In this section:
› Operational challenges - Kiwi Lessons
› Choosing the right location
› Finding premises
› Managing logistics
› Managing human resources
Operational challenges - Kiwi Lessons
Stick to the plan
"We have a good plan, we are following that plan and now we just have to remain focused and build on the solid base we have. That's quite often the hardest thing for companies to do. There's an enormous amount of opportunity available to companies like ours in China and it's simply not possible to follow all options. By having a tight strategic framework we have a guide for what we should and shouldn't spend our time on. Otherwise, one could waste an enormous amount of resource and energy." - Scott Coulter, General Manager Sales and Marketing, Comvita
"Our biggest success was taking the time for a planned entry and finding the best professional advice at each step." - Mark Radburnd, Director, Commtest Instruments
Wise up to distributors
"If a distributor is very good, they will be very expensive and using a product from a multi-national. They will invariably run their own brand and will not be willing to deal with you exclusively. If a distributor is interested in selling only your products, you have to ask about their track record." - David Percy, CEO, Pertronic Industries
Make friends with agents
"The best agents are developed over time and result from friendship." - Dr Anatole Bogatski, Student Services and Marketing Director, AIS St Helens
Approach JVs with caution
"Scott looked at a joint venture but these are fraught with danger.
Setting joint ventures up is a very complex process and you may find you are still negotiating details of the agreement through to the termination of the contract term." - Chris Hopkins, Managing Director, Scott Technology
"Our experience with the JV mode of operation in China has been ambiguous." - Dr Anatole Bogatski, Student Services and Marketing Director, AIS St Helens
"It won't work for everybody, but for us it has been a very successful business structure to have that JV because it does open all sorts of doors for us that don't exist if you come in simply as a foreign company." - Garth Smith, Managing Director, BioVittoria
Fully resource your rep office
"The volume of paperwork is considerable, especially for a representative office only." - Mark Templeton, CEO, Actronic Technologies
"A rep office is expensive to run and must deliver value for money." - Chris Hopkins, Managing Director, Scott Technology
Never generalise
"Our WFOE was relatively easy to set up and no more difficult than in Australia." - Mike Lowe, General Manager, Hayes International
"The bureaucracy and difficulty of establishing a company is massive." - David Percy, CEO, Pertronic Industries
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Choosing the right location
Go to a zone
"I think location is the most important thing in China if you're going to do what we did which was manufacture. If you're contract manufacturing that is different, because the responsibility for everything lies with the contract manufacturer." - Keith Curry, Skellerup's China Chief Executive.
"In my opinion, in China, you should not go outside any of the recognised zones - the recognised zones are managed by professional people and they haven't got a political input."
Ask the right questions
"How we went about [finding a location] was taking quite a lot of time, researching what style of company we wanted and most specifically where it was going to be located. In the end, that proved to be the decision that took us the longest amount of time and was the most difficult to get information about as well. And in the end, we realised it was about us asking the right questions."
"Our own way of achieving that was also to seek consultation with people who were already operating here in China in all the various forms, and that included the government agencies as well as other expatriate based company associations that we had." - Don Johnson, Marketing Manager Lumber, Pan Pac Forest Products. Pan Pac has a warehouse and distribution centre in the Tianjin Free Trade Zone. It took the company two years to decide to locate there.
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Finding premises
Get a prestigious address
Financial services company KVB Kunlun says consider getting a "prestigious address" which will help you be taken seriously. "Be prepared for the extra costs involved if window dressing is important in your type of business."
Be careful with lease agreements
"Small errors in detail can sometimes add weeks to the process," says Bruce McNabb, Pertronic's Technical Director for China. "For instance the building number on our lease agreement was missing (should be A803A instead of 803A) - that added another few weeks to the process, as well as requiring notarised board resolutions in New Zealand and more expense in setting up the office.
"Pertronic realised the need to be very alert to the process and to ensure it was complied with at every step. The lawyers monitored the legal documents for the rental of the office premise; and added some clauses that would protect the company if the WFOE application was not successful. This precaution paid dividends as when the office lease was being transferred to Pertronic Trading (the WFOE), the landlord attempted to get Pertronic to pay the tax on the lease payments and refused to sign the transfer documents. After meeting with the lawyer the issue was resolved in our favour. This added another three or four days to the process.
"Pertronic managed to negotiate a good leasing rate for two plus one years. To fit out the office we got three quotes, from a European company and two local firms. We chose a local firm and found that they were excellent to deal with."
Watch who owns the land
"A lot of people have been burned by property purchases after they are told by government officials that the property is available to them. I've had this recently. We looked at property and when I dug into it, they didn't own the property. They didn't have the right to offer me the property. They thought they were going to get it but they had to get approval from Beijing." - Keith Curry, China Chief Executive, Skellerup
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Managing logistics
Look for a one-stop shop
Christchurch-based Commtest Instruments has found that outsourcing to Christchurch 3PL provider SB Global Logistics means lower supply chain costs and removes the headache of working out its own piecemeal solutions. Through its international partners in China SB Global provides a one-stop shop, from collection and packing the product at the factory door in Christchurch to customs clearance and delivery at the other end as well as taking care of commercial invoicing.
Realise logistics can take a little longer
"At times the logistic services, ie shipping product from point A to point B, is a little longer than what we would expect in most developed countries. However, transport has improved dramatically in recent years. Our major markets are in Shandong province, which is approximately 700 kilometres north of Shanghai. The transit time is about two days which in reality isn't too much different than what we would expect in New Zealand." - Keith Stevens, General Manager, Richina Pacific Ltd's Ovine Garment Leather Division
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Managing human resources
Don't think hiring is only about money
"It is no longer so much a question of new entrants making tempting salary offers to your staff as it is to get the right cultural fit. Of course you have to pay what it takes to get the best people, but provided the match is right staff tend not to leave for the money. In addition, to attract and retain the best people you need to be able to offer opportunities, stability, challenges and rewards - the whole gamut." - Richard Yan, Chairman, Richina Pacific
Use Chinese nationals familiar with New Zealand
"A very important aspect of our start-up is that we employed Chinese nationals who have been working in New Zealand. Our Office Manager/Sales Assistant has proven invaluable in interfacing with local companies and individuals, resolving all manner of issues. Our Engineering Manager, having attained a Bachelor of Applied Technology from Massey University, is also invaluable to our operation. Without these two we would hardly have progressed." - Bruce McNabb, Pertronic's Technical Director for China
Hire a mixture of local and expat staff
"A strategy around having a mixture of local and expat staff is really the starting point. How you then mould your company and structure around whether it's more local or more foreign is all part of your business plan going forward. It's not something you'll see straight away. You'll have to be in China for a while to really understand that. We're still trying to determine what the right mix is." Clive Richardson, Former - General Manager China Operations, Beca Engineering Consulting, Shanghai
Offer staff regular visits home
"I think in terms of relocating staff to China, whether it is short-term or long-term, it's quite important to start with people getting regular visits back home. In my own case and that of a colleague, we worked up here for three or four weeks and then went home for two weeks. It was really necessary. It got to you after a while, working here. We were working seven days a week. But now that I'm living here permanently, it's different. I go home every four months for a quick one-week trip just to see my daughters. I miss China now when I go to New Zealand." - Keith Curry, CEO China Operations, Skellerup
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