Erfahrungen eines Unternehmers in China, praktische Hinweise von CHEURAM

Henning Schwarzkopf von der CHEURAM Consulting Group aus Hongkong und Bejing hat folgenden Artikel von Wen-Szu Lin  zu Verfügung gestellt. Er ist wirklich lesenswert und lautet “10 things I learnt about being an entrepreneur in China that I wasn’t taught in business school”:

Wen-Szu Lin is International Director of Operations covering North Asia for FOCUS Brands. Prior to that, Wen-Szu was the Master Franchisee for Auntie Anne’s Pretzels in China, where he and his partner raised a Series A fund to test the concept. He is the author of The China Twist: An entrepreneur’s cautious tales of franchising in China.

Want a challenge? Try launching your first business in a foreign country where you aren’t familiar with the language or culture.

Not difficult enough? Launch in a city where you have no connections.

Still too easy? Ok, introduce a product category that is completely new to the consumers.  Make sure that you are new to the industry as well.  Limit your initial investment to a small amount.  Oh yeah, for kicks, let this foreign country be China.

In hindsight, that pretty much summed up the un-intentional beginnings of my first venture.

My business partner and I were the master franchisers of Auntie Anne’s Pretzels in China.  Of course, when we started, none of those were issues.  Our partners were some of the top people in the food industry.  We had the “full support” of plenty of local Chinese contacts and business men.  We started with enough funds for proof of concept.  And we started with a great brand that had proven itself in Asia.  At that point, Auntie Anne’s was already successful in Thailand, Korea, Malaysia, Philippines, and Singapore.  The future looked bright.

What we experienced as entrepreneurs in China transcended the brand, the lessons from my Wharton MBA, the takeaways from the dozens of entrepreneurship books that I have read, and the reach of our contacts. Some of my experiences are common for entrepreneurs everywhere, some are shared in emerging markets and some are uniquely China.

1. Operations is massively under-emphasized

Some thugs tried to extort money from us, threatening the physical safety of our employees if we did not comply.  Advice from others was always to hire some people to go after the thugs.  Simple question.  Who do I call to hire this “hitman”?

Starting in Beijing, everyone always recommended, “you guys should open a store in Sanlitun or Wangfujing (some of the top spots in Beijing), and make sure that it is in the busiest parts.”  No shit.  Great advice.  The challenge and key is always the how.

MBA classes often emphasized the “sexy” part of the businesses.  How it is going to be financed?  What is the entry or turnaround strategy?  What is the innovative marketing that changed the course of the business?  Operations and implementation is only represented in most classes as a tiny aspect of the overall process; thus creating that impression in the overall value.  No wonder the top jobs lusted by MBAs are in private equity, investment banking and strategy consulting.  Who wants to worry about the day-to-day grind of operations when they can give random advice from a 5 mile high perspective?  Sad to say, I was part of that group who looked at operations as “beneath” me and my precious time. My perspective is completely reversed now.  We need the funding and strategy for any business, but great operations can navigate around certain shortfalls in those areas.  Poor operations will sink any business.  Operation is hard and it is a daily grind.  If you want to build a great business from the ground up, better start loving the operations.

2. How to navigate a corrupt regulatory landscape

Our MBA program discussed the implications of the US Foreign Corrupt Practices Act (FPCA) and how large corporations deal with working in corrupt environments.  I recall the classes portraying all cases as black and white, with the main recommendation to stand true and stay above any corruption.  Work with the governments and hire well connected locals to navigate these situations.

How does that translate to an entrepreneur getting shaken down by local government employees, all wanting some “favors?”  How do you work with the local “government” if you are standing in a long line waiting to chat with the government employees who is sitting behind thick bullet proof windows and will only give you a few seconds before turning you away?

Certain markets are open about corruption, where officials come right out and ask for payment for approvals.  These markets are actually easy to navigate as it is simply a matter of costs built into all interactions with officials.  For markets like China where only certain officials want something yet do not ask or accept directly, the onus is on the businessman to find common friends or relatives to the official to make the deal happen. Add in a layer of cultural sensitivity where a gift is often seen as show of respect rather than the underlying value itself, each case becomes circumstantial on the situation.  It is definitely not black and white and must be treated as individual cases.

3. Market studies are useless without true intimate knowledge of consumer habits

As a former management consultant, I did a full market entry study on Auntie Anne’s chances in China prior to our entering, collecting mountains of data, customer surveys and projections.  The result was a comprehensive market entry strategy that answered all the typical questions of how we position ourselves and why, our angle against our competitors, location strategy, pricing, etc.

What I did not do was live in China long enough to truly understand the consumption habits of locals and changing market dynamics.  While I did ask many locals questions regarding their eating habits, they answered only the questions that I asked.  But I was asking the wrong questions.  Having read through China entry strategies from many corporations since, I see the same flaws appear often.  One needs to know enough about the culture and market from an inside, on-the-ground perspective to know the essential questions to ask in adapting a foreign concept.

4. How to ethically deal with unethical people

There are cheaters everywhere.  How do we deal with these people without compromising morale integrity yet adapting to the local environment.

Case in point.  Our procurement manager took bribes and demanded kickbacks from most of our suppliers.  If I were in the US, I would have fired that guy as soon as the first supplier called to complain.  However, our procurement manager was the smartest person on our staff and could get prices lower than what we could, even with his kickbacks built in.  Many of the procurement managers that I met from other firms also took kickbacks.  So, if we fired this manager, there is a good chance that we would face the same issue with the next employee.  What would you do?

What we ended up doing was turn a blind eye but we checked the prices periodically to ensure that the prices he quotes are the same or lower than what we ourselves could negotiate.

5. Discount what your “network” claim they can do for you

“Yes!  I just became Facebook friends with the Chairman of state conglomerate’s son!”  Does that mean that this new “friend” is part of your network that will come to your rescue should you ask?

No one gives a crap about your business or your needs unless they can profit from it somehow.  We are all just a few connections away from the Hu Jintao and Barak Obama but that doesn’t mean that they would help us when we need it.

People like to talk big about how connected they are, especially when they are drinking.  Be careful before counting in these people as part of your “network.”

6. Cash is king. Be wary of deposits

We all heard it before.  Cash is king.  In the US, I experienced delayed payments and bad debt.  However, in China, the magnitude of the delay is multiples of my previous experiences.  In long term relationships with suppliers and landlords, this is not as big of an issue as with people I deal with only one time.

From landlords for my apartment to our store fronts, when I give a deposit in China nowadays, I have already discounted ever getting the deposit back on time or at all.  Six months or nine months delay is not uncommon from these scenarios, despite what the contract says.

Usually it is at the point where we were about to take legal action before the other party reluctantly gives back the cash.  I have been thoroughly impressed with the creativity of people’s excuses when you try to collect debt.  So, my lesson here is that I can never depend on cash from others who I do not deal with regularly.

7. HR concepts taught us how to protect our employees and business, but not ourselves

Our employees pushed into our homes in groups and demanded compensation for obscure HR laws that they used to take advantage of the company.  We feared for our physical safety and immediately looked to move our families away from harm’s way.

We applied what we learned in business school to protect our employees and business.  We did not realize that we put ourselves in jeopardy in the process.  One lesson from startups in the US is a family approach where bosses opened up their homes and lives to the employees in company picnics and gathers.  Not so in Asia where the income disparity is so large.

We learned to offer as little of our personal background as possible, in case relationships ever sour with the employees.  This is for the physical protection of our families.

8. Looks matter

Being of Taiwanese Chinese descent, I experienced reverse discrimination in China.  Locals had a different set of expectations for me versus non-Chinese foreigners.  The fact that I can speak Chinese did not help as locals expected me to be on the same wavelength in terms of cultural understanding.  But I wasn’t.  I am American.  As a result, I was not given the same leniency as other foreigners when discussing ideas.  Local Chinese were quick to dismiss me when I asked clarifying questions yet they would spend ample time with a smile to help a non-Asian foreigner through the same process.

I still do not know what the best way to approach this situation and would love suggestions from readers.

9. Impact of the lifestyle of an entrepreneur

Ever get in the situation where you only ordered a small dish as part of a group dinner but then get stuck dividing the entire bill filled with liquor and wine?  Usually, it is the offenders of the group who suggested dividing the bill.  That situation did not bug me much when I was working and making salary but it thoroughly pissed me off when I had to watch my spending.

Working as an entrepreneur worried about making ends meet changes a lifestyle, and usually not for the better. For people used to generous travel budgets, the change is a shock.  Add to that the stress from an owners perspective, the combination is difficult to endure.  Similar to pre-marriage counseling where couples are forced to talk through potential conflicts as a married couple, entrepreneurs should think through the impact on them and loved ones before taking the plunge into this life.

10. Entrepreneurs multitask, but learn to prioritize

As an entrepreneur without huge budgets, my business partner or I had to take on roles where we did not hire dedicated people for, from IT to HR to procurement to marketing to government relations (yes, we need that role in China).  What we found out was that there were so many administrative tasks that consumed most of our time that we have little time left for focusing on the business itself.

Small, trivial tasks like setting up printers or buying random supplies could turn into a long ordeal.  Instead of spending majority of our time on the business itself initially, we spent most of our time on administrative tasks.  Specifically in China, the administrative steps to get proper business licenses and documentation is far more tedious that in the U.S. We eventually learned how to become more efficient with our time but wasted a lot of time learning.  There are items that many new businesses can outsource from the start and a few that must be kept in-house.  These are practical issues that many startups experience and entrepreneurship classes could have offered best practices on how to approach these thorny problems.

 

Partner für China – Beratung in Deutschland, Österreich und der Schweiz gesucht

Die CHEURAM Consulting Group aus Hongkong mit Büros in Beijing und Shanghai sucht in Deutschland, Österreich und der Schweiz Rechtsanwälte, Steuerberater und Unternehmer als Kooperationspartner.

Da ein Partner in Beijing ein chinesischer Wirtschaftsanwalt mit örtlicher Zuslassung ist, können sämtliche rechtsberatenden Dienstleistungen einer chineschen Anwaltskanzlei erebracht werden.

Die Schwerpunkte liegen im Handels- und Gesellschaftrecht, IP – Schutz sowie bei Proessen und im Inkasso.

Die Korrespondenz kann auf Deutsch und mit einem Vertreter in Deutschland geführt werden.

Anfragen werden an info@heuram.com erbeten. Diskretion wird zugesichert.

 

 

China wird bis 2014 das größte Importland der Welt

Henning Schwarzkopf von der CHEURAM Consulting Group in Hongkong stellt folgenden Artikel von Helen Wang aus Forbes zur Verfügung.

We have heard a lot about China becoming the world’s largest this and that. In 2009, when the world was in recession, China leapfrogged the U.S. to become the world’s largest auto market. In 2010, China overtook Germany as the world’s largest exporter. This year, China is likely to surpass Japan to become the world’s largest luxury goods market.

So, it shouldn’t be a surprise when The Economist predicts that China will become the world’s largest importer by 2014. Yet, many skeptics still doubt China’s potential to be a stronghold of the world economy.

Last month, I was on BBC World News to discuss the eurozone debt crisis and whether Chinese consumers can make a difference in the world economy.  My discussion partner Johathon Holslag from the Brussels Institute of Contemporary China Studies argued that Chinese consumption is still far below its production, and people should not be over optimistic about China rescuing the world economy. See the discussion video below:

http://www.youtube.com/watch?feature=player_detailpage&v=CRluQ54RAFM#t=114s

Yes, official statistics show that consumption is only 34 percent of China’s GDP (compared to 70 percent in the U.S.). While the West’s economy is imbalanced with over-spending, the Chinese economy is imbalanced with under-consumption. However, this dynamic is changing. When I travel in China, I can clearly see the consumption boom in China’s large and small cities. Retail has been growing like a wildfire in recent years.

While it is not China’s role to save the world economy, it is in China’s best interest to balance its own economy toward domestic consumption. In so doing, China serves as a counter-balance of over-spending Western economies.  China may not want to bail out Italy or Greece, but China can provide opportunities for these troubled economies to get their own house in order.

As matter of fact, China has already helped. The Chinese middle class is creating enormous opportunities for Western companies selling into China. Europe’s exports to China have been growing steadily. In the first half of 2010, Germany’s exports to China increased 55 percent. Exports from other EU countries such as France and Italy all had double-digit increase for the same period.

Many Western brands are doing extremely well in China. For example, Chinese consumers prefer to pay a premium price for furniture that is made in Italy. The UK-listed retailer Burberry has opened 60 stores in China and plans to have 100 stores in the near future. Western automakers, from Volkswagen to Bentley to General Motors, are enjoying huge success in China.

In the coming years, China’s economy may slow down a little, but will still grow at least at 7 or 8 percent. There are plenty of opportunities for Western companies to take advantage of China’s growing middle class. For companies that want to export to China, here are a few useful tips:

  • Check out your local Chamber of Commerce or Export Assistance Center and familiarize yourselves with legal and regulatory issues in China. These facilities also have a lot of resources and services that can help you develop China market entry strategies and find the right business partners.
  • Consider rebranding or repositioning your products in China. Remember, what works in your native country may not work in China. You really need to learn about Chinese culture, understand Chinese consumers, and adapt your products and services to the China market.
  • For smaller brands, e-commerce is a great way to break into the China market without significant upfront cost. China’s ecommerce has been growing at 60 percent each year in recent years. More than 100 million Chinese shopped online last year. And China’s Internet users are expected to reach 750 million in 2015.

According to Credit Suisse, China will become the largest consumer market in the world by 2020. In the past, all the predictions about China have proved to be on the conservative side. With all its problems and potential crises, China somehow has managed to astonish the world again and again.

 

Teilnahme an der führenden Luxusmesse in China vom 20. bis 22. April 2012

Die CHEURAM Consulting Group Ltd., Hongkong, wird mit einem eigenen repräsentativen Stand auf der LPS Beijing 2012 vertreten sein und bietet interessierten Anbietern von hochwertigen Immobilien und Luxus- sowie Lifestyle-Produkten die Möglichkeit, ihre Angebote und Dienstleitungen vermögenden chinesischen Interessenten persönlich in einem außergewöhnlichen Umfeld vorzustellen oder präsentieren zu lassen.

Die Vorteile dieser Gelegenheit liegen auf der Hand:

  • Durch den Gemeinschaftsstand (unter Ausschluss von konkurrierenden Angeboten) deutlich niedrigere Teilnahmekosten gegenüber einem eigenem Stand (vergleichbar mit einer Anzeige).
  •  Möglichkeit der Produktvorstellung außerhalb des Standes bei Messeveranstaltungen (Vorträge, Seminare, Abendveranstaltungen) mit Begleitung durch eigene Dolmetscher
  • Repräsentatives und attraktives europäische Messepersonal mit fließenden Chinesisch- Kenntnissen (Business Dolmetscher Zertifikate)
  • Intensive und kompetente Vorbereitung des Marketing – Materials
  • Außergewöhnlicher Zugang zu vermögenden Investoren (Unternehmern, Führungspersönlichkeiten, Eigentümern von Immobilien, Flugzeugen und Yachten), Vermittlern und Vertretern der Luxusgüterbranche in China (Messezugang nur mit Einladung); dadurch ideales persönliches Umfeld zur Kontaktaufnahme und zum Networking
  • Erstklassige Referenzen und nachweislich hohe Abschlussergebnisse bei Vorgängermessen des Veranstalters.

Im Ergebnis: Es gibt kaum einen direkteren Zugang zu vermögenden Chinesen mit der Möglichkeit, eigene Produkte und Dienstleistungen im persönlichen Gespräch vorzustellen als an unserem Stand auf der LPS Beijing 2012 – und das zu einem Preis, der konkurrenzlos günstig ist.

Nähere Einzelheiten erhalten Sie unter info@cheuram.com oder (+49-40) 32 43 33.

Die Besucher der LPS Beijing 2012 sind an folgenden Angeboten interessiert:

Luxus – Immobilien (weltweit)

  •  Eigentumswohnungen
  • Strandhäuser
  • Innerstädtische Eigentumswohnungen und Penthäuser
  • Golf- und Jachthafenimmobilien
  • Ferienresorts
  • Timesharing
  • Privatinseln
  • Burgen und Schlösser

Kapitalanlagemöglichkeiten

  •  Vermögensverwaltung
  • Private Banking
  • Steuerplanung
  • Aufenthaltsrecht (Visum und Aufenthaltserlaubnis)

Luxusgüter

  • Hochwertige Luxusgüter
  • Wertvolle Inneneinrichtung

Fortsetzung der Webinar – Serie zu Firmengründungen in China

Henning Schwarzkopf von der CHEURAM Consulting Group Ltd. weist darauf hin, dass auch im neuen Jahr 2012 die erfolgreiche Reihe von Webinars zu allen Fragen um eine Firmengründung in China fortgesetzt wird. Die Sprache ist deutsch.

Behandelt werden insbesondere Themen aus den Bereichen Recht, Steuern und Wirtschaft.

Die Teilnahme ist kostenlos. Anmeldungen können gerichtet wertden an: info@cheuram.com.

Reiche in China möchten auswandern

Henning Schwarzkopf von der CHEURAM Consulting Group Ltd in Hongkong hat folgenden interessenanten Bericht aus der China Daily vom 3. November 2011 zur Verfügung gestellt (sofern eine Übersetzungshilfe benötigt wird, bitte per Email melden):

About 60 percent of the rich Chinese people, each of whom has a net asset of at least 60 million yuan ($9.44 million), said they intended to migrate from China, a report has found.

About 14 percent of them have either already migrated from China or have applied for migration.

The three most favored destinations by the Chinese rich are the United States, Canada and Singapore. The US is the first choice of some 40 percent of the people interviewed, according to a white paper jointly released by Hurun Report and the Bank of China (BOC) on Saturday.

According to US Citizenship and Immigration Services (USCIS), the number of Chinese applicants for investment immigration has exceeded applications from any other country or region.

Last year, the USCIS issued 772 EB-5 visas, meant for investor immigrants, to Chinese people. They account for 41 percent of the total EB-5 visas issued by the agency.

“Among all the destinations in terms of investment immigration, the US always outstand all other options as the country does not impose any quota,” said Jiao Lingyan, a client executive of the investment immigration department of the Beijing-based GlobeImmi International Education Consultation Co.

“The minimum amount required for investment immigration to the US is $500,000. But it should be noted that this applies to investments in projects recommended by authorities in the US. People considering these projects should take into account that they may not make profits,” Jiao said.

“It is worth noting that the minimum amount for investment immigration will be raised in the coming years, because the number of rich people in China is rapidly growing,” she said.

Among the 980 people interviewed by Hurun Report and the BOC, one-third said they have assets overseas, which on an average account for 19 percent of their total assets.

While 32 percent of the interviewees said they have invested overseas with a view to immigrate, half of them said they did so mainly for the sake of their children’s education.

Zhang Yuehui, a Beijing-based immigration expert, said children’s education is also the top concern among those who want to immigrate.

“A growing number of parents in China have realized that children growing up in the examination-oriented education system in China will find it hard to compete in an increasingly globalized world,” Zhang said.

Wang Lilan, 38, a mother of two who immigrated to Australia from her home province of Fujian two years ago, was one of those parents.

“My 12-year-old elder daughter used to do her homework very late into the night. But here in Australia, she does quite a lot practical assignment, in a playful way. And she has more spare time to do the things she likes,” Wang said.

“I feel very delighted to see my children having fun while studying,” Wang said.

Chinese immigrants are also getting younger, with the largest group aged between 25 and 30, compared to the 40-45 age group in the past, Zhang said.

 

Verbraucher in China im Fokus

Henning Schwarzkopf von der CHEURAM Consulting Group, Ltd. berichtet aus Shanghai, dass der riesige Verbrauchermarkt in China nach einer Untersuchung von PricewaterhouseCoopers die Invesitionsentscheidungen großer Unternehmen in den kommenden 3 bis 5 Jahren entscheidend beeinflussen wird.

Danach ergab sich in einer Umfrage, dass 44% der Führungskräfte im asiatisch-pazifischen Raum Asien und dort besonders China als Ziel für größere Investitionen in den kommenden drei bis fünf Jahren ausgewählt haben. Als Grund gaben sie an, dass sie von der steigenden Kaufkraft der Verbraucher in der Region überzeugt seien.

Ferner teilten 55% der befragten Vorstandsmitglieder und Unternehmer, die in China investieren wollen, mit, dass ihre Investitionen in Konsumenten – bezogene Projekte fließen werden.

Nur 11% votierten für die USA als bevorzugtes Investitionsland.

Offizielle Zahlen belegen, dass Chinas Wirtschaft im dritten Quartal um 9,1% (gegenüber 1,6% in den USA und 1,6% in der Eurozone im zweiten Quartal) gewachsen ist.

Die Umfrage wurde von Juli bis September dieses Jahres unter 320 führenden Wirtschaftsvertreten  durchgeführt.

Einzelhandelsumsätze in Shanghai steigen um 12%

Henning Schwarzkopf der CHEUAM Consulting Group Ltd. berichtet aus Shanghai, dass das dortige Statistische  Landesamt (Shanghai Municipal Statistics Bureau) in seinen jüngsten Berechnungen einen Anstieg der Einzelhandelsumsätze um 12% (auf Jahresbasis) auf 676 Milliarden yuan (EUR 76,9 Millarden) für dieses Jahr vorausgesagt hat.

Es führt aus, dass die Umsätze sich im dritten Quartal dieses Jahres kontinuierlich erhöht haben.