How to prepare the distribution of its products in China

container exportThe current economic situation is pushing the organizations to designate export as the leading way to save the country. SME’s are considered as the spearhead of this strategy of external development.

In this context, some developing countries with high growth rate have become the targets for export and China is obviously a part of it. Indeed, its 300 million people with an European level of life have worth dreaming number of export managers.

Too many companies will take the plunge of exporting as soon as an opportunity will arise and will prefer to go ahead rather than trying to organize their approach of the market. The problem is that this strategy very quickly reaches its limit, especially in China. And this, no doubt, is one of the reasons of the French companies’ lack of success in exporting to China.

A methodical approach shall consist to firstly ask oneself some questions:

Am I ready to export to China?

Nowadays, some companies propose what is called « an export diagnosis ». This tool works by asking some questions to potential exporters and according to the given answers, it will determine if the company is ready to export or not. These questions will be about the company’s production capacity, the financial situation, international experience of the employees…

Regarding to exporting to China, we can take out some important and typical questions :

  • Have you already exported your products to some countries?

It is indeed important that the company, who wants to export to China, has already an experience in exporting to near countries or even better, to Asia. The return on experience (ROE) and the fact that the company counts some people used to communicate with other cultures in foreign languages… will be a very big added value and will give the possibility to go quicker on the market.

  • What are the real motivations for you for exporting to China?

We constantly hear about the huge consumption market in China and its high growth rate. Basing its strategy only on this fact will necessarily lead to disappointment. Some information must be collected because in reality some sectors are already spread among a lot of actors, some others are regulated by Chinese law, some are protected by Chinese Government with high import taxes…

  • Is your company in growth and is your financial situation healthy?

Developing his strategy, especially in far countries like China, requires a real investment for making market study, sending there a team several times a year… Without it, it will be impossible to understand the market, to develop a real local network based on long term cooperation and to control the local partners (distributors, agents…).

  • At what step of your product development are you?

Some companies may want to develop their products in China to sell in China. This strategy, taking into account, that a local production will be an advantage to develop its business, is smart but can be very risky if the company has not been able to learn and cumulate its experience. In that case, instead of managing selling issues, you will have to be focused on solving production problems.

  • What norms/standards do your products comply with?

In a country, where your products will often be in competition with local and cheaper products, the “Made in France” can be revealed as a key success factor. It can be an advantage in your future selling and you would have to concentrate your communication on it.

  • Is your company able to develop and adapt its products to local needs?

No matter what anyone says, far countries, such as China, have different cultures, consumption behaviors, organizations… and it is quite likely that you will have to adapt your products in terms of packaging, design… Even, in some sectors, China shall be approached as a group of many small markets with for instance the difference North/South, City/countryside, Hong Kong/China mainland…

If your company doesn’t have the ability to adapt its products, it may be necessary to find some local partners who will collaborate with you on this matter.

What is the situation on the market?

After the questionnaire regarding internal capability of the company to export, it is interesting to see what the situation on the market is.

  • Is the Chinese market interested by your products?

Even if this question can be seen as obvious, however it has to be the major focus in the strategic thoughts. SME often are very innovative and they are persuaded that their revolutionary products will get the interest of the Chinese market, believing that this product doesn’t exist in China or that the local products are lower, technically speaking. Based on it, these companies will often not loose time in analyzing the market needs.
But, the reality is that Chinese manufacturers, traders, distributors… are aware of what happens and exist in foreign markets and know well the western technologies. Thus, it is not rare that some industrials or intermediaries will contact directly some European companies, to propose them cooperation by selling their products in China or by setting up a joint-venture. These contacts are a very good indicator of interest for your products. Indeed, there is nothing better than Chinese people to know what Chinese market needs.

  • Who are the competitors and how are they organized?

The presence or not of competitors on the market will also contribute to determine if China is a good target and if yes, what would be the best strategy for your development. The problem will consist in getting information on these international and local companies. It is very delicate and even sometimes impossible for a company to gather information on its competitors especially if the said company desires to be discreet about its interest for Chinese market, or if it doesn’t have any local employees to make this job. That is why the best solution is to outsource this analysis to an external company who is used to collect information in the field and giving clear recommendations based on real figures and best practices observed.

  • Do my products have to comply with local regulations?

China is protecting some sectors with, for instance, high import taxes, especially for equipment. These taxes or sometimes registrations fees and procedures can put a strain on the interest of your project by considerably increasing the cost of your products delivered in China. A deep study of the norms and local regulations will have to be included in your approach of the market and be a part of the calculation of your selling price.

 

Some will tell you that China is the country of pragmatism and that it is necessary to jump on all the opportunities. It is true. But, we would add that pragmatism should not be confused with incoherence. Even if the market can be considered from outside, as completely disorganized, various and open, it is however, essential to approach it with methods and structure. If not, you will begin to sell in China, but your sales will stay at the lowest level, you will not be aware of prices and you will not control your partner (Distributor/agent). In the better cases, you will “only” lose time (sometimes 2-3 precious years), but in worse cases, you will contribute to create a new competitor who will control the market.

The only way to guarantee the success of your sales development in China is to move forward by benefiting from some people’s methods and experience.

 

 

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