It’s a global economy. We know that. But what does that really mean? It means that even if you decide to start a business tomorrow in your hometown, more likely than not, you’re going to have to turn to other parts of the world to make your business efficient and profitable. For many business owners, that other part of the world will most likely be China.
The economic powerhouse has defined itself by becoming the manufacturing go-to source for companies worldwide. Many businesses rely on manufacturing their products in China to help offset the costs of production. But large companies aren’t the only ones to capitalize on outsourcing; small businesses also benefit. Although specific rules apply depending on what you’re producing or manufacturing overseas, there are some general tips to outsourcing your business processes to China. We consulted with Rosemary A. Coates, president of Blue Silk Consulting and the author of 42 Rules for Sourcing and Manufacturing in China, who provided us with her top 10 tips for doing business in China. Here are her recommendations:
1. Build Guanxi. Guanxi is a type of relationship building that carries with it a responsibility to maintain contact and assist each other. It is essential that you build guanxi with your Chinese contacts before you try to do business with them. This process can take 1-2 years before Chinese business people will trust you.
2. Learn about Chinese history (at least the last 200 years). Chinese history affects the way business is conducted every day in China. To understand why things happen as they do, you will need to understand some recent history, especially since the Republic was formed in 1949.
3. Work with a sourcing company or an agent. You will need someone on the ground in China to handle issues as they arise. I always encourage my clients to work with an American who lives in China and with a native Chinese speaker. Experienced people who are available to help you can provide enormous value.
4. Visit often. Even though you may have a representative on the ground in China, your suppliers and customers will expect to see you at least once every quarter. There is no substitute for in-person meetings.
5. Put everything in writing. Be sure that your instructions, blueprints and work orders are clear and detailed. Confirm everything via email and continue to correspond until you are absolutely certain that the Chinese understand your instructions completely. If they don’t understand, they will probably do nothing or make errors.
6. Tour the factory, with an agenda. Many Westerners tour factories and have a cursory look inside. Unfortunately, what you don’t see or don’t ask about will inevitably come back to haunt you. You should plan the tour before you go. What exactly do you want to see? What questions will you ask?
7. Don’t depend on the legal system. If you have a problem with a Chinese contract, don’t expect the legal system to help. In the extraordinary chance you got a favorable judgment, it is very unlikely that it would be enforced. It’s better to plan up front how you will handle disputes without legal assistance.
8. Engage multiple suppliers. Hedge you bets….have at least two alternate sources of supply.
9. Don’t skimp on logistics. Work only with reputable worldwide freight forwarders and transportation carriers.
10. Always allow Chinese to “save face.” Never criticize anyone or any process in public. Use indirect approaches to ask about issues without accusing anyone. If Chinese lose face in front of others because of something you said, you might as well end the relationship. There is no recovery.
