Success in China Requires Balance

Success in China Requires Balance

Success in China requires strategic ideas balanced with operational plans that are actually executable. In addition, since required solutions depend on a company’s experience and maturity in China, needs will change over time. For example, a multinational company may initially require assistance developing an entry strategy, conducting due diligence and integration, while establishing a baseline HR infrastructure. Later, profitable expansion, organizational transformation and technology implementation may become much more important. Finally, sound financial controls and processes, low cost sourcing and supplier performance assessments may be priorities throughout the entire life cycle.

Sourcing:

Recognize that switching to China based sourcing will represent a significant change in the way your company does business. Costs will be lower, but supplier development, management and risk will be higher. Discussions over risk-reward trade-offs need to take place before moving forward.

Supplier capabilities vary immensely within China. Onsite evaluations and due diligence studies including financial, operational, quality and social responsibility reviews must take place early on.

Success in China Requires Balance

Relationships are vitally important to the Chinese, so it’s important to build a high degree of trust, communication and integration with each supplier from the outset. The more strategic and complex the commodity, the greater the level of integration is required.

Some staff need to be located in China for supplier validation, integration, monitoring and development. You will not realize the full potential of China sourcing if you do not invest in developing your key suppliers.

Growing a business in China presents very unique challenges that should be factored into investment and profitability objectives. Temper your entry strategy with very realistic expectations as you launch operations, localize products and services, and establish an employee base in China. Finally, business operations may vary from province to province as there is no”one size fits all’ concept in China. As a result, strategic ideas must be balanced with operational plans.