By Dr Johnny Hon, Anglo-Chinese entrepreneur, investor and philanthropist. Founder of Global Group.
25% of all UK small and medium-sized enterprises (SMEs) see China as a market that they would like to expand into (Western Union’s Business Solutions International Trade Monitor, Oct 2014). Despite its recent economic downturn, the Chinese market still presents a huge opportunity for a wide range of UK enterprises.
China’s growing services sector, propelled by the country’s emerging middle class, represents a particularly strong opportunity for SMEs offering proven brands, including niche brands, and technology businesses, especially e-commerce and consumer technology enterprises.
This said, the Chinese market is vastly different to that of the UK and entrepreneurs must bridge the cultural gap in order to improve their chances of success.
Having helped many UK and international businesses secure Chinese investment and/or expand into the unique Chinese market, I have learnt that the following factors play a huge part in success:
Understanding and respecting local culture
It is important to understand and respect Chinese business culture and the tastes of Chinese customers. Don’t be afraid to seek advice from individuals or organisations already in the market or those with local knowledge and make sure to carry out proper research. It is also important to be open to tweaking your strategies where necessary.
Targeting the most appropriate market
If expanding into mainland China, aim for provincial cities. These are of a similar size to major cities in the UK, so have a potentially huge customer base, but are not as competitive as well-known cities like Shanghai or Beijing. These cities will provide a strong foundation to further expand across the country.
Establishing a strong base
In order to allow you to expand across wider Chinese cities, it is worth establishing a base in Hong Kong. Hong Kong offers high-quality (and relatively cheap) financial and legal advice applicable across mainland China. It is also an international city with strong links to the UK so will provide a solid base for your business in China.
Finding the right partner or staff
It is fundamental that you find the right partners and/or staff when looking to expand in China. Chinese working culture generally dictates that staff should obey superiors without question. This may work in many respects, but with regards to managerial or partnership positions, you need to ensure that your partners and staff understand your unique business culture and can creatively solve day-to-day business issues.