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Case 03

Getting Your Foot in the Door Overseas

In the following case study, Savio S. Chan, president and CEO of Melville, NY–based US China Partners, Inc. explains how a family-owned service provider on Long Island prepared to do business in China by implementing basic strategies that can be applied to any industry.

Most companies understand the huge potential in doing business in China, which has 1.3 billion consumers and the fastest growing economy in the world. And the opportunity isn’t only for large companies like Apple, GE, or Microsoft, but also for small businesses. There are many ways a small business can gain access to the biggest emerging market in the world today, and this is the story of how one company implemented some basic strategies to do just that.

About two years ago, Richard Hayat, president of his family’s Farmingdale, NY–based small business, WHPR Inc., decided to go global. WHPR has been around for more than 50 years, and has 15 employees. WHPR serves universities around the world by purchasing and consolidating their subscriptions to medical, technical, and scientific journals, and other periodicals.

WHPR has been doing business with universities all over the world, with the exception of two major countries, China and India. Within these two large economies, there are millions of students aspiring to be like their successful Western counterparts, and they are eager to learn and grow by reading and subscribing to tens of thousands of journals.

Richard faced several challenges to entering the market. First, he is selling a service, not a product, which is more challenging in China. Even though China is the fastest-growing economy, Chinese business people today are far more used to paying for products than for services, as evidenced by the millions of factories located there. Second, his competitors are all well-funded, multi-billion-dollar companies that have deep pockets and many resources, which a small company like WHPR cannot match.

Third, because all the universities in China are state-owned, four state-owned enterprises (SOEs) control all the ordering of journals and periodicals in all of China’s universities. Many industries that are considered “pillar industries” are state-owned, such as media, banking, telecom, education, and insurance. So, if you are trying to do business in these industries, chances are you will have to deal with the Chinese government.

The good news for Richard was that there are only four potential prospects and customers, so he was able to focus his energy on developing those relationships. The bad news was that every major competitor of his was already doing business with the four SOEs. So the barrier to entry was relatively high.

In general, it takes approximately twice as long to establish contact with decision makers in China than it does in the US. The process of getting meetings requires time, patience, and persistence. It also requires updating your marketing, hiring local experts, and learning about the Chinese culture.

Translate Marketing First

Set up a website, and create marketing materials written in Chinese before trying to set up a meeting. WHPR did not initially have marketing materials or a website in Chinese. Translating your marketing will cost both time and money, but it is an essential first step before you request a meeting, because it shows that you took the time and effort to make it easier for the Chinese buyer to understand what you have to offer.

Hire Local Experts

As in any other market, who you know is as important as what you know. Through a consultant that specializes in Chinese and American business services, WHPR hired an ex-government official who worked in the Ministry of Education for many years and had great relationships with the SOEs. The Beijing-based recruit was then trained on what WHPR could offer, and was able to persuade one of the buyers to accept a meeting.

Learn Chinese Culture

Learning some aspects of the culture can save lots of time and avoid costly mistakes. Before traveling to China to meet with the SOEs, Richard was coached on Chinese culture, including several important tips. Small things are important, such as presenting business cards with both hands and accepting them with both hands. It is disrespectful to do otherwise. Other cultural norms include:

  • Smiling. Don’t be too serious. The Chinese see a smile as a gesture of interest. Wearing a poker face when you meet someone will give the impression that you lack interest.
  • Speaking slowly. Most Chinese buyers do not learn English until they are older, and as a result, their command of English may not be proficient. The Chinese often do not ask people to repeat themselves, and if you speak too fast, sometimes even the translator can misunderstand you.
  • Understanding that “Yes” may mean no, and “maybe” means impossible. Many Chinese buyers have a habit of saying “yes” just to show they are paying attention to you. It doesn’t mean they agree with you. If they say “maybe,” it could be a polite way of saying no.
  • Avoiding jokes and use simple language. Most translators are not proficient enough to translate jokes or highly technical language. So keep it simple.
  • Letting people “save face.” Most Chinese are not used to revealing much about their company operations, especially in public or during first meetings. If they are vague or unwilling to share information, don’t force the issue, and let them “save face.” It will go a long way toward building trust.
  • Know that Chinese are superstitious about numbers. The number 4 in Chinese rhymes with “death,” and numbers 3 and 8 are good numbers. The number 3 in Chinese means “growth,” and the number 8 rhymes with “prosperity.” You will find many hotels in China that have phone numbers ending in 888.

As an example of how this can affect your business, a few years ago a businessman set up a phone number in China with several fours in it, and he could not understand why he got so few phone calls. Richard did eventually meet with all four SOEs. Six months after he came back from Beijing, he got his first order from one of them. It was a very small trial order, primarily designed to test the quality of service and response time. Gradually, he earned the trust and confidence of the customer, and three months later, three out of four SOEs gave WHPR their trial orders.

Today, WHPR is doing business with all four SOEs, and growing his business in China significantly. Richard travels there every year to meet with buyers. That leads to the last tip—“A journey of a thousand miles begins with a single step.” If you are a small and growing company thinking about doing business in China, start taking small steps now.