Coatings World - October 2011

back off from existing objectives?”
Before embarking on a China strategy there are some obvious
actions you need to take.

• Develop a clear China Vision Statement (i.e., Your China vision statement articulates your dreams and hopes for including China in your business portfolio. It reminds the many stakeholders in your company of what you are trying to build in that part of the world). While a vision statement doesn’t tell you how you’re going to get there, it does set the direction for your business planning such that proper attention is given to the development of critical plans as described in the following.

• Develop a China Strategy Statement (i.e., You intend to capture what market share, using what resources in what period of time using what metrics to gauge if you are making progress. In addition, list all assumptions used to formulate such a strategy).

• Develop a China Impact Summary (i.e., the pursuit of a China strategy will have what impact on each existing company business structures/bottom line).

• Develop a China Implementation Plan (i.e., what actions are to be taken by what groups at what cost, at what timing).

• Develop a China Intellectual Property Protection Plan (i.e., how will you ensure that your IP is protected especially when the Chinese Government is continuing to put pressure on new entrants to share their technology with local companies? Technology theft in China is a genuine and real concern, you need to have a clear plan as to how you will handle this critical situation).

• Develop a China Resource Burn Rate Plan (i.e., what resources will be required in what timing and who will provide those resources at what cost and availability?)

• Develop a China Exit Plan (i.e., if things don’t work out, how will you unwind your China strategy, what will happen to assets, resources such as personnel, contracts, etc.). A number of companies have found it’s just as difficult to exit China as it was to enter.

In the generation of the above plans careful thought must be given to staffing. Will you have dedicated personnel assigned to this pursuit or will you simply add-on this responsibility to existing infrastructure? If the latter it’s important to communicate with all personnel how their compensation will be calculated. Employees tend to gravitate and focus in those areas where they perceive their rewards emanate. Ambiguity or lack of clarity about compensation may lead to confusion and bad decision making by various employees/groups. If China is important treat it that way and make sure that your employees understand what is expected of them and in turn what the rewards and risk are that are associated with such activities.

apply. For instance, if one of your key assumptions happened to be that you could ship from the West Coast to China and clear customs on the other side at a particular cost structure and you find that the numbers have increased then you need to determine if this is a recoverable situation or a true stop point. The suggestion here is that you test each and every one of your critical assumptions and make adjustments to your overall China strategy to reflect reality versus assumptions. The time to do that is before you commit all your resources and proceed to a point in your strategy that may be difficult to unwind.

History has shown that most companies underestimate their resource burn rate by as much as 25-40 percent, particularly in the early stages. It’s important to include some level of flexibility in your resource allocation in the beginning stage of your implementation phase. As such you need to ensure that the sources of your resources are compliant with such a situation.

Let the rubber meet the road

No company should embark on a China strategy without first having key personnel visit China to see and experience the culture and the perceived opportunity first hand. Not only will this help form a stronger commitment but it will dispel often held stereotyping of the country, its inhabitants and culture. Meeting potential customers, suppliers, agents/distributors and gaining an understanding of possible routes to markets along with the obstacles that may be encountered helps to strengthen your overall implementation strategy.

Equally important, you should exhaust your network of contacts to discuss the actual experience of others who have chosen to pursue a China strategy. Benchmarking can save you from duplicating the same problems that others have encountered in this effort.

Understand if your assumption about a chosen market entry is viable (i.e., will you be able to go direct to customers or will you need a distributor/agent?). What are the available routes to markets, which one will you choose and why? Who are the competitors and how are they structured and what routes to market do they use? Are your competitors making a profit and if not, why? What are the government obstacles you will face in the pursuit of your chosen entry?

Determine where and how you will enter China There are numerous avenues open to a new entrant coming into China. The following is a listing in increasing order of control that your company has over the entry model. If your chosen entry strategy involves having an onshore infrastructure with local and expat employees then you need to spend time understanding what is required by the Federal and regional/city governments. Don’t assume that China requirements follow your country of incorporation policies, I can assure you that its different.

Test your assumptions

If you have chosen to include a China strategy then you have based such a decision on various critical assumptions. Before moving forward at too fast of a pace it’s important to test those assumptions and weed out/modify those that don’t seem to

• Export – Your firm’s sales of goods/services produced in the home market and sold in China through an established entity inside China (i.e., agent/distributor/reseller, etc.). This entry model allows you minimum control over the entry model.