Search This Blog

Saturday, October 23, 2010

China is not only for big players. Even you are small players, you can still take part in the economic development in the country, amid in much smaller ways. If you are small, then go for small share of the market, which can mean big to us. I remember  there was a Malaysian ICT enterprise ventured into a small city in China of 200,000 population, offering a unique IT solutions that can benefit the whole city. In this case, though the market is small, but it is an achievement for this Malaysan enterprise gaining access into China market. It will take some time though but what is important is that you have a niche and special products/services and you have a reliable partner, which can be privately or state owned enterprises. The support from local partners is absolutely important in making sure that your business plan executes well.

A friend of mine recently asked my views on how to promote her 'special' tooth brush in China. This special item, with a special design, is claimed as a very effective tool to eliminate dirts and clean teeth. For a new product, a lot of work needs to be done in marketing and promotion. In this case, you  also need a good backup from medical point of view and work with reputable partners. Pricing is another issue, where market segment you want to target, the price cannot be too high though there are many customers who can afford to buy expensive imported products. If you  are nobody in terms of branding, the marketing and promotion task will be tougher. For internationally known brands, the brand itself can facilitate promotion of new products in the market, for these popular brands, consumers already associate any new products as reliable and high quality though prices may be expensive.

Competition is very stiff in China, regardless of what business you are in. It comes from local and foreign players and for marketing purpose, you need to have a deep pocket. It's better to ask ourselves whether our presence in China is crowding out the market or is giving us a competitive edge. If it is crowding out the market, the competition is very strong and may require deep pocket. If you have a competitive edge, then you may require less spending but what is required is how you position the product in the market. This is where your partner's cooperation in crucial since they normally understand the local market better, though we also need to do our own homework.

Sunday, October 17, 2010

What products or services that China want? For so many years, China has been importing a lot of natural resources/raw materials and commodities and continues to do so. China imports timber, natural rubber, oil and gas and palm oil from Malaysia in a large quantity. It also imports huge volume of semi-conductor and integrated circuits from Malaysia. Generally speaking, imports of all these items constitute more than 60% of China's total imports from Malaysia. It implies that China still require these products for its industrial use and more or less we can say that there are already big players from Malaysia who consistently export these products to China and if you plan to join in, you need to compete with these big players and certainly it is a tough challenge.

So, what else we can offer for Chinese market? Products like processed food and beverage, like confectionery, snacks and bakery products, canned and ready made products, frozen food, seafood, juices, white coffee and cocoa products among those that have good potentials in China. As I mentioned several times earlier, the increase of purchasing power and the middle income population has to some degree shifted the customers perference for imported products. Buying imported products, though relatively expensive as compared to local ones, is perceived as having a high status in the society and imported products are regarded as high quality products.

The mushrooming big shopping malls and complexes in major and medium size cities in China has contributed to increasing inflows of imported products. Products with big brands like Channel, D & G, Dunhill, Ferragamo and Gucci are much sought after in the market and it goes on to so many other foreign brands that to us some of the brands maybe we have never heard before. All these brands and products have their own niche market and relatively doing well even though some of them did fail.

During my stay in China, some of Malaysian brands are already present in the market, among them like Royal Selangor (pewter), Bonia (leather products) and Ekowood (engineering wooden flooring). The brands are not only limited to products but also companies and services and these include companies like Maybank, Petronas, Malaysia Airlines, Air Asia, Parkson, Shangri-la Group, Sime Darby and UMW.

Beside food and beverage products, what else have good prospects in China? Some of Malaysian ICT companies have also made inroads into China with their unique services that can cater the need of ICT customers; like softwares, solutions, creative multimedia contents,etc. We read in the media that such companies as Green Packet, Cworks Berhad and Mobif Berhad have ventured into China market. If Malaysian enterprises can offer some special and unique ICT services that can fulfill the increasingly ICT savvy customers in China, then they have a good chance of success.

The above are just some instances of what products or services that Malaysian enterprises can offer for China customers.

Friday, October 15, 2010

As I mentioned earlier, one of critical success factors of doing business in or with China is a credible partner in China. It is a challenge if you want to do everything by yourself but it would be more realistic if you work together with a reliable partner to achieve a success. How?

There are many ways to find a good partner. It may come from recommendations from other people that you know well, from government agencies that can advise you like Malaysia External Trade Development Corporation (MATRADE) or Malaysian overseas missions. Another common and relatively effective way to look for partners is through participations in international exhibitions overseas. In fact, though this is a traditional way of promoting your products and services internationally, these events are still much relevant to those who are especially new in international market. During participation in the exhibitions, you not only can introduce your products but also can establish contacts with potential partners who come and visit your booth.

You may receive hundreds or even thousands of visitors during the period of exhibition and many of them probably interested in your products/services and interested to become your partner; in the form of distributorship or importing. Then come another challenge; from all these interested potential partners, who will be the right partner(s). Let's see if you want only a sole distributor of your products for China market, how do you choose the 'right' partner from many. You then need to assess the credibility and reliability of this partner, via many ways, including via your already existing contacts in China, internet, local commercial authorities in China like Ministry of Commerce (MOFCOM), China Council for the Promotion of International Trade (CCPIT), municipal bureau of trade and investment as well as Malaysian representative offices in China like MATRADE, MIDA, and Malaysian overseas Embassies/Consulates.

This proper due diligence is essential to be conducted before a final selection of a partner is made. One thing for sure your partner should not show genuine interest in your products but also should be supportive to you to overcome regulatory hurdles for your product to enter China market and work closely together in marketing and promotion activities for your products to gain customers' acceptance. Sure you do not want parners that can give 1001 promise before they get the business but later end up failing in the market or you do not want  partners who say everything 'no problem' but after the deal sealed, then you realise that there 'are many problems'.

So, finding the right partner is important. It is not easy but you have to if you want to succeed in business. This applies not only for China market but also elsewhere.

What else important beside finding a right partner? Next, do you have the right product or services for China market? This is from the perspective of selling products/services to China.

Tuesday, October 12, 2010

Malaysian companies that I think have successfully established their presence in China include among others Shangri-la Group, Parkson, Salcon Engineering, Sime Darby Berhad, Maybank Berhad, Hong Leong Berhad and UMW Berhad. These are big companies, there are others that are small and medium sized companies, including ICT companies like Redtone Bhd, Green Packet Bhd, Cworks Bhd and many others.

The above companies and many other Malaysian companies have recognised the importance of China as their market for growth as other markets probably do not offer the same length of business opportunities for expansion and continuous growth. Competition is tough though considering many other local and foreign players each trying to grasp a small pie of share but due to the vast experiences and expertise that Malaysian companies can offer, they are able to execute their projects well in China and being recognised.

In terms of trading, China offers ample opportunities for Malaysian products. Though commodities like petroleum and gas, semi-conductors and integrated circuits, palm oil, timber and rubber among others are main exports to China, gradually this trend has changed and more exports of Malaysian-made processed products are gaining access to China's huge consumer market. These include processed food and beverage, leather products and rubber-based products and wood-based products.

Saturday, October 9, 2010

Investments into China by Malaysian enterprises are in many sectors; manufacturing and services. The size of companies do not matter and it depends on what types of business they are doing. Among products and services that Malaysian enteprises involve in include processed food and beverage, rubber gloves, cosmetics, electronics components and parts, construction and real estate, information and communication technologies and hospitality.

There are many different reasons for investing in China. Main reasons include the huge domestic demand that China offers. The 1.3 billion population market size is already a pulling factor for foreign enterprises to come to do business in China. The purchasing power in China has also risen significantly, the middle income constitute about 30% of China or about 400 million people.

Another reason is that China has abundance of labor resources and relatively the labor cost is still lower, especially at 2nd and 3rd tier regions. Labor intensive industries will have no issue to get people to work, and in another word Malaysian investment in China also generate employment for the locals.

Besides investing in China, some other Malaysian enterprises resort to direct exporting and importing with China. And because of the growing middle class and increasing purchasing power, imported products are becoming more sought after items due to various reasons; status, high quality perception and internationally well known branded.

Friday, October 8, 2010

Yes, China over the past 10-15 years have evolved drastically; economically and socially. The China Government has put in place rigorous strategies and plans to benefit the people and one of the bold moves made was the 'Open China' policy. This especially seen during the administration of its leader, Deng Xiaopeng, who has steered China as the important economic superpower nowadays.

Open China policy has witnessed the inflows of foreign investment in China, and this has helped to develop the local economy and partly contributed to the social stability in China with increased job creation  for the locals. Nowadays, China is one of the biggest recipients of foreign investments in the world and the trend continues. The foreign investment plus China Government's robust action plans for achieving social and economic stability has led to weath creation and increased purchasing power.

China is also Malaysia's important partner in all areas; economy, social and cultural. Malaysia in fact was the first among ASEAN countries that established diplomatic relationship with China on May 31, 1974. I was 6 years old then. Our Father of Development, Tun Abdul Razak at that time made a historical visit to China and met his counterpart, Zhou Enlai, during this histrocial moment, and since this the relationship between the two countries continues to flourish until now.

Malaysia has also taken part in the development of China's economy. Malaysia's investments in China continue to increase. In 2008, Malaysia's investment in China amounted to more than USD3 billion and I believe the volume now is bigger. Malaysian enterprises realize the importance of China as the future economic superpower and leveraging on this conducive environment to do business in China, to tap on its relatively cheaper resources and huge domestic market.

Thursday, October 7, 2010

I had a chance to travel around China during my more than four year stay. It is amazing how fast China develops. During my first trip to China about ten years ago, China cities like Beijing were congested with so many bicycles, even vehicles need to find their ways through a throng of bicycles. But when I arrived there for my second visit and stay, the roads were full cars and the bicycle lanes were not as busy as before. Now, the road can have 3 or 4 lanes one ways but it is still full with vehicles and heavy traffic is common.

What does it show from the above one scenario?

Monday, October 4, 2010

There are more than 30 provinces in China, which include several autonomous regions and municipalities. Hence, when we plan to do business in China, we can't treat China as 'one' market, but instead as more than 30 markets. Each province is big in market size and may have different set of ways of doing business.

We should consider exploring other markets or cities in China. As mentioned earlier, big markets like Beijing, Shanghai and Guangdong are already saturated and highly competitive.

There are thousands of cities in China; some of them are categorised as 2nd tier (very fast growing) and some of them are 3rd tier cities (least developed markets but economy is gradually improving). Many of us probably never heard of the cities but a lot of things have happened that made these cities develop very fast.

Some of 2nd tier cities include Nanjing, Dalian, Qingdao, Yantai and Chengdu and 3rd tier are like Urumqi, Xinjiang and Yinchuan, Ningxia. The 2nd tier economies are growing rapidly with increasing inflow of foreign investments. These cities are not only big in size but also offers good infrastructure facilities for doing business. The competition in 2nd and 3rd tier cities is also not as intense as in the 1st tier cities though we can see growing competition in the 2nd tier. There are therefore still ample business opportunities in these 2nd and 3rd tier markets.

Saturday, October 2, 2010

Where you want to sell your products or services in China is one of important factors to consider. China is a huge market of 1.3 billion and  a size of more than 1 million sq km. We need to study the market first before decide which part of China we want to start.

We probably know more about Beijing, Shanghai and Guangzhou as compared to other cities and probably we want to start from these 3 biggest cities in China. Beijing has about 17 million population, Shanghai and Guangzhou have more than that. So these three cities already offer us with about 50 million market size. But, do not forget that because of being too much exposure to foreign business community, these 3 cities have been overcrowded with not only local players but also foreign businesses that are chasing to grasp a small share of quite a big market. Competition become stiffer and only big players with deep pocket can sustain their presence. It does not mean that small players like us cannot go into these 3 cities, we must pretty sure that the products or services that we want to offer are unique enough and for 'niche' market. Otherwise, the money spent to open up the market will be wasted and 'burnt'.