Doing Business in China - it's easier/far harder than you think...

It's Monday.  The weekend is over and it is time for us to get down to the business of our trip - visiting companies and discussing emerging markets, specifically in China.

This will also be our last day in Beijing before we head to Jinan in the Shandong province. So it's a sad, but exciting, day.

We start the day with a briefing at the US Embassy.  The impressive part of the discussion was the candor and direct responses to our questions.  The unfortunate part is that, as informative as it was, a lot of it was confidential and cannot be discussed.  However, the information was not original and did not color our views of either the country or the trip, but merely served as an explanation for a lot of what we saw and answered questions we had on issues with starting and maintaining foreign businesses within China.

One of the issues brought up, for instance, is the reliability of food quality in China.  Consistent quality of food, transport, sale and pirated packaging is a universal concern not just for local markets and "street meat" but has shown up overseas in baby food and animal food.  This is a recognized issue and the country is attempting to respond to ensure consistent quality.

Lawsuits and bad press have a way of getting someone's attention.

Our first business visit (aside from the Jade store) is with General Electric Medical devices.

We were received by several executives in a meeting room, provided refreshments and a generous welcome.  We were then treated to a slideshow presentation that gave not just an overview to GE's development in China, but in general development in the country.

With over 1.5 billion consumers it is understandable why companies want to develop business in China, with such an enormous market it is critical to first identify what type of business you want to do there.  GE is developing In China for China (ICFC) products which means that they do not create products for export, but for use within China.  In the medical device market there are urban global players such as hospitals, and there are rural local players.  To reach the suburban markets GE, with their ICFC strategy, set up salespeople in second and third tier cities to learn the culture and market as a holistic enterprise. 

 This is important as each region within China has challenges that need to be mastered.  Ensuring that they understand how each region operates and what positions them best in that region is a critical goal for companies like GE who recognize that China will eventually become their biggest markets.

Because of the issues with Intellectual Property protection there is a risk of localization in China with any product, but high tech products are particularly susceptible.  Companies like GE keep critical parts of their devices separate and key items in a secure location.  Final assembly is done in a different location to avoid intellectual property theft.

 This issues mean that companies may only decide to bring 10 year old technology to China while leaving newer products back in the United States or Europe where they enjoy IP protection.

Because of the recurring IP issues GE is focused on commitment to a high quality product and support to their customers.  This also helps compete against less expensive knock offs since they are not as high quality and their support is not as sophisticated as GE's.

Our second visit is with Ogilvy & Mather Advertising.

The owner of the company has a simple philosophy: The consumer is not a moron, she is your wife.

The company deals with public relations and advertising for companies.  One of the company's areas of expertise is foreign clients who are doing campaigns in English.  This requires that their specialists be versed in two cultures and able to operate, and translate, from one to the other and back.  For instance, one of their specialties is training clients to talk to the media succinctly.  This requires an executive to sometimes have to prepare and deliver remarks in a language that is not native or to a culture where gestures or facial expressions may carry a different message.

One of the most interesting parts of the presentation was the method of direct advertising used in China.  They do not use flyers or direct mail, but send messages, coupons and other advertisement directly to cell phones.  This guarantees that the people on the receiving end have disposable income for the products or services advertised.

But in China it is not just about reaching the consumer.  Reputation is critical and Ogilvy has developed a method of measuring reputation through four emotional indicators: Trust, Esteem, Admiration and Good Feeling. It is part of the complete package that the company offers to clients to ensure that the campaigns and products are positioned appropriately in foreign markets.

Train ride to Jinan:

We boarded a high speed train to Jinan after the visit with Ogilvy, enjoying first class service on the train ride.  We met with our local guide at the station in Jinan.  She greeted us with some stories about local culture, sang a traditional song, then got us to the hotel.  Unfortunately for her, we had been drinking for several hours and a few of the members then treated her to some traditional American music in the form of Beastie Boys.

After checking into the hotel we piled into cabs to continue enjoying finally getting over jet lag and feeling like normal at 9 pm.  The bar had a local musician, beer and smoking allowed.  You really forget what its like to reek of cigarette smoke after an evening out.  Being reminded was one of the less pleasant parts of the trip.