2014-15 Canada-China Business Forum Magazine - Page 40

SMALL & MEDIUM-SIZED ENTERPRISES SMALL & MEDIUM-SIZED ENTERPRISES Opportunities & Challenges for Canadian SMEs in China PROBLEMS ARISING FROM DOING BUSINESS IN CHINA CAN BE ATTRIBUTED TO THE FOLLOWING FACTORS 1. China lacks predictability in its business environment. Transparent and consistent laws and regulations would make the Chinese market more predictable. However, China’s legal and regulatory regimes can be opaque and arbitrary. Implementation of the law is inconsistent. Lack of Chinese government protection of intellectual property (IP) rights is a particularly damaging issue for many companies, including those that operate in China and those who do not. Many have had their products stolen by domestic competitors. 2. Canadian companies tend to underestimate the challenges of market entry in China. Encouraged by a government eager for foreign capital and technology, and entranced by the prospect of 1.3 billion consumers, thousands of Canadian firms have charged into the Chinese market. These companies often do not sufficiently investigate the market situation. Common pitfalls involve not carefully reviewing product standards and conformity assessments; not fully understanding legal issues, like protecting IP rights and employing people legally; and not properly vetting local business partners. by/par KRISTINA KOEHLER-COLUCCIA C anadian small and mediumsized enterprises (SMEs) continue to have mixed experiences in China. Many have been profitable, while others have It is important to understand that while continued reform is absolutely necessary for China to achieve the economic growth it requires and to fully participate in the world economy. In many areas, the necessary changes have not yet taken place. Companies must deal with the current environment realistically. Risk must be clearly evaluated. If a company determines that the risk is too great, it should seek other markets. struggled and failed. In order to succeed in China, Canadian SMEs must thoroughly investigate the market, take heed of product standards, pre-qualify potential business partners and draft contracts that assure payment and its people. Chinese companies respect face-to-face meetings because they demonstrate commitment to working in China. Continued long-term relationships are key to finding a good partner in China. To maximize business contacts, Canadian companies should aim at forming a network of relationships with people at various levels across a broad range of organizations, such as the CCBC. Canadian companies tend to use agents in China to initially create these key relationships. Localized agents possess knowledge and contacts to better promote their products and to break down institutional, language and cultural barriers. It is highly recommended for companies to carefully choose their potential business partners and take the time to understand their distributors, customers, suppliers and advisors. China is a challenging market and requires a strong understanding of a firm’s capabilities and in-depth market knowledge. Before making a decision to enter the China market, companies should consider their own resources, their past experiences in entering other foreign markets as well as their willingness to commit a significant amount of time and effort to exploring opportunities in China. WHAT SHOULD YOUR STRATEGY BE? and minimize misunderstandings Romolo Tavani/Fotolia between the parties. A Canadian company should visit China in order to gain a better perspective and understanding of its potential market and location, especially given China’s rapidly-changing market and large geography. A visit to China can provide a company great insight into the country, the business climate CANADA CHINA FORUM BUSINESS 2014-2015 ccbc.com ARE YOU READY FOR THE CHINA MARKET? The following questions can be used as a self-diagnostic tool to explore and to evaluate whether your company is prepared to meet the challenges posed by China’s system for regulating international trade. 40