Journey To China

February 1, 2012

When you think about China, what’s the first thing that comes to mind? It’s almost guaranteed that your answer will NOT be basketball. With over 600 million fans watching NBA televised games and an 11% rise in basketball apparel sales this year, there is no question why China is one of the most popular countries for the sport of basketball. The truth of the matter is, basketball is more than just a game to the Legends; it’s a business. It is easy to see how China is setting the benchmark for all things business related. Whether it is marketing, sponsorships, media, sales, or entertainment, China is known to be a leader. These are all fields in which basketball greats explore from a business perspective. With a keen understanding and an open mind, the NBRPA’s Executive Director, Charles D. Smith journeyed to the country of the Great Wall to discover new relationships and opportunities for the organization and its’ members.

Continue reading for more information on Charles D. Smith's travels from Beijing to Guangzhou providing you with the latest insight and information in the world of Chinese business.

Posted: 10.15.2010

China Business Etiquette

Success ultimately depends on suspending your beliefs about what you think you know about doing business in China. “We’ve interviewed U.S. expatriates over the years and many of them told us the same thing,” says Dunham, who has conducted extensive research on management issues in cross-cultural boundaries. “If you go over there assuming you know how to do business better than the Chinese, you’ll get eaten alive. No matter what preparation you do beforehand, it’s not until you are actually over there doing business that you can fully understand how markets work, how financing works and how relationships work.”Chinese business etiquette

In the West companies like to do business with companies, individuals are often just regarded as representatives of a corporation. Chinese business etiquette turns that concept on its head. Your Chinese contact will want to do business with you and that means getting to know you as a person. From a Chinese business etiquette perspective you should reconcile yourself to putting a great deal of effort in to the relationship. Chinese business etiquette dictates that you are just as important to your Chinese counterpart as the product or service that you sell.
For Kim Patton, director of business development for GBBN Architects, with offices in the U.S. and Beijing, offers five keys to success for firms doing business in China: creativity, management processes, quality materials, access to the U.S. for Chinese counterparts.

Patton states, the Chinese are more brand-conscious than many other peoples of the world, including Americans. That, in part, may explain why so many kids in China want to have their birthday parties at KFC restaurants.

You would think that language was an insurmountable challenge to business in China with its 56 different ethnic groups, except that last year 300 million Chinese, roughly the U.S. population, studied English as a second language. That compares with about 50,000 Americans studying Chinese, mostly Mandarin.

No, the real challenge is understanding culture, according to Brown-Forman's Jim Murphy. Let's say you were planning a reception for an official delegation in China, and you're corporate planners envisioned a large white tent with intimate tables of four. Sound good?

That's great, except to the Chinese the color white and the number four symbolize death and a tent could be viewed as rudely informal. You get the idea.

In China, the number eight is lucky. People will pay more to have No. 8 in their phone numbers or addresses or to live and work on the 8th floor of a building. So now you see why there's no coincidence that the 2008 Olympic Games in Beijing opened on Aug. 8 (8-8-08). Opening ceremonies were scheduled at eight o'clock.

Keep an eye out for unsolicited e-mails from China for business opportunities. Maybe your eighth e-mail might bring you some luck.

 

 

Posted: 10.14.2010

How a Former Player Conducted Business in China

A former NBA player went to a national clothing and manufacturing convention in Las Vegas a few years ago to appear at one of the booths for the purposes of signing autographs for any fans that came to this particular booth. As he later walked around the convention, he stumbled upon a gentleman that developed some technology for how pants can be put on and taken off very simply with a zipper that ran down the side of each pant leg. The former NBA player immediately saw the need on how this development could change the sports warm suit design and why sports teams and individuals would love the concept.

The former NBA player, now entrepreneur, started a business with the owner of the technology and today they market a product called “ZipWay”. After achieving all the necessary steps in building their business, they now needed to fulfill potential contracts from interested vendors. They needed to find the right manufacturer.

ZipWay needed a manufacturer economically feasible for a start-up business. They needed to keep the cost down and get great quality of service. Through various conversations with other people in the manufacturing industry he was consistently directed toward China. They heard of about three or four manufacturers in China that were all located in one area.  One of the partners from ZipWay flew to China and met with about four manufacturers and visited their facilities. The criteria for the manufacturer were as follows:

1.      They needed to have a great relationship with the Chinese government so that their merchandise and products would be able to get in and out of the country with no problems.

2.      They needed to have great security standards so that their merchandise would not be replicated.

3.      They needed to have a successful track record with other companies in the industry.

4.       They needed to be the right size manufacturer suitable for their needs.

5.      They must do great quality work.

ZipWay eventually selected the manufacturer they still use today in China. There business arrangement was the manufacturer was a simple services agreement on orders processed and delivered. They also came to terms on a Non Disclosure Agreement concerning the technology.

 

Without the detailed calculations, below are the full factory levels for costs for a product with material cost of $100. These are factories from four locations chosen:

 

California:              $127.20

Eastern Europe:    $113.40

Mexico:                   $110.00

China:                       $98.90

 

I asked the former NBA player that if a cost analysis were performed and you found that doing business with a manufacturer in China was no different than doing business with a manufacturer in the United States, would you utilize the services of a United States manufacturer for ZipWay. His response was, “I probably wouldn’t use a U.S. manufacturer because I’m more interested in the quality of our product. I’ve found that the Chinese take pride in their work. They go beyond the call of duty to make sure each pair of pants delivered to us is of the best quality and we need to satisfy our consumers”.

Today, this same former player has a product line of warm-up suits. He and his Associates have formed strategic relationships with Footlocker, the NBA and other third parties in an effort to continue to build his brand.

Zipway is still continuing to establish its' innovative brand in the asian markets.

“Zipway is a product for the young, the old, men and women. Itʼs a diverse athletic product, the most complete athletic pant Iʼve seen. I wish theyʼd been around when I was playing.” –John Starks

zipwaysport.com                   zipwaychina.com

Posted: 10.13.2010

I would like to share an essay I wrote in the summer of 2007. The education I recieved then assisted our business dealing this week.

How to do Business with China

Authored by: Charles D. Smith

Dated: August 2007

I traveled to China with the “June in China” program through Seton Hall University. The social, cultural and academic experience was very enlightening.  I’ve heard various lectures and participated in discussions about the customary business practices in China.

I began to realize that in order to build a successful business in China, as a foreigner, when travelling to China; you must plan on spending some quality time in the country to get to understand the culture of your potential local partner.

The rise of China in the early part of the twenty-first century is distinctive and has more in common with the rise of the United States in the twentieth century than the advance of its Asian neighbors.

There have been times in the United States where I’ve had extensive phone communication with a company and would not travel to see the company in person unless I thought both parties were ready to consummate a signed memorandum of understanding or some form an agreement. However, you just can’t travel to China and stay for even a week and expect to leave the country with a signed contract in your hand. Although this may happen in the United States, it is not customary in China. The building of a great relationships or connections with people is called “Guan Xi“ in Mandarin. This is very critical. It takes time for the individuals to get to know each other, their ideals, business practices and company culture. It is best to plan for at least a week or two and that’s just for your first trip.

The Chinese government also has mandated rules and regulations imposed on foreign companies on how to do business in China. For example, a foreign company must have a joint venture with a local Chinese business and that local Chinese business will maintain the controlling interest in the business.

Another interesting lesson is that most of the people in China have certain moral and cultural standards that do carry over into their business practices. For example, I received some travelers’ checks from my bank in the U.S. without signing the secured signatory line in front of the bank personnel before leaving the bank. When I presented two unsecured unsigned travelers checks at the front desk of hotel in China to be exchanged for “Yuan” I immediately signed the secured signature line in front of the individual and apologized, then I proceeded to sign the line which you’re suppose to sign in front of the recipient of the checks. Because that wasn’t the proper protocol and I could have potential stolen the checks from anywhere they would not accept my checks. I even showed them that my passport signature and my signature on the checks were identical. That did not matter. What mattered most was that they were not going to conduct business in a way where someone could get in trouble. I was banned from cashing my travelers’ checks for the duration of my stay at that particular hotel in Beijing.

From that point forward I sought out the understanding of various rules, regulations and customary practices wherever I went so my expectations were always justified.

 

CHINA GOVERNMENT JOINT VENTURE

From a historical perspective, under the centralized monarchy, the emperors of the various dynasties were doing two things to maintain their rule.  On the one hand, they spared no efforts to strengthen the massive hierarchical system; on the other hand, they went all out to discourage commerce.

Along Chinese history, commerce and private business have been significantly oppressed by the government.  As a result, market of exchange between money and political power develops.  Cases of political abuse for private gains have been prevalent and pervasive.  The understood socialism in china discourages private property and promotes public or state ownership as the icon of socialist system.  The protection to private ownership was arguably shunned in the most recent constitutional amendment last year. For the last 20 years the people of China have been trying to separate business from government control.

Unlike the United States, a foreigner cannot go to China and legally open up a business. Nor can a foreigner go to China and purchase property. Today you must find a local partner in China to have a successful business. That local partner is owned by the government. Basically you are partnering with the government of China to conduct business on China’s soil.

The financial structure of the joint venture is that the local partner would own 55% of the business and a portion of that is shared with the government. The remaining 45% is owned by the foreign business.

SELECTING CHINA PARTNER

When the founder of a company called Unigene was finalizing different arrangements in selecting the right local partner. In the town of Shandong (Shing Dow) the Mayor’s dad had much political power and flew to New Jersey to ask for partnership because they wanted a bio-tech industry established in their town. The Mayor introduced Unigene to a local tobacco company because Unigene needed cash and the tobacco company had the cash to a deal. Although the company had the cash needed, they weren’t too sure if a joint venture between a tobacco company and a bio-tech company would sound right from a public relations point of view. Unigene was later introduced to another company in Heber, China.

When selecting a local partner in China it is very important for you to define the criteria of that partner that best serves your business. Clearly you must know your own business objectives before you can decide what is needed to complete your objectives in China.

Your business must do an analysis on the China market. Is there a market channel for you to serve in China? Once you know that then you must understanding if that local partner can assist you in serving that market. In order for that local partner to do so, you might want to make sure that they are connected with the government. You want to know that they have the necessary relationships to help the business prosper. Local relationships are very important as well. The local partner must know how to navigate through the culture and know the right businesses and people close to the consumers. You should try to find a local partner that is synergistic with your firm. Do you have the same goals and objectives? Where do you differ?  You have to spend time traveling back and forth to China getting to know the culture and the local partner and it will sometimes take years to consummate and great joint venture with a local partner. It would be worth it in the long period of time so you must be patient.

Most U.S. based companies that have a strong desire to conduct business in China hired Chinese nationals in leadership roles. The NBA has done a fantastic job hiring key Chinese citizens not only for their business acumen but the fact that they help the NBA understand their culture from a business perspective.

 

Posted: 10.11.2010

China has 265m online game users:

blue paper (Xinhua)

Updated: 2010-10-07 15:46

BEIJING - China had 265 million online game registered accounts as of 2009, up 41.5 percent year on year, according to a blue paper recently released by a publishing house.

The blue paper, published by China's Social Sciences Academic Press (SSAP), said more Chinese are living a lifestyle in which the Internet has become a preferred channel for them to purchase goods, seek entertainment and acquire information.

The number of China's online shoppers topped 108 million in 2009, rising 45.9 percent from the previous year, according to the blue paper.China has the world's biggest online population, which stood at 420 million by the end of June, up 36 million from December last year.

The increase was boosted by rising cell phone connections, said a report issued by the China Internet Network Information Center (CNNIC) in July.

The SSAP is a publishing institution under the leadership of the Chinese Academy of Social Sciences, a top government think tank