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.

Iphone in China can succeed. Here's how...

So Iphone entered China early September. And thus far, no more than a few thousand sales have been registered. Where did Apple go wrong?

The problem isn’t due to the Iphone’s popularity, as there is a huge demand for Iphone’s in China. One can see black-market Iphones all over the place, which sell for anywhere from 4000 RMB to 6000RMB (about $600 to $875 dollars).  It also isn’t the fact that there aren’t enough cell phone users. A China news agency report printed early May 2009 showed that after introduction of 3G technology, mobile users grew to a total of 670 million people. That’s almost twice the population of the U.S.. Also, it isn’t that people don’t want a new phone since they already have one, most people I met there change their phones on a frequent basis. So, shouldn’t Iphone be making a huge blast in China?

A recent Forbes article by Shaun Rein on why Apple is Failing in China outlines some interesting  points. Here are some of my observations and commentary to his article:

1. Apple entered the market assuming China is the same as the U.S.
   • Anyone who’s been in China knows how easy it is to get a pre-paid phone number and keep that as long as one wishes. Iphone is making Chinese consumers lock in to an expensive phone plan without realizing that model, although it works for the U.S., has never been popular in China. Chinese like to change phone numbers quickly and easily, although most don’t. And imiting their “options” isn’t going to win over any new customers, considering they can get a black market iphone for around the same price that doesn’t do that.
2. Apple didn’t understand consumer spending
   • Chinese usually prefer to buy cheaper plans, although they will go all out on getting a phone. They prefer texting over calls, etc. So by having them lock into expensive call plans, they are turning off customers. No pun intended.
3. Apple didn’t understand the competitive marketplace and partnered up incorrectly
   • Partnering up with a telecom (Unicom) that sells to a least wealthy consumer and has lower number registered users was a mistake.
   • Most people believe this company to have worst signal, and most people don’t want to change carriers, let alone change phone numbers.
4. Apple took too long to enter China
   • If you are not in China quickly, then the black market for your products will start becoming the main market and it’ll be harder to get back in when u decide to.

So what can Apple do? They are locked into a contract with Unicom, but have to make the best of it.

• Spend time doing more market research to understand what people want out of a phone.
• Find a way to address needs, such as: being able to keep existing phone numbers, working with Unicom to change the people’s perceptions of their service (ie providing better coverage, affordability, etc)
• Reach out to other businesses and educating them on the power of developing great apps.
• Chinese people don’t want “convenience” through the internet, as much as Americans. They are more interested in developing connections, playing games, and keeping informed, learning English, etc etc . So Apple should develop free apps that work as English dictionaries, news feeds, as well as reviews of restaurants, entertainment, and others. (those would attract the cosmopolitan crowds at least)

The lesson here is find good partners, do your due diligence, and plenty of market research, or partner up with people who understand the market.

So one of my good martial arts buddies in China has been a DJ for several years and has always loved writing songs and rapping, etc.

Well in the past few years he’s transformed himself into a total underground Hip Hop Artist. He’s actually completed a ton of songs, and will finally get his album out on stores.

Anyways, check out his stuff here http://xennightz.com/enigma_review_kit/ he’s giving out the album for free for halloween.

Speaking of halloween… what will I be doing this halloween? Yup, that’s right. I will be working on my fashion site, trying to recruit several writers to boost our SEO, of which it’s been going great. We already rank on page 1 for our main keyword and have number 1 rankings for several other profit-bringing keywords. Things are great and getting better. Anyways, I will also be setting up several more blogs for our business, as well as trying to get bloggers to write about us .

Finally, plans are on the way to start a new business. Which will be a small business consulting, where I will help small business owners rank highly for google and yahoo and other search engines so that they may be easily found when their clients are trying to look for their products. Gonna be great!

I recently had the great pleasure of catching up with current U.S. wushu champion Alfred Hsing and finding out his motivations in wushu, and the keys to his wushu success. This motivated a series of martial arts tips on how to succeed in life in his blog. The success lessons he learned in wushu and business can be applied to any endeavor so make sure you read up on them. Below I have reorganized the information slightly and created an acronym to easily remember the points. Here you will find just a quick summary, but get to his blog to read the full article:

Success in Wushu can be Summarized with the acronym WUSHU:

1) W for Work – Be consistent and work smarter/harder than the rest.

2) U is for Undeterred and Unchanging Focus – when you are working, give it your undivided attention and focus on the work at hand by eliminating distractions. Also, focus on one goal at a time, and don’t move on until you have completed the goal at hand.

3) S is for Sleep and Recovery – Get rest and have time for just fun- You will come back much more refreshed and more effective.

4) H is for Heroes – Surround yourself with people who are getting the results you want and learn from them. Surround yourself with the Heroes, be they Zhao Qingjian, Wu Di, or Bill Gates, Peter Drucker, Jack Welch, Kotter, Brad Fallon, etc.

5) U is for Unique and Undisturbed Environment – Immerse yourself in the appropriate environment – Don’t make your workplace the same as your “rest” place. Make sure you have a place where you can just focus on work, a workplace that is only used for work, and where you can concentrate solely on work.

Anyways, check out his great article on some great stories on how this lead to him becoming number 1 spot on the U.S. wushu team.

What do businesses need to understand about the Shanghai Expo and the opportunities it will open in the market?

The next 2-5 years will see a dramatic growth in a few areas. Here’s actually my take on this.

I just attended an expo in Beijing promoting the Shanghai Expo 2010. There are two major observations and some conclusions that I can draw from the information information given there.

1) Japan, apparently known for having won the award for best pavilion several times, will probably win the award this year. Their pavilion is 80% focused on Green Technology. Their winning will be due to Japanese engineering as well as the world’s attention on Green Technology. This will draw the attention of China and the desire to step up it’s Green Tech efforts even further. Currently the stimulus plan allocated a large sum of money on this sector, except I’ve heard that it’s not easy for Foreign Companies to get direct access to that money other than with partnerships with Chinese companies. Who knows what will happen afterwards though.

2) Japan winning, as well as the world focusing so much on Green Technology will further focus China’s eyes on encouraging innovation. China, known for wanting to learn from other countries and “copy” their style, will be further convinced that in order for innovation to start coming out of China certain laws and enforcement will need to be in place. This will increase the desire for the Gov’t to protect intellectual property rights.

Out of these two results, I think we will be seeing a huge increase in Green Techs focusing on efficiency as well as alternate sources of fuel, and China trying to lead the efforts in innovation in these aspects. Based on the fact that the Gov’t here has been pushing a lot in certain “experimental” hubs to promote development of technology, I think all these things will lead to creating a “goal” for China to become the world’s innovator. How likely they are to achieve that goal is another issue altogether, but the fact that it will become a goal will reveal a lot about where China will be headed.

What does this mean to business in China? Basically, If I were to bet my future on any market in China, I’d start learning either of the following:

either a) Ecommerce and Internet, which has a correlation with intellectual property rights as well as the push from the gov’t to promote the tech sector.

or b) Green Technology.

I’m pretty confident that the pattern that China is taking will lead to these results, and my advice to all those interested in China right now is to start looking for ways in on any of these fields and get first mover’s advantage.

What do you guys think will be the effect of the Expo?

Starting in the 1980s, China developed it’s 1-Child policy as a means of population control – meaning most families, especially in cities, could only have 1 child. This has had a deep effect on the psyche of the Chinese youth. Understanding this change in the mentality in China is crucial to understanding how to market to these youth, as well as how to lead them, work with them and interact with them.

From the 1980s on, this policy marked a new generation of Chinese who were often referred to as “Little Emperors.” Most youth tended to be the only child with several grandparents and parents often fighting for their attention. Thus many of these youth developed an attitude that they were the center of the world. There are several other problems this policy created, as well as some other solutions. However, one thing is certain, starting from the 80s generation (referred to in Chinese as the 80? ba – ling- ho) the youth in China have developed a completely new attitude towards life.

Some of the obvious attitudes are a need for self-expression, individuality, patriotism, as well as westernization – ie. love of basketball, soccer, F1, Tennis, etc etc. In Beijing and Shanghai this also means a higher English ability than even their Chinese teachers. (In 2nd tier cities, the English level is still fairly low, but with an influx of “foreign experts” give it time before the overall English level as a nation becomes highly proficient).

Some other attitudes and believes can be seen on this report: China Youth Trends and Business Implications, which separates major groups of Youth into categories. Some of the observations are obvious, and some speak of only a small minority of groups (Check them out since I will not re-state the opinions of their findings). Of particular interest to businesses are the following views which I disagree with or add comments to:

1. Social Participation:
   • Pertains to big events, such as the Sichuan Earthquake, or the Olympics. But it’s still rare to see much social involvement besides posting on blogs or forwarding “chain letters” amongst the majority of youth. Community service is all but non-existent in the way we know it in the west. Charity is still seen as “suspicious.” Probably due to the idea that “people who do favors for you, will surely want something in return.”
2. Searching for meaning:
   • Chinese youth, are often confused about the world and sometimes feel “lost.” Having grown up their whole life listening to their teachers and taught to memorize and not encouraged much to develop critical thinking skills (Seen not only in adults and mid-managers, but also in the youth) means that those businesses that can create a vision in the youth, and can appeal to their philosophical searches will attract more and more business.
3. Action:
   • Chinese youth are taking more and more action, that is true. If by action we mean posting on forums, and boards, and talking about things on QQ (chinese ICQ) or MSN, then yes, Chinese youth are more action than “talk.” However, those that take real “action” is still a small minority of the Chinese.
   • What this means to your business? You need to show the youth the action they talk about. Your companies actions should include those topics which the youth flock about on the blogs, forums, etc. So investing on a web 2.0 specialist is a good idea to work with your branding and PR team.
4. Identity:
   • Chinese youth are searching for their unique voices, talents, etc. The 90s generation is moving away from the “Brand names” shopping binge of the 80s generation towards a more “unique-centered” idea which showcases their individuality.
   • What this means for your business: Encourage individuality not in your products, but in the uniqueness it will create for them.
5. Pride in Chinese Identity:
   • While, the Chinese are very proud of their country, I would not go as far to say that young people have started to be more interested in traditional culture. In fact, more and more youth are becoming more and more westernized. It is a small minority of those who practice Chinese Martial arts, enjoy Chinese Opera, or enjoy any of the other cultural traditional aspects that China provides. What we’re seeing here in China is more and more youth-oriented westernization while resonating the words “we love china.”

One thing is certain:

1. Expression of one’s opinions and the use of the Internet is becoming more and more prevalent, which is a good thing for businesses, so long as they are willing to make the connections with them. Whenever a scandal props up, or a political view, Chinese youth are known to mobilize and post on forums, blogs, etc. Samples can be seen of the time a CNN spokesperson insulted government officials in China and it ignited an online war against CNN. More and more youth use blogs, Instant Messaging as daily communications, most are on MSN or QQ (Chinese ICQ) during work, or at their dorms. So viral campaigns with strong messages get across quite rapidly
2. What this means:
   1) Stay away from political arguments and disagreements.
   2) Feed into their “patriotism” much the way Adidas did during their promotional campaign for the Olympics, showing 1.3 billion people standing behind every athlete
   3) Encourage social media activities, such as blog postings, reward with incentives by creating a community.
   4) Communicate social action and the ways you are empowering Green Energy, Youth, etc
   5) Branding  and Marketing Campaigns should focus on the gains of the individual in terms of self-respect. Gaining admiration by fellow youths, creating a “unique” experience for each customer, customization of products to fit each customer’s needs, etc etc.

Below you may find slides from the presentation from China Youthology Consulting.

China Youth Trends And Biz Implications

View more Microsoft Word documents from chinayouthology.

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.