Networking in China: Part III Building a Network

Saturday, October 21, 2006 1:16
Comments Off on Networking in China: Part III Building a Network
Building a network in China is something that requires time. It does not come overnight, and in many cases it may take 6 month to a year for a network to yield much of anything except initial inquiries.The approach you take and the effort it will require will depend on the type of relationship to be built. following our previous post, we will look at how to build relationships between your organization and government entities, manufacturers, distributors, and customers. Each has their own twist, and will require different strategies:

Relationships with Government Officials:
Building relationships with government officials is something that requires a time and energy. Relationships with the government are always talked up, and few really understand how to manage them properly. Some take every opportunity to snap pictures with government officials to promote their network and others take a very quiet approach and meet with officials outside the office and never say a word.

One the east coast, these relationships are becoming less about promoting each other than it is about a straight business transaction. The days of showing up at a provincial mayor’s office and expecting red carpet treatment are gone. these are busy men and women who are trying to manage 1000 things at once, and are themselves having to deal with a changing political environment. By working with lower level officials and fulfilling promises thought, relationships will be built on a higher level.

In the central and western areas, where foreign companies are fewer, one can expect a higher level of involvement and flexibility as they have yet to be inundated by thousands of companies looking to invest in their areas. However, that is not to say that officials in these areas are less sophisticated, and in many cases they are even more skeptical as companies have made and broken commitments more in these areas than on the East Coast.

One event for every foreign company to attend if looking to meet with government officials is the AMCHAM Government Appreciation Dinner. Held every year, officials from Shanghai’s surrounding provinces are invited to join members of the foreign business community to meet more casually. It is one of the most well attended events, and often senior foreign business leaders are there as well (double bonus point for those looking to meet China GMs)

Relationships with Manufacturers/ Suppliers:
Potentially the easiest relationships to establish, maintenance is the tricky part, relationships with manufacturers and/or one’s suppliers are now based more on an economic and pragmatic basis that on anything else.

Making first contact is much easier now than ever before (see How the Internet Changed Sourcing) as websites like Alibaba and Global Sources provide online directories of tens of thousands of manufacturers and trading companies. In addition, exhibitions like the Guangdong fair (twice a year) and industry specific conventions occurring every day, potential suppliers are easily accessible and a single trip can potentially provide an buyer with contacts to multiple potential suppliers.

Relationships with Distributors:
Relationships are often more difficult to make than those of manufacturers, and for most companies, these contacts are often more important as one can train up manufacturers, but a good distributor can be really hard to find.

As highlighted in the Changing Nature of Distribution in China, the role of distributors is a very important one, and the relationships must be managed very carefully as the power of distributors in many markets is still very strong.

Making initial contacts is best done through by first understanding how one’s market is segmented in China, and how regionally which distributors are the strongest or have the best track record. Once identified, the most important part is understanding their portfolio (i.e. where your products fit into the mix), their capabilities, and their network is going to be the most important. Finding distributors that are moving symbiotic products is best, while distributors relationships that involve competitive products are often very difficult to manage.

Some resources include the Gold Key service of the U.S. Commerical Service, current customers with China presence, industry specific organizations (Foreign Agriculture Service), trade shows, consulting firms who are capable in an industry and have knowledge of the landscape, China suppliers, and even home based organizations like State International Marketing offices and World Trade Centers.

Relationships with Customers:
The last group, relationships with customers, is one that there are probably the most resources for depending on who a target customer is.

For those selling into foreign customers, the resources are many and building the relationships is just a matter of time and patience. for many, the American Chamber of Commerce (Shanghai or Beijing), E.U Chamber, and BritCham offer almost daily events to meet others in the foreign business community, alumni organizations (Thunderbird has 180 alumni in Shanghai alone) are also a great way to meet people, and of course introductions through U.S. Commercial Service are a great way.

Like anywhere else, maintaining these relationships will come down to having a proper team, good pricing, and stable quality.

However, in China, one area that I find sets the winners apart from the pack are those companies that commit to the product development process of their customers. for example, a starch company helping a dairy company introduce new yoghurts into the market and working with their customer to provide the right consistency and flavor are critical. Simply selling a good product from abroad is not enough, even if the pricing is the best.

Some Conclusions:
Relationships in China are important, no question. however, more than that, making sure the right relationships are developed and maintained is even more important.

for some organizations, this may mean there is a need to develop connections within the local Chinese community, and for others it may not. For some, a government connection can help bring deals together, while for others, a connection to the Commercial Service can provide clearer visibility to strong distribution networks.

In the end, it is the business model that will dictate what relationships will be required, and once those are determined, the course of action will be dictated. Once that course of action has been dictated, it should be followed. Unfortunately, there are no short cuts and it will require time and patience, but once established relationships in China can bring real mutual benefit to both parties in business and on a personal level.

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