One of the more exotic invitations I have received over the last two years, was extended to me by Scottish Enterprise and Electronics Scotland, who were planning a trade mission to China. Electronics Scotland is the trade body for its industry and the Scottish Marketing Association recently supported its Annual Conference at Gleneagles.
The purpose of the visit was to meet with some of the top electronics and IT companies in China to explore business opportunities for Scottish companies. The organisers recognized that the deputation would be strengthened by someone who could represent the Scottish marketing community, hence my invite.
In advance of the trip, the deputation received a full briefing on Chinese business culture. This included details of the recent changes in the business environment where the structures are complex and in rapid transition. Equally important is an understanding of how business relationships are developed. Central to this is the concept of ‘guanxi’ which broadly means ‘connections’. To do business in China you have to make the right connections - meet the right people, develop long-term relationships with them and make sure that favours and generosity are reciprocated. Guanaxi is probably the most important single asset of any foreign business in China.
With a relatively young framework of laws, and the inexperience that goes with it, coupled with the traditional bureaucracy, working with reliable locals is recommended – be they consultants, lawyers or existing operators (China hands) to help work through the maze that exists.
Similarly, understanding the concept of ‘face’ is essential. This would equate to ‘respect’. If someone is embarrassed or makes a mistake, they are seen to lose face. If they do well and get complimented, they gain face.
It is important that your business partner does not lose face, and equally important to increase your own face, if you are to develop strong business relationships.
Ways to increase face include offering compliments, asking after their families, commending their office or production facilities and certainly not contradicting them in public. So the use of typical Scottish ironic banter needs to be tempered.
Business meetings have very formal procedures. After shaking hands, business cards are always exchanged using two hands (as a sign of respect). It is important to study the business card and ask any pertinent questions e.g. pronunciation of name, clarification on role, nature of business etc. Business cards are then laid out on the table for reference during the meeting.
Meetings generally start on time and follow an agreed structure with the most senior person taking the lead.
During most of our meetings, translators were used so speaking slowly and using simple concepts was required. It is also important to realise that often Chinese will nod their acknowledgement if asked if they understand (saving face) even if they do not.
Following business meetings, there is often a ‘banquet’ a dinner where the emphasis is on guanxi, and the opportunity to network.
During the course of the seven day trip to Shenzhen, (the fastest growing city in the world), and Beijing we met with 11 of the biggest electronics and IT companies in China and attended three banquets.
These companies offered the deputation two key opportunities. First as a gateway into the massive Chinese market as they were keen to deal with Scottish companies who could help with innovation and new product development. They readily admit the Chinese are great at copying and cost-effective manufacturing but they are not inventive and have limited marketing experience.
The other opportunity is in helping Chinese companies develop business in Europe and dealing with the complex challenges of the many cultures, languages and legalities.
The one area where there was a fantastic appetite to learn more was in the concept of brands and branding. Whilst embracing the many global brand icons e.g. Coke, McDonald’s etc with a passion, there is limited expertise in understanding how to develop their local products into international brands.
After an exhausting schedule, we spent the final day of the trip visiting the Forbidden City (complete with Starbucks!), and the Great Wall.
Walking along one of the great wonders of the world on a warm late afternoon, as the sunset created a magnificent autumn light, was the perfect way to end the week and contemplate the massive opportunity to provide China with effective marketing solutions.
Graeme Atha is a partner at Frame and the former chairman of the Scottish Marketing Association.Our man in China