During our Industry Panel Q&A event on September 8th, we asked business leaders for their insights on the challenges and opportunities of operating businesses across the Australia/China business landscape. Peter Liddell from KPMG shares his thoughts on successfully doing business in China.
- Peter Liddell
Historially, China has been the prime market for many Multi National Companies (MNCs) to establish their operations and directly manufacture and source goods and industrial products at a very low cost. Today, the primary reason these same MNCs maintain operations in China is to serve the China market, ‘be in China for China’. The opportunity continues to be tremendous, even taking into consideration China’s new ‘growth’ model, they will still have access to just under 1.4 billion prospective consumers and 10.6 million enterprises.
I spent three years in China working with MNCs on their market entry and expansion strategies and observed that turning a Chinese investment into a profitable business venture takes careful planning and a disciplined approach.
Despite the numerous challenges of operating in China, we have seen foreign brands such as Starbucks and Louis Vuitton achieve amazing results. They have been successful because they’ve been able to truly understand local consumer trends, align their brand for the right Chinese consumers and navigate the regulatory challenges.
There are five critical elements that I believe businesses need to consider to execute a successful market entry or expansion in China:
- More than 50% of the Chinese population will be middle income earners by 2020 with a propensity to spend. Australian businesses must be ready to compete in a dynamic and fast-paced environment and interact with new consumers through various channels
- Selling into China’s many markets is not easy – view China as a number of markets and plan how to interact with each market separately, tailoring product specifications and delivery mechanisms that meet the needs of local customers
- Think about the successful marriage and exit options upfront, not just the honeymoon. Plan an approach that aligns to your long-term objectives
- Finding and incentivising the right partners is critical – really understand who you are dealing with and what motivates them to achieve the outcomes that you both desire
- Understand the non-trade barriers relating to your product, supply chain and chosen markets so that you can navigate local customs and regulations effectively.
As part of the Spotlight on China program we invited alumni and current students to contribute to the ideas covered in the Q&A event.
Our guest contributors have learned many things about doing business and working in China. Here are their insights:
- Mali Zou, MM (Marketing) 2014, Shanghai
By attending different business events and seminars such as AsiaLink and ACYPI, I found out about different opportunities and inspirations for my future career.
- Nick Yan, MIB (2004) Shanghai
That Wechat (the mainstream Chinese social media APP) is becoming more popular in the Chinese business community. It is more responsive than email, so its important to familiarise yourself with this tool if you are preparing to do business in China.
- Travis Huggins, BCom (2003) Hong Kong
I learned the importance of meeting as many local contacts as you can and asking plenty of questions to your team and peers when you first arrive to quickly gain understanding of local business practices.
- Vivian Lu, MFin (2015) Melbourne
I have learned the importance of being able to adapt quickly no matter what role I take. Additionally, credibility is something that one has to earn. China has opportunities for people who are adaptable and credible.
- Vienna Ke, Bcom (2009) Sydney
Relationships ('guan xi') are ultra-important for doing business in China. I've learnt to build trust based relationships with colleagues, clients, regulators and advisors in China. These relationships contribute to mutual business success.
- Yiling Chen, Melbourne
Through my GBP project, I began to understand the complexities of the interaction between government and business in China. I've learned that most industries are dominated by state-owned corporations that operate very similarly to private businesses in Australia.
Peter Liddell is a Partner in KPMG’s Management Consulting practice, Peter is the Asia Pacific Leader for Operations Advisory within KPMG and is a senior member of the firm’s global Supply Chain executive. For the past 27 years he has worked with clients across the Asia-Pacific region to help them enhance their operational and financial performance. Peter recently worked with the firm’s China practice to support multi-national clients in the development of their China/Asia market entry strategies and to help them realign their global and regional supply chains.
Spotlight on China was part of the MBS and BCom Enrichment Program which is coordinated by the Student Employability and Enrichment team, Faculty of Business and Economics, the University of Melbourne.
Discover the full range of student enrichment opportunities HERE