China Analysis, Strategy and Entry
"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat." - Sun Tzu
Even though we are completely content with our Global Development Center in China today, we should have heeded to Sun Tzu more so before the grand opening, for doing business in China, still requires a lot of preparation, awareness and stamina.
For example, it took us three months to submit, change and re-route of our applications. There were repeated trips to the same "Federal Building" destinations, in order to obtain the necessary paperwork and approvals for our Business-License (which itself, requires much detailed explanation and categorization compared to that in the US). This is because, applying for a business-license in China is a three-step process:
First, obtain a temporary record and Tax-ID with the "Industry and Commerce Bureau" - which, takes about 3-weeks of triumphs and tribulations.
Second, get approvals from the following record-keeping agencies which, each has its own paperwork/approval process, office-locations and hours (let alone pain and sufferings):
- Federal Taxation Bureau
- Local Taxation Authority
- Foreign Reserve and Currency Management
- Custom and Import/Export Agencies
- High-Tech Approval Authority
- Statistics and Controlling Bureau
- And this is not even the comprehensive listing
Third, go back to the "Industry and Commerce Bureau" to obtain the official record and Tax-ID, then back to each of the agencies list above for their official records.
This is, despite of having local Chinese friends and family relatives who have done months of advance studies and surveying of Chinese policies, followed by our own, on-the-ground, physical and repeated site-examinations beforehand, in order to find the appropriate office space in the right "zones", along with the specific/favorable policies (as China typically creates "Special Zones" within municipalities, with tax and policy incentives to attract and lump similar industries together).
In other words, even though we can speak the Chinese language and even the local dialect, and have all the resources that normally won't be available to a foreign entity, we still really wished that we could have had an experienced operator and partner with prior and proven experiences in terms of China Entry, to guide us along the way (and we are even not including the need for a trusted, local Integrated Services vendor). For example:
- How productive is it to wait for hours after the government official took your application paperwork and disappeared behind a closed-door, in an overcrowded, smoke-filled and tempers-flying hallway?
- How strenuous is it that he comes back only to reject your paperwork because of some ad-hoc policies changes that you couldn't have googled?
- Do you know that you are the envy of everyone that your 1st-time submission will be rejected only for a few word changes, that they will swamp you for advice?
So ... sure, after three months of staying in China, bounced like a pinball, we eventually get everything right, but it is such an extraordinarily laborious process that we would have been more than happy to pay top-dollar to shun away from, for we have our own productive issues and core-competencies to focus on.
Separately, onto the Chinese market itself, it is far more fragmented than you would imagine. For example, China Telecom and China UniCom (two biggest Telecom incumbents), operate much like the Federal vs. State government in that each company has a subsidiary in each of the 30-something Chinese provinces and administrative regions responsible for a large percentage of the day-to-day running of operation.
If you simply look up the financial releases of some of the largest Telecom equipment vendors over the last decade, you will notice that each of the 30-something Chinese provinces and administrative regions subsidiaries purchases even their Telecom equipments differently, where vendors winning a license and contract in one jurisdiction have no relevance to the next.
Anecdotally, in the consumer markets, grocery, household items, clothing and day-to-day items carry distinct brands, flavors and substance across cities. The Federal, States and Municipalities also vary greatly in terms of rules and regulations, let alone the lifestyles between the Mega-cities such as Beijing and Shanghai, suburbs, and rural regions.
In summary, as an IT Consulting Boutique running an actual operation out of China, instead of just having a Sales-office, we have first-hand operational experience of the China Entry and Market.
Our experience leads us to believe that, if you intend to tap into the China market, for all of its glory, potential and promise (as truthful as we have discovered), you should at least, listen to what we have to suggest.
