Should You Be in China?

The promise of the China market is undeniable, but can also be a difficult market to crack, and cannot be approached in the same way as Western Markets. Who is right for China, and how should one proceed in dealing with this market? The first step is to gain reliable knowledge of this market.

In addition to working with companies in China, GCiS works with companies that are offshore, or at different stages of involvement in this market. We believe that the first step in this process is Market Knowledge, and that this should guide actions in the market.

Too many companies- many of them world leaders- have entered this market without proper knowledge, leading to poor results. Market knowledge can be used to determine such issues as: whether opportunities exist, how to best proceed, what partners to work with, how to sell into the market, who to target, and others.


The China Entry Litmus Test

For a company, business unit, or product line, there are a few questions to ask that constitute a kind of Litmus Test for this Market, that companies should answer with as much reliability as possible before taking action:

a) Is there a market for your product or service?

-Without local production?
-With local production?

b) How will the trends in this market affect this issue? Will this create more or fewer opportuni-
    ties for your company?

c) Is this market large enough to merit investment?

d) What sales &distribution structure are required to reach a critical mass of end-users effectively?

e) If you produce locally, can your technology be protected? To what extent?

f) What are the most likely ROI scenarios, and how do these match with your expectations?


What GCiS Offers

GCiS offers a full set of services for market entry, from strategic market assessments to selecting channel partners, most notably:

o Market Assessments: to determine whether there is a market and how best to enter it
o Partner Search: To find and evaluate the right partners, such as for a distribution network or JV    partner,and including due diligence
o Company registration (as part of an entry package)
o Manufacturing Related: Including site selection advice, and follow-on work.


The Right Structure

The word “entry” here is a misnomer. Establishing a Rep Office is can be counted as market entry, or can be seen as one step in a deeper entry, which would include local production, developed sales channels, an engineering staff, etc. The precise procedures required for entry depend upon the structure of entry, and other factors such as size of investment, location. In general, the decision to invest in manufacturing is closely related to the type of product involved and the technological sophistication of such products. While there are different structures possible in China, there is really only one choice here:

1) With Local Production
2) Without Local Production

Going without local production is much lower risk, and requires no direct investment, though there will be market development and operating costs. This is normally in the form of a Rep Office, and allows one to incrementally develop and become familiar with the market. However, one cannot accept payment in Chinese Yuan, which will exclude many end-users. Going with local production means direct investment, which means greater risk and commitment. However, this allows one to manufacture locally, which means lower costs and faster delivery time. This also allows one to accept payment in RMB (Yuan), and penetrate the market to a greater extent. For some products, and some markets, this is the only way to be competitive in China. Furthermore, this step can be taken after operating a Rep. office.


Extended Cooperation

Before you leap, please consider these issues thoroughly, and contact us if you would like to discuss this further. GCiS can work with a company from entry and beyond. We are willing to work with companies on a continuing and in-depth basis to meet their needs in this market. We, will only do what we can do well, stand behind our work, and have a long-term approach to our relationships.

To get more details on Market Entry in China, please e-mail us and request our Market Entry PDF (10 pages).

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