How to Help Americans Doing Business in China - Assignment Example

How to Help Americans Doing Business in China How to Help Americans Doing Business in China Introduction Trade between China and America has seen a significant growth that exceeds one hundred billion US dollars each year. The trend is set to grow even more significantly following China’s latest decision to expand its export subsidies to important industries in the economy in an attempt to boost trade. Currently, China is among the best performing economies coupled with an expanding export market. Consequently, China attracts entrepreneurs and foreign investments because of its growth and expanding opportunities. In addition, the Chinese business regulatory structure and climate have remarkably improved. The strength and size of Chinese have grown as well as its domestic companies. Because of the improvements, businesses and entrepreneurs can launch ventures with ease. Despite the growth experienced in China, there are several challenges that foreign investors and firms while trading in the country (Banerjee, 2015). Chinese domestic or state-owned companies receive preferential treatments that render it difficult for foreign (including American) firms to match their competitiveness. Further, the Chinese government has instituted strict procurement laws that act as obstacles to the foreign companies. Such rules place emphasis on encouraging purchase of local goods and services at the expense of imports. Such domestic purchases get encouragement in both business-business levels and business-customer levels. The part of procurement law that causes more prohibition to American companies is that the law encourages that state-owned firms at any given time must exclusively purchase their products from Chinese companies. Further, China’s antimonopoly law seems to favor domestic firms while it remains stricter to foreign investments. Considering the aforementioned challenges, it is therefore in order that American businesspersons, entrepreneurs, and investors understand the Chinese business environment. Some of the measures would help in creating an enabling and favorable business environment to the American investors trading in China. Helping American Businesspersons Identify Trade Partners within China Every American entrepreneur who hopes to set a successful business enterprise in China should recognize a local business partner. It is vital that the local partner be a member of an established China-based company (Michael, 2015). In addition, the partner can be a well-contracted businessperson in China whose reputation is remarkable. Consequently, the local business partner would enable the American businessperson to navigate legal processes despite the complicated regulations successfully. The partner would also remain vital in handling and dealing directly with the Chinese government. It is crucial to choose a partner whose investment is almost the same as that of the foreign investor. His investment must be at least Chinese owned, and the Chinese partner should have comprehensive connections and knowledge of the Chinese business (Sanders, 2014). As a result, the connected partner will always help the American businessperson to get things done efficiently to ensure success in the business. Consequently, the American business will flourish by participating in significant deals with established enterprises in the country. Helping American Businesspersons Understand Chinese Business Culture Culture is influential in the economic status of a country as it describes the patterns of living styles individuals develop and pass to next generations (Gertmenien, 2015). Culture includes all the ethics and norms of the society showing appropriate ways to handle one another. Understanding of the Chinese Culture by the Americans would create an active trade association between the two countries because of understanding of individual interests. Both parties would know how they mutually benefit from each other, maintain the trust when making business transactions, and maintain practices that aim to satisfy consumers’ demands. That is America and China must consult senior business entrepreneurs who have experience in the commercial activities in the country to avoid possible common problems. Americans planning to have business venture in China should be well conversant with the environment to know how to operate. China and America are geographically apart and several miles of world away when it comes to matters business. America displays great deal of transparency when it comes to business transactions and dealings unlike in China where transparency is lacking. Any businessperson eyeing the Chinese market must first understand how Chinese market environment operates. For instance, businesspersons from America should learn the differences in the business dealings. In China, most businesspersons make business deals in social settings, for instance (Sheets, 2013). In America, however, the business transactions take place in the boardrooms through formal procedures. China also keeps operate their businesses through informal decision-making in conversations as opposed to American culture where business people and their clients reach decisions formally, particularly based on legal conditions. Consequently, Chinese business deals terms are subject to changes at any time compared to those terms in America that are more binding and have little or no likelihood of changing, unless through legal procedures. Therefore, American businesspersons require good understanding of the Chinese business culture before entering into a contract with the Chinese companies. Josh Timberlake, one of the senior managers in Deloitte Consultancy firms, attests that there is need to establish a good relationship in the Chinese business environment. Such relationships are essential between the incoming businessperson and provincial officials and the investment zone officials. It is through these two bodies that one can understand whether his business investment fits or not. By remaining aware of such dynamics, one can quickly succeed with his investments and businesses in China. Chinese business dynamics seems to be harsh realities. However, they have, over the past few years shown likelihood of improving towards favoring even foreign investors. Both the Chinese government and companies have realized the need to conform and adapt to the globally acceptable best practices. Helping American Businesspersons Should Realize Chinese Unique Business Opportunities Doing business in China could at times remain a challenge to American businesspersons in diverse perspectives. However, businesses that find amicable solutions to such challenges end up accessing lucrative and unique opportunities in a wider range compared to most other countries. The emphasis that the Chinese government is currently placing in innovation is critical towards presenting numerous unique incentives to businesses and companies (Limmer, 2013). Consequently, firms, entities, and businesses that can maneuver through the strict policies against foreign firms end up in future economic success as well as becoming highly profitable business ventures. For instance, the state funds incubators and tech parks in abundance that offers a variety of benefits to the businesses. The government sets up such massive projects in an attempt to bring together innovative companies found in self-sustaining communities and environments. In this bid, the government is on the hunt of foreign investors such that if American businesspersons can jump into such opportunity without haste, the firms will enjoy lucrative business deals. American businesspersons should also realize that Chinese government has backed venture capital that has crucial benefits, particularly significant benefits to venture capital of American styles. Most American venture projects target lower than twenty percent or lower returns on their investments. Similarly, state-backed capital funds are often lower than twenty percent, which is a significantly lower figure compared to those yielded by foreign ventures, particularly from American ventures. From state-backed ventures, the US Company that supports a company going to run in China would always reap at least sixty cents on each dollar they invest. Such business deals would land American companies that geographically stand in some of the prominent tech parks land enormous benefits. American investors should understand the Wild West brand that China bore is no longer there. However, it is still a place of dynamics where bold entrepreneurs and informed investors can trade with a little uncertainty and calculated risks but for potentially significant reward. Helping American Businesspersons in China Switch from Growth to Cost Management Maintaining competition in the Chinese business environment is quite a complicated mission to achieve from American companies and other foreign firms. American investors have gained mileage in capital equipment investment for growth over time to achieve automation. In addition, American investors are heavily investing in outsourcing of resources and labor (Saxon, 2009). American businesspersons should realize that time for using Chinese internal managers and employees in a bid to satisfy localization requirement has elapsed. Afterward, the American investors should observe Chinese businesses as competitors by carrying out proper marketing strategies similar to Chinese companies. After new product identification, American companies should take such products’ approval directly to China as opposed to taking it to the head office, as it has been the case. Moreover, American investors should also think of transferring the corporate functions and general counsel to China to enable them operate efficiently when conducting business (Kwock, 2014). By moving such facilities to China, it also become possible to the structure of cost of company operation and strives to match it without incurring enormous expenses. American businesspersons should also shift their focus from upper market end, which represents just a small slice, to the market middle where big business is guaranteed since it captures a wider market base (Gries, 2014). To achieve the target of central market base, American investors should participate in thorough distribution and logistics organization. Recruiting, payment and training of the labor force is also vital towards achieving the goal. American businesses should also give efficient attention to the business location to be able to monitor the consumer behavior, the likely risks, and uncertainties closely. Helping American Businesses Engage Agents and Distributors China has a wide attraction of international participation because of its economy that is currently fastest growing globally. Its international participation primarily covers exports from US together with enterprises of medium sizes (SMEs). The SMEs go contrary to the multinational or large foreign companies that establish branding operations as well as carrying out marketing of various business activities by fostering sales using a limited budget. SMEs also establish efficient networks through utilization of regional distributors or agents. American businesspersons should utilize the services of distributors or agents in China to establish efficient keeping track of regulation and policy updates both within Chinese borders and internationally. Furthermore, such distributors and agents are also essential in market data collection as well as responding quickly to changes. The existing networks and contacts that the distributors and agents enjoy can be vital to American SMEs towards expanding their business operations. China has currently designed its regulations to permit manufacturing focused invested enterprises from foreign countries (FIEs). The Foreign Invested Enterprises (FIEs) has a privilege of exporting and purchasing any technologies or products without necessarily paying quotas, free from government monopoly and license control. FIEs are capable of obtaining trading rights for an established trading company even before obtaining the rights of the phase-in of distribution. Registered Chinese companies that have attained a capitalization of US$ 148,000, approximately RMB 1 Million can obtain license for both export and import (US Commercial Service, 2012). US businesspersons should take advantage of the Chinese Ministry of Commerce initiative to establish new commercial enterprises that are foreign-invested (FISCEs). These FISCEs helps in opening trading businesses and new distribution enterprises. The authority set up in the provincial level to approve foreign enterprises should be of significance to the American businesspersons because such measure makes their entry into the market as investors less complicated. Franchising Most foreign companies in China have come up with creative initiatives to establish retail outlets that function as the franchise. Chinese partners assist to franchise foreign companies to manage their operations. The partners help in leasing out or selling master franchisee as well as doing the oversight of various franchise areas inside the boundary of operation (Sheets, 2013). American investors can also take into account that Catalogue for providing Guidance for Foreign Investment helps in eliminating restricted category, enabling the foreign countries such as America to enjoy such free trade benefits. Foreign investments under this program enjoy the freedom of less stringent approval as well as partnership requirements. Americans doing business in China should also put into consideration that Chinese consumers are highly brand conscious. As a result, the businessperson should focus on improving the quality of their brands because some Chinese are on records for traveling abroad to look for better brands. If Americans practice perfect brand strategy, their businesses will automatically lead to success through attracting a large customer base. It is also vital to note that Chinese urban consumers do not discriminate on foreign company goods and services. The Chinese consumers instead value brand. Consequently, American businesses can excel in China provided they guarantee the consumers top quality brands. Joint Ventures There is an increase in foreign entities that are wholly owned since China opened and made free its market. Most investments in China whose owners are of US origin are currently one hundred percent owned by the Americans themselves. Joint adventures are useful in making it quickly for market access (Xiaoyun, 2014). American businesspersons in China should import their advanced and new technology to assist jointly Chinese companies achieves their technological advancement. However, joint ventures are likely to cause investment control loss, conflict of interest intellectual property theft. Traders should, therefore, carefully assess joint ventures or licensing to avoid falling victims of risks associated with it. Trade promotions and advertisement Advertisement Advertising is the most efficient method of creating awareness among the consumers about the benefits of particular goods and services. Many methods can do advertisement depending on customer’s base and the exposure of the immediate public. The advertisement channel comprises the publications, radio, television, and the social networking media such as the internet. In China, the Advertising Law of the People Republic of China protects advertising, and the law outlines the content prohibitions and the advertisement responsibilities. The advertisement should ethically follow the code of conduct rule by supporting physical and mental health of the public to ensure authenticity in the materials they post. Therefore, to promote the Chinese international business relationships with the America, China should restructure the prohibition of the foreign business without Chinese business license to advertize in China. The making of transparent advertisement policy would encourage most foreign investors like the U.S to venture more in Chinese business collaborations with the mission of Trade partnership expansion. Trade promotions China should support America interest in Pavilions around China in different industry and sector to widen the marketing base of the U.S goods in China. The U.S Pavilion is the brainchild of the America chamber of commerce implementation to promote American Goods and services in various Chinese markets. The America and Chinese government should organize trade fairs to display the benefits of products and services offered to the consumers (Cohen, 2010). Pricing The support by the Chinese government increases the consumer’s awareness about the U.S companies’ with strong international brands adding their marketing strategy in Chinese market. The America products and services have high sales and customer support standards, which requires a certain degree of localization and commitment to training the local sales. Most Chinese consumers are highly sensitive to price but can spend much on the sound quality and sophisticated goods because of the quality and prestige. Legal Support for American Business and Investors in China Since business, ventures between America and China are similar to any other business venture, and there should be a legal representation from experienced lawyers. The barristers would have the vast knowledge needed by the potential investors to reach their goals efficiently and effectively (Backaler, 2014). The lawyers promote the business relationships of the two countries by giving support to American nationals with aim of doing business in China. They also provide help for the Chinese citizens with the prospect of venturing into business in the United States. The lawyers have significant knowledge in handling international legal matter using a broad range of languages and international network of attorney. The company represents the Chinese investors in America business deals handling many issues related to Chinese clients in the U.S. The firm checks on the legal aspect of purchasing or developing U.S business arena. It enhances the perfect analysis and advocacy in business information and contract issues. They indulge in significant litigation representation of numerous business disputes. Friend’s first and business later technique Chinese would like to know much about people they deal with which is quite different with the Americans who pride themselves on being precise to the point. For the Chinese you have to socialize well to improve friendship in order to succeed in business ventures. The Chinese entrepreneurs wine and dine together with their anticipated business associated with getting into actual business with them (He &Wang, 2014). Therefore, American industrialists with the intention of investing in China must have a local connection in order to penetrate the local market to reach the consumers. Avoiding being too casual Americans are very relaxed people, and this can affect or influence the relationship between them and the Chinese who believe their society is not class-conscious. The American investors in China should abolish the obsession with the social status to promote the business collaborations of the parties. In America, workers or business associates relate freely with one another and even call strangers by their first names.CEO, telemarketers, and the workers address each other by first names, which should not be the case in China. Avoid calling the Chinese contacts by their first names, and addressing of Chinese business associates is official to expand their trust. In China, only the childhood friends and spouses can refer to each other by their first names. However, the strangers are not allowed to do so because by the community to avoid serious embarrassments. Provision of Grants at Commerce The technical assistance initiative of International Trade Administration of the U.S Department of Commerce gives the organizations competitive grants and opportunity to host industrial delegation. It is the entry point of the U.S business seeking financial help to initiate long –term links with the potential customers, partners, and the distributors. The organization offer training programs for the scientists and the managers in most businesses to facilitate inter-border relationships. The personal relationship serves as a basis for enterprises developments and reduces market access barriers for U.S companies. Sales service and customer support The ability to provide adequate after –sales services is an important selling technique to differentiate a company from its rivals. The foreign investments comprised of product and service companies offer after-sales services to the Chinese nationals to persuade them and increase the customer awareness (Simkim, 2014). The knowledge provides the U.S companies with strong international brands advantage over other firms in the Chinese market. American products and services are viewed superior sales and customer support standards. The products have high quality and, therefore, being sought after by a majority of clients. Due diligence China is the leading international hub for global markets it is also one of the challenging environments for American companies. Many U.S companies invest in China and operate profitably in Chinese markets, but clashes rise because of misunderstanding that are costly and disruptive to local business (Oxford, 2015). To logically, avoid these conflicts one must adopt a reasonable way to handle the issues, which leads to the wrangles. The commercial disputes between Chinese and America companies include breach of contractual payment obligations, incompetency in accounting activities, and financial mismanagement. Some problems are because of the struggle of power in managerial duties in the joint business ventures, which minimizes by signing understanding and partnership agreement. Chinese and U.S service providers with offices in China conduct due diligence investigations. The investigative charges by the companies are a significant investment to ensure the reliability and the financial stability of the locals. The Chinese encourages the due diligence in China than the U.S would do to reduce the more business risks Technological Improvements The technological advancement promotes the performance of the business through the development of electronic commerce by the incorporation of the communication technology and the computer. The regional business transactions have become efficient because of the availability of smart technologies. Money transfer and banking services are relatively faster and cheap increasing the development maintenance of business ventures. Because of the existence of intricate technology between the U.S and China, communications have harnessed (Grieve, 2014). Political Stability The existence of a secure environment promotes the growth of business activities and since China and the U.S are stable politically there advancement in business collaboration between the two. The U.S and Chinese government must ensure and invest in fight terror and insecurity to provide a safe environment for running business errands. According to (Huchigian, 2014) the political stability also stabilizes the economic status or the financial stability of a country because politically stable nations do not spend expensively on unwanted wars depleting the states funds. Creation of New Markets The Chinese American Business Development Center focuses on developing, driving the growth in the Chinese markets internationally, and domestically promoting business transaction between the countries. The organization works with companies to advance the marketing value by improving their market penetration to market through alliances. Many recognized companies have problems in the initiation of projects in the Chinese. Therefore, the organization offers public relation and guidance to support appropriate branding. Business-to-Business companies achieve a new level of growth in various platforms of markets through the influence of CABDC. Creating Domestic Appeal Chinese Americans tries to gather communities where the viral marketing and simple verbal communication promotions are the pillars of successful campaigns. The Chinese American campaigns have kept the expansion in the stagnant markets relatively left unattended. CABDC help companies break into the communities through a collection of selective media buying, public relation management, and culturally perfect activities that confirm the results. Growing Abroad The Chinese America relations has established a network of relationships with major Chinese media, an extensive network of about 500 Chinese firms with branches in China and the United States and the local central decision makers in China (Stough &Zhang, 2013). CDBDC has created a strong and respected presence in the government arena. The development of the successful business enterprise was possible by having access to the local government and business leaders in manufacturing dockets. The organization also provides over 20 years of experience in helping American companies develop market strategies in China. Conclusion Being an emerging economy and currently the second largest after America, China proves to have potential for foreign firms and investors. Particularly, Americans doing business target china as a key economy. In response to the trend, Americans doing business in China demand assistance on diverse aspects. There is necessity to help American businesspersons identify trade partners within China, understand Chinese business culture, realize Chinese unique business opportunities, switch from growth to cost management and engage agents and distributors. Other sectors include franchising, joint ventures, trade promotions and advertisement, trade promotions, pricing, legal support, Provision of Grants at Commerce, Sales service and customer support, due diligence, technological improvements, political stability, creation of new markets, creating domestic appeal, and growing abroad. References Backaler, J. (2014). China goes west: Everything you need to know about Chinese companies going global. Basingstoke: Palgrave Macmillan Banerjee, S., Prabhu, J. C., & Chandy, R. K. (2015). Indirect Learning: How Emerging-Market Firms Grow in Developed Markets. Journal Of Marketing, 79(1), 10-28. Cohen, W. I. (2010). Americas response to China: A history of Sino-American relations. 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