Wagas Group

Difficulties when Doing Business in foreign markets: Market accessibility

WAGAS Business growth Soft-landing

Strategic advisory on planification, organisation, execution, delivery, positioning, etc.
On the ground experts to assist and facilitate the initial hire of employee. This incudes part of the seed money to cover possible salary gaps.
To address these key issues the soft-landing program shall include staff members whom will be dedicated:
To liaising with the local & central Governments
Train & qualify staff members to International Anti-Bribery Standards with well-known consulting firms
Achieve certification with International Anti-Bribery Standards with well-known consulting firms l as a guarantee of good practice
Sales Revenue Generation
Matchmaking with corporates generating +72% new customer acquisition
Market Penetration
Go-To-Market Channels generating +87% New Projects every quarter
Customized Approach
Tailored qualification of opportunities from PoCs to Purchase Orders +achieving 95% Customer Satisfaction

Difficulties when doing business in China

One Chinese word heard constantly while doing business in China is “guanxi”. Translated into English, the word means, roughly, relationship. The importance of building strong relationships in business is not a novel concept for western businesses. However, in China, guanxi plays a far more important role than it does in the West. While in the other parts of the world, one may be able to broker a deal just through formal business meetings; in China it is necessary to spend time getting to know your Chinese counterparts outside the boardroom during tea sessions and dinner banquets.

In order to develop such relationships, it is important to have the patience to build them. Due to the necessary time commitment, deals may take three to five times longer to complete in China than they do in the West. For a company to succeed in China it is important to spend time cultivating relationships with counterpart businesses, government agencies, and trade organizations.

From a cultural perspective, in China most deals are hammered out based on Guanxi. The Chinese have a tendency of doing business with people they have a connection with. The odds of securing a business deal are much higher when you work on your connections. Guanxi means you can have connections to government officials, or you can have connections to a person who is in a position of offering a favour to you. In the West, by contrast, your Guanxi might mean you belong to a network – perhaps an alumni association many people belong to and who regularly meet up to explore business opportunities.

Regardless of what type of Guanxi one might be connected to, businesses are tied by rules and regulations. For example, in the UK one is obliged to avoid conflict of interest. While operating business abroad, by law, one must comply with the UK Bribery Act 2010, which sets out rules and regulations that do not allow for bribing foreign government officials or businesses in return for B2B or B2C activities.

The cross-cultural differences between China and the EU give European companies a disadvantage regarding market rules and regulations, fearing regulatory repercussions for not complying with domestic laws. The consequences could be tremendous: the regulators back home might fine the company for the misconduct committed overseas, or they may press charges against any of the executives on the board. Many European companies argue that they have no control over what their Chinese counterparts do when securing a business deal. This adds more uncertainty and confusion to multinationals operating in China.
Some market aspects such as distribution channels, purchasing behaviours and legal requirements make China a difficult market to access. Many foreign companies have failed to establish themselves as they have tried to apply the same business model as in other countries; Home Depot or Best Buy are the best examples. Therefore, it is essential to understand and adapt one’s business strategy prior to rushing into the market. What’s more, the market environment is completely detached from most other economies in the world, making it difficult to take the first steps.
It is estimated that 37% of products that pass for the US market fail in the China market. Nowadays that the competition for China’s market is heating up, the government is favouring domestic enterprises. 70% said this situation is as bad as it was last year, 30% said it had gotten worse. Here are a few points where companies are really hurting:

Difficulties when Doing Business in China: Competition

Due to a massive number of foreign companies coming into China, competition has risen. Considering that Chinese consumers have increasingly been attracted by foreign brands, innovation is now needed more than ever before in order to stand out from the crowd on the Chinese market. Another factor to take into account is that the government has the chance to give preferential treatment to national firms rather than foreign ones.

In conclusion, a decent understanding of how to manage these 5 difficulties when entering China market is the key to a successful migration. Although, it is not mandatory to collaborate with a local consultancy to have managed one’s legal and administrative procedures at the early stage, it is recommended. However, we have to mention that if the foreign company possesses an administrative team who has an excellent Chinese language proficiency and understanding of China’s legal framework, all management requirements can be achieved. Even though it would suppose a much bigger economic and time investment at the end of every month.