Editor's note: Negotiating business in China has never been more crucial for N.C. businesses. In this fifth installment of our series on doing business in China, Grace Whi-Tze Ueng, CEO of Savvy Marketing Group, explains successful strategies and talks to N.C. businesses that have made the leap.
The cost of local competition can be high in China. As a result, U.S. companies typically try to position their brands higher up the value chain there than they are in America.
That's why Howard Johnson operates five-star hotels in China and Pizza Hut restaurants feature velvet ropes that allow throngs of visitors to queue up for dinner.
Chinese consumers have a perception that American brands inherently offer higher quality than their local counterparts. This is a powerful marketing advantage that companies entering the market need to learn to exploit. It does not mean, however, that companies should ignore local market conditions. On the contrary, adapting to local values, taste and preferences is critical to success.
Burt's Bees makes natural personal care products. Its global strategy development is done in Durham, but the company trains local people on the ground in other countries to make local changes "to make the last 10 percent relevant."
But first Burt's Bees had to hire the right local people, and then it had to learn the best way to get its message out to Chinese consumers.
The same was true for Cree, Quintiles and every other Triangle company that has launched in China.
Chinese labor
Talent acquisition is always a key challenge - and driver for business - in any country, and in China finding the right leaders can be particularly difficult.
The low cost of labor has attracted many companies to China, but the company's developing economy lacks an experienced, creative work force. Despite relatively high unemployment, especially among college graduates, turnover remains high. And many professionals aren't loyal to their employers. Compensation often determines the level of loyalty. Not surprisingly, Chinese citizens returning from abroad are the most desirable job candidates, and the competition for such talent is fierce. Many believe the demand for Chinese labor has surpassed supply, which will lead to higher wages.
Companies whose executives in China have strong government and business connections, good English skills from having lived abroad and a depth of experience are the ones that have most thrived. The companies that have had hiccups attribute them to hiring mistakes.
David Mohler, the chief technology officer at Charlotte-based Duke Energy, credits their country director, River Lu, who was an interpreter during his first trip to China, as being "instrumental - with quite a network in China."
Cree relies on strong local talent with both English and Mandarin skills and good business experience, but they have supplied, on a temporary basis, engineering support and a top manufacturing expert from Durham.
Quintiles, like many U.S. companies in China, needs workers who have strong English skills as it is the company's official global corporate language. While improving, English skills among older workers can still be tough. It is often challenging to get Chinese executives who have both business and leadership experience, along with strong English communication skills.
One positive is that the company is able to attract doctors and people with graduate degrees; 70 percent of the company's clinical research staff in China have medical degrees.
Keeping workers
Job loyalty is also a challenge companies must overcome. New companies often raid their competition with the lure of better salaries.
Companies that provide their Chinese employees with opportunities for learning and advancement have better retention rates and job performance. Thomas Wollman, a Quintiles senior vice president who is responsible for all global laboratories and cardiac safety , credits "focus on engagement and training" as key to Quintiles retention rate being consistently above 85 percent in China.
While they strive to hire locals, Quintiles hires expats to fill some top level positions since experienced local talent is challenging to find.
Manufacturing companies can find it especially difficult to earn their workers' trust and commitment. Some management techniques, however, can have a huge impact, such as managing from the floor, greeting employees on a first-name basis, publicly recognizing excellent performance and innovation, and establishing a positive career path.
Employing local talent is not without its pitfalls in other industries as well. To combat turnover and training difficulties, companies can partner with technical schools and universities to create a pipeline for talent. Firms should also use team-building exercises to forge strong connections.
Some other best practices include:
Attention from the senior executive team.
Visible performance standards.
Rewarding employee performance.
Opportunities for upward mobility.
Training opportunities abroad or overseas assignment.
Communicating
Once their Chinese workforce is in place, companies face another challenge: getting their message out.
China leads the world in the number of citizens it has online, and its technology infrastructure is more advanced than those of every other emerging economy.
As a result, social media and social networks may be as important as traditional marketing in China, particularly for young Chinese. In fact, online networking is a fast, connecting force that cannot be as easily restricted as traditional media sources and as such has made the Chinese population increasingly powerful.
The Internet in China continues to be strictly monitored. Sites such as Facebook, Twitter, YouTube and Blogspot are inaccessible because of the "Great Chinese Firewall." Government monitoring also slows access to overseas servers.
This has caused most Chinese Internet users to spend little time on sites outside of China, which has led to explosive growth for several domestic alternatives.
Baidu, for instance, is the leading search engine, QQ is used for instant messaging, taobao.com for ecommerce, Renren and Kaixin001.com for social networking, and portals like Sina Weibo for micro blogging.
U.S. companies need to establish a strong marketing presence using Chinese Internet platforms to compete for customers.
Next week: Communicating across cultures and building guanxi.
