Doing Business in China - Making the most of the free trade agreement

It fails a number of tests regarding the advice of selecting easy markets first - it's not close, it has language barriers and the business environment is often radically different from New Zealand's.

New Zealand companies with successful businesses in the Chinese market say getting started was time consuming and took a large commitment of their resources.

Don't expect success to come quickly or easily.

Are you ready to export to China?

There are a number of steps you need to take to make sure you are ready for exporting to China.

New Zealand Trade and Enterprise (NZTE) has outlined generic steps which companies interested in exporting should consider to help them assess whether they are ready for exporting to any market.

The steps include:

• Commitment
  Developing the Chinese market can be costly in terms of time, money and resources. For example, if your company wants to be successful in China, senior managers will not get away with a single visit to the market. Success may only come after numerous visits.
• Product
  China is one of the toughest markets in the world. The opportunities are huge, but the rest of the world knows this as well. It is important to know your product and its marketing advantages in the Chinese market.
• Production
  You need to be confident that your product or service is sufficiently proven and developed to take to the Chinese market. Also if you are manufacturing in New Zealand you need to make sure you have the production capacity to meet market demands.
  
  If you are looking to manufacture in China you need to factor in the many hidden costs such as greater management overheads, inflexible manufacturing schedules and quality management and cost issues.
• Marketing
  Marketing in China is not easy thanks to the varied culture and geography of the country, the sheer size of the population and country and differing levels of economic development. A one size fits all marketing strategy will not work.
  
  It is vital to have a strong marketing understanding.
• Selecting markets and setting pricing
  China is in fact several large regional markets and many more numerous niche and micro-niche markets. All are very price sensitive.
  
  You need to have done the research to validate both the potential and the investment. NZTE has produced a Guide to Export Pricing, which includes sample costing sheets and other helpful advice.
• Management and international sales management
  Exporting to China requires considerable commitment of management time and to be successful you will need to at least consider hiring managers familiar with the Chinese market.
  
  Does your company have the available management capacity, which will be required to develop the Chinese market?
• Finance
  Does your company have the financial strength to commit a minimum of six figure sums for the year or two it may take to develop the Chinese market with no guarantee of a return on this investment?
  
  As with other markets, breaking into China requires considerable funds (research, airfares, accommodation, advertising, trade fairs, sales promotion, new brochures, training of overseas sales agents etc).
  
  China is also full of hidden costs relating to language and cultural issues, and the time you need to spend building relationships and intellectual property protection.

For more NZTE exporting resources see:

• Export Assessment Guide
• Guide to Market Selection

Are you ready to set up in China?

If you want to grow your business and have a long-term future in the Chinese market you need to have a local presence. This requires both deep pockets and reserves of patience as setting up in China involves a unique set of issues.

It will also require a strong commitment to the China project from your head office back in New Zealand. As well as investing large sums of money (by some estimates companies need a NZ$1 million budget over two years to set up in China), senior managers have to be prepared to spend a lot of time flying between New Zealand and China.

Glen Murphy, Managing Director Japan and Pacific for market information company Nielsen, says you cannot run a rapidly expanding China business from an office in New Zealand. "At the very least, you have to commit to being here frequently."