Make It in China

6 Secrets to Successful Sourcing

Steve Feniger

• Publisher: Candid Creation Publishing
• eBook ISBN: 9789811171284
• Topic: Business
• Subtopic: Operations
• Index: Business

What's it really like to do business in China? Bridging East and West, this is a practical guide to succeeding in the most vibrant business environment on the planet!

Whether you are a corporate manager seeking to improve your company's performance in Asia, or an entrepreneur looking for your next opportunity, Steve short-circuits your learning curve by sharing with you his sometimes painful experiences and recommending specific solutions. He dismantles the "urban myths" surrounding Chinese suppliers with multiple tricks and tips for sourcing products in China for Western markets.

Steve, a sourcing veteran who has made Hong Kong and Shanghai his home for the last two decades, guides you on:

• How trust is at the heart of building business, and how to develop it in a way best suited to China.
• How best to negotiate, and ensure the deal sticks.
• How to go about developing your own network, and building your Asian platform.
• How to convert adversity into opportunity, including dealing with intellectual property rights

infringements, integrity issues, and being cheated.

Anyone who wants to buy or source products from China will benefit hugely from this insider's view of what works and what doesn't, so you can accelerate your own business.

01

SECRET ONE:
GENERATING TRUST

“Never do to others what
you would not like them to do to you.”

____________

Confucius

Using Wes’s experiences as a starting point, we start to understand the realities of forging trust-based relationships in China, and learn to read between the lines of the surface activity going on during any Chinese negotiation.

WES FLIES IN TO MAKE A DEAL

In a smoke-filled room in a remote factory in Eastern China, Wes, a jetlagged and weary owner of a North American manufacturing company, stares across the table at his Chinese counterpart Mr. Chen, his supplier’s chairman. Wes feels his blood begin to boil. He can’t believe he’s spent the last 24 hours traveling halfway around the world for this.

He stares at the people in the room and, in turn, places blame for his growing rage. He’s angry with his Chinese staff, who, after months of haggling, couldn’t close the deal. Now, at their request, he’s sitting in this nicotine-stained conference room, all the while thinking, “Why can’t they do their jobs? Why do I have to do everything for them?”

He’s angry at the woman sitting across the table who awkwardly translates their conversation, giving the meeting the feel of a low-rent diplomatic mission as the presentation moves in halting fits and starts. “Clearly her English isn’t that good. I know what I’m saying isn’t being translated correctly. Why does it take her so long to say the same thing I’m saying?”

Mainly, he’s angry with the man he’s travelled so far to see. Wes was patient during the lengthy tour of the factory and listened respectfully through Mr. Chen’s monologue at the start of the meeting, even though little of it seemed important to the deal at hand. He was tolerant of the deference everyone, including his own China staff, showed to Mr. Chen throughout the tour and meeting. But then, while Wes was presenting his pricing proposals, the chairman’s mobile phone rang. Tired and frustrated, Wes waited for him to turn his phone off and apologise for the interruption. Instead, he took the call.

Shocked, Wes thinks, “The man I’ve travelled so far to see takes a phone call without apology in the middle of an important meeting? How can that not be an insult, in any culture or language?”

Before passing judgment, it would pay for Wes to consider Mr. Chen’s perspective:

For months, Wes’s company, a North American firm, has been going back and forth on fussy details for three small trial orders, taking up time and energy from Mr. Chen’s staff. He tries to politely point this out—albeit indirectly—to Wes by talking in general at the beginning of their meeting about the number of customers and range of clients his company currently has, all the while painting the picture of a very busy operation with no shortage of work. “Surely now he will understand what he has been doing to us,” the chairman thinks.

While Wes is thinking, “The hardest part is over. Now the real opportunity is here with a large-scale order built on the back of the test orders,” the chairman is wondering, “They’ve been jerking me around, chopping and changing three small trial orders. What will future orders be like?” Instead of putting the chairman’s fears to rest, what does this foreigner do? He launches into a PowerPoint presentation to try to squeeze the price down. This foreigner may be a busy man, but Mr. Chen is also busy with requests and demands from other clients around the world. How can this foreigner not see that he’s wasting valuable time?

Just then the chairman’s phone rings. On the line is a real customer, someone who has been placing bulk orders with the company for years. Without hesitation, Mr. Chen takes the call. And why not? A guaranteed order is worth more than the possibility of a bigger one that may come to nothing. They even have a phrase for this in the West: “A bird in hand is worth two in the bush.”

In truth, the chairman does like what he’s hearing about volume, but is worried about the fluctuation in prices of raw materials. “The orders are okay and what we hoped for, but how much of the raw-material price increases can I stick him for?” he thinks.

It’s no wonder Mr. Chen’s demeanour is reserved as the Western entrepreneur tries to win him over with facts and figures. How many similar presentations has he sat through before? The chairman looks at the clock in the room and wonders, “Why isn’t this guy listening? I don’t need him. Unless my margin is a solid 10%, there’s no point in this deal. I’m not sure I can trust him.” Still, the amount of business the Westerner is claiming sounds promising. The chairman clears his throat, and his words are translated: “It’s getting late, and I’m sure you need some rest from your long journey. Why don’t we pick this up later? Let me take you out to dinner this evening.”

Although Wes would prefer a hot shower and room service, this company is the only choice he has until he lines up other vendors. His more seasoned colleagues have told him that dining together is an important part of doing business in China. He’ll do the dinner to get Mr. Chen’s backing in the short term while he considers his options. “Sure, that sounds great,” he says. As he listens to the translation, he notices the tension in the room among the Chinese staff lifting.

Wes was smart enough to accept the dinner invitation—which was the only point of the entire first meeting. He didn’t understand that this was the sole goal at the beginning of his meeting—or even at the end—but now that you know, act accordingly, and look for signals that a dinner is being considered.

The way China does business is not better or worse than the West. It’s just different. Your aim should be towards merging the best of East and West, seeing the strength in both, and how they can complement each other. Let’s consider how Wes could have prepared better.

LESSONS TO BE LEARNT

Nobody to Blame but You

Notice when the meeting goes awry, how Wes, our frustrated Western entrepreneur, begins pointing his finger in turn at the different players in the room: his staff, the translator, and even his would-be business partner. Noticeably missing from his growing ire is himself. You have to wonder if he even knows what’s going on or how he’s contributed to mounting frustrations in the room.

Trust Requires Travel

Wes did do one thing right. He got on a plane to China. Changing your mindset—that China isn’t a short-term strategy, that it takes time to develop relationships, and that you can’t start business meetings by going straight to the crucial issues, no matter how pressed you are for time—is no small task. Over the years, I have seen so many executives and entrepreneurs fly into China as the flavour of the month, only to beat a hasty retreat when times are difficult or a few failures mount up. Those who stay and persevere reap the rewards. They develop a bicultural acumen that matures as they continue to work in China with Chinese partners.

What’s crucial here is to enter into the culture with a spirit of openness and non-judgmental interest. This is easier said than done. Every Western executive who steps into a Chinese boardroom would describe themselves that way, but thinking it and feeling it are two very separate things. No doubt Wes thinks he’s a paragon of worldly thinking, even after flushing with anger as his potential business partner took a call in the middle of his meeting.

You now know that building trust requires both a commitment to travel to enable face-to-face meetings, and sufficient time to allow the relationship to form, via the dinner table to the negotiating table.

Set Realistic Goals for Meetings

After the fractious meeting, the Chinese staff in the room knew something that our Western friend had yet to realise. From the supplier’s position, the point of the meeting wasn’t to settle the pricing details of the contract. The true goal of the meeting? To be invited to dinner by the chairman where trust can start to be built. Food is incredibly important to China’s culture, but also important to China’s business culture. Eating in China is a favourite pastime. It doesn’t matter if you’ve made great money together or if business is difficult, you can always “break bread” in a positive and productive way. It gives you the opportunity to get to know one another better and strengthens the foundation for future business. Wes, our Western executive, didn’t understand that sharing a meal was his ticket to making things happen.

While the cuisine and teas varies from region to region, you’ll benefit from paying attention. Once you understand which dishes you like, be sure to learn their names so you can suggest them when it’s time to order, which is both impressive and flattering to your potential partners. Otherwise, you’re going to be stuck eating the stereotypical foreigner meal of spring rolls, fried rice, and sweet and sour pork.

Understand Your Counterpart’s Mentality

The chairman is throwing Wes a gracious lifeline. The deal is far from sealed, but Wes, despite his rocky audition, is granted entry to a place where relationships are built and fruitful business relationships blossom—the sumptuous dining halls and drinking establishments of China. Trust may or may not be enhanced over dinner. The location of the dinner and the entertainment afterwards will be key indicators of fu...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Acknowledgements
• Contents
• Foreword
• Preface
• Introduction: Why China?
• Secret 1: Generating Trust
• Secret 2: Mastering Negotiation
• Secret 3: Networking with Purpose
• Secret 4: Building your Platform
• Secret 5: Partnering for Profit
• Secret 6: Coping with Challenges
• Conclusion
• Afterword
• Works Cited
• About 55 Consulting
• About the Author
• Backcover