North Head - Case Study
From the Asialink Business China Country Starter Pack
Persistence, adaptability and a sound business plan are vital, according to Australian communications specialist John Russell.
Persistence, adaptability and a sound business plan are vital for newcomers hoping to break into China's unfamiliar business environment, according to Australian communications specialist John Russell.
"Most Australians are great travellers, they seem to have the ability to adapt," says Russell, managing director of strategic communications and public affairs company North Head. "In China they will deal with distinct cultural differences, business processes and ways of operating but if there's persistence there are good prospects for success."
Chief among those cultural differences is the practice of guanxi, or building relationships.
"The Chinese business model tends to be less contractual and more based on trust and the guanxi so there can be a sense of frustration. It's slower to build relationships, but having said that, once trust has been established the Chinese partners and entities normally want to move very quickly," says Russell. “An understanding of those relationships is necessary for success, but increasingly with economic reform and changes in China guanxi is no longer sufficient for success."
That change is a constant factor throughout the business world.
"There's no such thing as the status quo in China," says Russell. "It’s the land of opportunity because of its growth, the size, the dynamism. What you see now was not really there five or 10 years ago and you get the sense the market will look very different in the coming five to 10 years. That can be very disconcerting to many business people, but there are enormous opportunities in the opening up of segments and new markets very quickly.
"There's no such thing as the status quo in China."
"You have to fit in with the broad objectives of what the government is trying to do and if you work to the rhythm of the economy and its development here, whether it's green tech or the growth of healthcare and education services, if you're fitting into the priorities of the government and economy you're running with the tide and have more opportunities. If you're trying to do it without understanding what's happening with the broad market direction you can be caught out badly. This is not a market for carpet baggers."
Due diligence and a sound business plan set genuine players apart from those chasing a quick buck, says Russell.
"It comes back to the need to do due diligence. Many times I've seen people come here who will spend more on hotels and airfares than they will on doing proper due diligence, taking the time to understand the partners and market dynamics. There are many differences of the east from the west, the north from the south; and drilling down to various provinces and city markets.
"What is required is what I call not an interest in the Chinese market but a commitment to the Chinese market. You hear lots of bad stories of people doing short trips up here, they meet someone who seems OK, get into a business relationship that then falters and turns into a bad marriage, a loveless marriage, an antagonistic marriage, so it requires work, effort and commitment."
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