Going global is not easy for Chinese companies, and most of them are not prepared to enter markets outside China, tells author Joel Backaler of China Goes West: Everything You Need to Know About Chinese Companies Going Global at Knowledge CKGCB. Most are losing out on five points.
When you are looking at the developed markets, the vast majority of Chinese companies aren’t ready. There are five relations that Chinese companies need to master or deal with effectively. First they need to understand how to interact with the government. That’s not just within the overseas market but also here in China. For Chinese companies to go global for the first time, they may need to interact with the NDRC (National Development and Reform Commission), MOFCOM (Ministry of Commerce), or SAIC (State Administration for Industry and Commerce of the People’s Republic of China) if they want to get their money outside China. It’s very complex. For a company that isn’t fairly large in size, it can be very difficult to understand how to navigate that system, what the right path is.
Additionally, when Chinese companies go to the US or Europe, they tend to rely on the government to give them more direction as to where to invest. They are finding that the only way to get that insight is through relying on professional services firms, be it tax advisors, management consultant or accountants: people know how to play by the regulations in these different markets. Oftentimes Chinese companies want to continue that government relationship model as they do here in China.
The next thing is their relationship with their employees. As you look at any company when they go overseas, there tends to be a need to balance between a centralized organization and a decentralized organization. So how do you maximize the fact that you have a global company but also the fact that you have people on the ground that can respond more quickly to change?
In addition to needing to empower individuals on the ground, Chinese companies need to have people back at headquarters that have global perspectives and are able to manage expectations across the organization for overseas business. The other factors are the relationships with consumers and communities, to overcome misconceptions, to know how a Chinese company operates. The last relationship is with capital. Chinese companies need to make sure that they are investing for the long term, investing in their employees and incentivizing them appropriately.
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