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5 Tips for Setting Up Shop in China

For the past decade, China has enjoyed the economic benefits of serving as a popular sourcing and production location for major high-tech and electronics manufacturers. Now businesses within the industry are seeing the country in a new light and recognizing its potential as a major growth market, as well.

Companies around the world are gearing up to begin selling or further ramp up sales capabilities in China's growing consumer market, and the high-tech industry is feeling a particular sense of urgency to develop this region for new revenue.

Express delivery and logistics play a critical role in the support of trade and transportation of goods between China and the rest of the world. UPS established its presence in China in 1988. Sinotrans, a Chinese transportation company with over 40 years of experience, was the service agent for UPS until 2004. Today we have 88 operating facilities and cover 330 cities throughout the country with 190 weekly flight segments that connect China to the United States, Europe, and across Asia. UPS also has 16 import gateways and 17 export gateways and serves several airports throughout the country, including Beijing Capital International Airport, Guangzhou Baiyun International Airport, and others.

Although China is unfamiliar territory for some companies, this emerging market is ripe with opportunity and can be successfully navigated with some advance preparation and research. Here are some tips on how to successfully establish and maintain a global business in China, as well as information on some unique challenges you may face:

  1. Identify a business objective . High-tech and electronics companies should evaluate their strengths and resources, know what they can do best, and have a clear vision for what they want to achieve in China before entering the market. China is a vast country with very different regional characteristics, and it's not necessarily the right market for every company.
  2. Do your research . Research is essential before entering any market, and China is no exception. Economic development and average per-capita income varies by province and by city. Therefore, it is important to gather specific, local information from reliable sources about a broad range of topics, including local business life and government regulations for foreign companies.
  3. Understand the business environment . To succeed in China, companies should partner closely with local communities and governments. Although there is no set timeframe for building a strong brand in China, it's critical to understand that business in China is based on relationships and trust. Chinese businesses take a long-term view toward business, and business transactions are based upon the parties developing a relationship first.

    This scenario extends beyond interactions with individuals in the business community to the government. It's important for a company to demonstrate its operational competence and be recognized by the Chinese government and regulatory authorities as being valuable to the economic and overall development of China.

  4. Study the market . It's important for foreign enterprises to understand that China is not a homogeneous market. The world's most populous nation is a rich mixture of languages, cultures, and ethnicities. To enhance a brand's chance of success, a company should offer products targeted to specific regions and demographics within China, and then develop an appropriate marketing strategy to support that image. A marketing strategy that works in the other countries might not work in China. A company must maintain enough flexibility to adapt to shifting needs and stay abreast of consumer demands.
  5. Become a “Student of China.” Before attempting to do business in China, company representatives should make an effort to obtain a basic grasp of Chinese history and culture. Although translators are at the ready, it is helpful to learn one or two simple Chinese phrases. Your efforts will go a long way toward breaking the ice during a business meeting.

UPS can help companies with both the process of determining if China is the right market for them, and if so, getting started doing business there to navigate challenges and capture new market opportunities.

19 comments on “5 Tips for Setting Up Shop in China

  1. Ms. Daisy
    October 26, 2011

    This is a very good ad for UPS. I also recognize the fact that there is growth opportunity in China, but concerned about this new wave of new companies pitching their tent in China and helping it it grow even more at the expense of the West. Each company is free to make its own decisions, but the outsourcing of western jobs is why the US economy is in trouble and I am not enthused that UPS is helping in this regard.

  2. AnalyzeThis
    October 26, 2011

    These are all good tips, Carla, but I think #3 is the absolute most essential thing to keep in mind.

    It is very difficult to even remotely compare China to anything else. You absolutely must understand what you are getting into and adapt. Many companies have tried to apply their traditional models to China and failed miserably: Best Buy, for example, learned the importance of partnerships the hard way.

    The rules are different. And as you say, China is not some singular, homogeneous market. There is a great deal of diversity.

    All that being said, I do believe there are plenty of potential opportunities. But if you don't take the necessary time to understand the environment, you will almost certainly not be successful.

  3. DataCrunch
    October 26, 2011

    Hi Carla, thanks for the tips and you are so right that China is a very diverse country and each region/province may need to be approached differently.  Do you have specific examples about UPS’s experience(s) in how the company markets differently in China based on region?

  4. prabhakar_deosthali
    October 27, 2011

    Carla -These are very good tips. Is UPS the first US company to establish business in China? I believe companies like IBM must have already set up shop there. Can we get some insight into their experience. And how many years it tooks UPS to “understand” China?

  5. Taimoor Zubar
    October 27, 2011

    I agree that understanding the business environment is the most critical step here. Business culture in China is pretty different from the rest of the world and is not documented within text-books. Understanding of the business environment is only possible by visiting the place physically and interacting with local people. Business may have to change up a lot of things within their processes to suit the culture and environment in China. 

  6. Daniel
    October 27, 2011

    If Chinese government feels that, the new business can have a greater economic impact in growth and to create job opportunities, then they allow for all sorts of business.

  7. Jay_Bond
    October 27, 2011

    Your five tips seem pretty accurate for being successful in China. Obviously these are just tips and this is a more complicated situation to actually set up shop and be successful. I have noticed that UPS is doing very well in Asia and has very good lead times to get things shipped at reasonable costs.

  8. tioluwa
    October 27, 2011

    I also agree that Understanding the business environment is the greatest key mentioned here, but more specifically, that patnership with local companies is critical.

    The chinese market is large and complex, and from experience at our company business with china, i realise our local contact with a few local companies and even personal relationships with locals goes along way.

    It is hard to do business with and in china from a distance.

  9. Himanshugupta
    October 27, 2011

    These tips are useful to any new location where a company wants to setup its shop. The cultural and social understanding is very crucial to capture the local market shares. UPS is MNC and can be a bit expensive so knowing and using a local ecosytem can help in cost cutting.

  10. chuang
    October 27, 2011

    Ms. Daisy:

    Thank you for your comment. Unlike outsourcing, expanding exports to fast growth markets, such as China, actually increases jobs in the United States.  Export growth provides new consumers for products made in the U.S., which lead to more production, and in turn more job creation. In fact, exporting supported 27 percent of U.S. manufacturing jobs in 2008.

    As the economy rebounds, so will the number of jobs. The Office of the U.S. Trade Representative reports that exports to China, the 3rd largest export destination for U.S. companies, totaled $91.9 billion, an increase of 32 percent over 2009. Just imagine how many jobs can be supported to produce a growing number of in-demand U.S. goods to be sold in China.

      Sources

    If you have any further questions, please let me know.

    Thanks,

    Carla Huang

  11. JADEN
    October 27, 2011

    All these tips are very important most especially “Understanding the business environment”, as business environment refers to the surroundings of business enterprise, and this affect its operation and determines its effectiveness and success.  Business can't work in isolation, it is the economic and social organ of the society, it must achieve its economic goal, it can't ignore the interest of the society, and the government of that country has also interest in business affairs.

  12. Houngbo_Hospice
    October 27, 2011

    @JADEN:

    and the government of that country has also interest in business affairs.

    I know that China is an appealing market for potential investor. But what I fear the most is the government control over business activities. Can China government be always trusted to garantee investors a safe business environment?  

  13. Houngbo_Hospice
    October 27, 2011

    Understanding the country's history and culture will definitely help. That is the same for any new country in which you want to established your business quarters. But I agree that there features specific to China you might learn first.


  14. Anne
    October 27, 2011

    Understanding the business environment can really help business to avail the existing opportunities of resources to grab the market. It can also help to biuld image of the company in the minds of people and to formulate effective business plants.

  15. JADEN
    October 27, 2011

    China governement has no reason for not making the business environment a safe and conducive one for the investors, as it has much benefitted them socially and economically.

  16. garyk
    October 27, 2011

    I think we should start looking at 5 tips for setting up shop in any other country but CHINA! Manufacturing Job!

    How many CM'S are not from CHINA?

    Is it possible for other counrties to set up CM'S other than CHINA?

    Is CHINA importing any good fron other countries? or just exporting?

  17. Kunmi
    October 30, 2011

    Absolute truth! The China business environs may be fascinating but deciding to have a shop there may cost one relocation to China

  18. electronics862
    October 31, 2011

    Thanks Carla for providing the 5 important tips. I do agree with becoming the student of china before establishing a shop, it is very important to learn the chinese language to do market with people there. And if you especially join a business school you can understand different marketing standards, likes and dislikes of the people there to come up with product to match there expectations.

     

  19. itguyphil
    November 29, 2011

    You mentioned some good points Carla. A friend of mine lives and has a business in China & shared some experiences with me like:

    Picking a location is very important especially in the urban cities. People need to know which city is the place for their industry and then they will need an office or shop. Now, we all know that setting up a shop its all about location, but even office? You'd be surprised how the locals there think. They are more keen to doing business with a foreigner sitting in a decent office in a decent location.

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