With its rich heritage of Eastern and Western culture, this city has long served as an engine of business and trade. Like others along China’s Eastern coast, it is industrializing at a rapid pace and foreign businesses want in on the action.But there are challenges to doing business in this region, and businesses should proceed slowly and cautiously before making any commitments.
No region in the world holds a monopoly on ideas and innovation, Todd Bradley, executive vice-president of HP’s Personal Systems Group, said during the HP Mobility Summit held here earlier this month.
HP has R&D labs around the world. In Asia, its labs are focused on developing next-generation products. It has a design centre for PCs and notebooks – specifically for the Asian market – as well as two manufacturing facilities and on-site service in 2,900 cities across the region.
Silicon Valley is no longer a geographic location, said Satjiv Chahil, senior vice-president of global marketing with HP’s Personal Systems Group. In the IT business, manufacturing is driven by China, while software development is driven by India, with pockets of innovation around the world. And these are the growth markets, he said. In fact, 65 per cent of HP’s growth – and revenue – is international. “People think of poor countries with low purchasing power, but they are countries of affluent and aspiring people,” said Chahil.
And there’s the potential for more growth down the road, whether in Asia, Eastern Europe, the Middle East or Africa.
HP is now the top foreign supplier in China, said Chahil, and the top vendor in India. Currently the company is undergoing geographic expansion here, and it’s already built a solid team in India by adapting to this “affluent and aspiring market.”
Its marketing campaigns reflect this. In India, HP taps into local culture by using a Bollywood star in its “The Computer is Personal Again” advertising campaign. “They don’t think of it as an American brand,” said Chahil.
But global marketing is not an easy task. So HP’s marketing group is run as a global group, with a team of 20 people from around the world.
“We’re careful to keep it at a level of relevance and abstraction to be expressed as the local team wants to express it,” he said. In its latest campaign to rework the Compaq image and logo, for example, it discovered that “Q” is an offensive word in French, so it had to change tactics.
Last year HP announced expansion plans in India, as well as a broader Asian extension, which includes Sri Lanka, Bangladesh and Pakistan. Dell, with two manufacturing sites in China and one in Malaysia, is following a similar path.Lenovo also sees India as a high-growth market, and is replicating there what it’s already doing in China. Other tech vendors, including Intel, AMD, IBM, Motorola and Samsung, are all investing in India.
Canada has strong ties to the Asia-Pacific region and is a member of several multi-lateral organizations. But according to Foreign Affairs and International Trade Canada, while the China market continues to expand and offer commercial opportunities, it also poses significant challenges to those who are unprepared.
The Trade Commissioner Service recommends organizations fully research the market before pursing any opportunities. Several Canadian companies have received fraudulent trade inquiries from Chinese companies, usually in the form of unsolicited e-mail, where the Canadian company is asked to quote on a large order, providing specifications, delivery times and banking information. Other frauds include “representative cheque fraud” and “representative scams” where the company is seeking Canadian-based representatives to establish a business practice in Canada.
Before signing any contracts, the Trade Commissioner Service recommends proceeding cautiously, conduct due diligence, confirm legitimacy through contacts or associations, ensure that funds are not advanced and consult with legal counsel.
It has developed lists of local service providers in various regions, including Beijing, Guangzhou, Chongqing and Shanghai, which can help quantify companies on your behalf. Sales of products can be insured through Export Development Canada or through letters of credit from financial institutions. Before travelling to China, contact the Trade Commissioner Service at the Embassy of Canada to China to make preliminary inquiries on your behalf.
And don’t underestimate cultural or bureaucratic challenges. You may not face a level playing field when arriving on the scene – which means it’s essential to establish the right relationships. Most importantly, learn what the word “guanxi” means – in all its intricacies – and how to use it. In the end, that could be your deal maker or breaker.