves Heavy Drinking of White Spirit Wine (aka Bai Jiu, aka, white petrol), and spending countless nights at KTVs with new prospects.

While, it is true that is one of the most direct ways to build a “relationship” with new clients, westerners make the mistake of thinking “we’ll drink with them tonight, and tomorrow we’ll sign the deal.” I see this kind of mentality over and over, in every deal and every consultation I give.

In this website, I will try to illustrate to those interested in China the proper way of doing business. You will learn what works, what doesn’t, what has already been tried and why did it succeed/fail, and what hasn’t been tried yet.

My goal is that I will be able to help as many of you as possible, and hopefully, when you have taken my advice and gotten some level of success, but aren’t sure where to turn to next, you will come to me for further help.

So suscribe to the RSS, and keep up to date with all the latest findings.

Straight from Beijing, this is MarcP Goodman.