Why China

Asia has a wealth of resources that can benefit almost any local business. While each Asian country provides its own comparative advantage, it is China that really has something to offer. Don’t let the headlines scare you away from going global.

China offers several resources that many U.S. companies will never have the opportunity to take advantage of, simply because they are not aware of how to enter the market. With continuous governmental deregulation (brought on, in part, by China’s acceptance into the World Trade Organization) and increasing consumer wealth; China provides an ideal market for both production and sales. The question is not whether to enter the Chinese marketplace, but how.

As the urban population continues to grow in China, so does levels of disposable income. Not all of China’s 1.3 billion population is likely to desire your company’s product (or be able to afford it for that matter). Yet, if even a small portion of the vast population does (or can); that could add enormous profits to your bottom line. The important thing to remember when marketing to the Chinese consumer is that relationships are more important than price when it comes to sales. Often, it is best to utilize an intermediary or to form a joint venture with a local company to initially penetrate the market and to build your brand name image.

What business couldn’t benefit from reduced expenses? Overseas manufacturing is very controversial these days due to the fear of job loss. But doesn’t it provide better customer service to outsource a portion of the job that does not involve direct interaction with end users (read: transfer production instead of call centers)? How many customers can you gain through price reduction because you have reduced your labor expenses? How much more money could you spend on marketing if you can increase your margins? In addition, the Chinese government needs to create more jobs as the urban population continues to increase.

What about piracy and intellectual property theft? It does happen. China has laws to protect intellectual property; the problem lies in the enforcement of those laws. So how do you protect yourself? One way is to outsource only the standardized portions of production. Another is to form a joint venture with a local manufacturing company: sure you will have to transfer knowledge to the Chinese company, but you will also gain access to their local distributors and customers (remember - relationships are the foundation for sales in China).

Globalization of sales and production is inevitable. As emerging markets strengthen, demand for products will increase. As the barriers to market entry continuously diminish, the companies that can reduce their costs will survive. Don’t let the headlines hold you back from venturing into a new market.

Kelly Kasic, President of GLOBAL ID, LLC can be reached via email: kelly@identifyglobal.com. Please visit http://www.identifyglobal.com/ for more information on GLOBAL ID, LLC, a management consulting and international research company.