UK-China Business: Interview with Matthew Grandage
Matthew Grandage runs Grandage Consulting, aka Guan De Zhi, to advise UK businesses on how to succeed in trade with China. In this exclusive interview with KnowledgePower, Matthew shares his up-to-date insights and recommendations.
1. Behind the news headlines, what do you view as the actual trend in UK businesses selling into the Mainland China market?
MG: The trend is clearly upward. UK exports of goods to China have more than doubled since 2010 and increased by over 37% in the last 2 years – they are now worth about £15 billion to the UK economy.
Jaguar Land Rover’s success contributes massively to these figures, of course (the West Midlands region actually reported a £1.74 billion trade surplus with China last year), but I’m equally excited about the number of small-medium sized enterprises (SMEs) that are carving out their own niche in China’s markets. That’s why I’m running a series of features on my website, focussing on different British SMEs who are doing business with China, and asking what they’ve learned through the experience so far.
2. In your experience what kind of products have a strong advantage in China? ... And which products don't work?
MG: The first characteristic would be that they must have a unique selling point. UK products don’t stand a chance in the Chinese market if they are competing on price only.
In addition, three kinds of physical products that stand a good chance are:
- Consumer goods with a well-known, desirable brand;
- Food and beverage products that can only be made in the UK because of local know-how, and are niche products as far as China is concerned;
- Products that are safety-critical in some way, which involve proprietary knowledge, or where high build/design quality are essential.
3. One of the principal fears of selling hi-tech or proprietary products to China is that it just gets pirated and the IP owner is thrown by the wayside. Is this fear justified?
MG: Research by the US Chamber of Commerce in China*suggests foreign businesses already working in there do not rank IP protection among their top five challenges – it featured more highly a few years ago. Labour costs, unclear regulations and a shortage of qualified labour are their biggest concerns. Most of them feel that the situation regarding IP protection enforcement is improving, though China remains a relatively difficult place to protect IP.
* [China Business Climate Survey Report 2015, pages 20, 29 , available from http://www.amchamchina.org/article/13962]
It’s still really important to register trade marks in advance of entering the market, partly because China has a “first to file” policy. I suggest anyone who needs advice about IP matters in China to talk a specialist, for example James Love (www.jllip.com) – James is an expert in IP law.
4. Apart from trading physical products, can you see a market in China for UK services?
MG: Yes, absolutely! But once again the key is establishing whether you have something that China wants, and doesn’t already have. And then you’ll need to market it in a way that works in China.
Here’s a great piece of advice from LNP China’s Andy Clayton:
“The key question you have to answer … is whether the Chinese market will really have an appetite for your product, service or way of doing business. The assumption that because it is in demand in your home market, therefore it will work in China, is fatal. You can safely assume that whatever it is that you sell, or the way that you sell it, will have to change in order for it to work in China.”
5. What are the prerequisites for a UK company to succeed in expanding into China markets?
MG: Doing business with China takes a lot of commitment over a long period of time if you’re going to do it successfully. And even though e-commerce has opened up all sorts of new possibilities for British businesses, it still requires significant time investment.
Small businesses and start-ups need to think really hard before getting involved – “do I really want to give (say) 15 hours a week to the China market?” Because, honestly, there is no point playing at it.
As a very minimum, a company looking to start business with China must expect to do the following, with specialist help:
- Give significant time to market research, to establish whether there is an appetite for the product;
- Be prepared to rethink both product and marketing in order to suit China;
- Translate marketing, technical documents, and possibly even some internal procedures into Chinese;
- Establish whether service or produce can be legally traded with China;
- Set up a robust system to make and receive payments;
- Set up appropriate IP / trademark protection;
- Depending on marketing strategy, be prepared for owner / senior management representatives to make at least two week-long visits to China per year. This will be necessary if you are to establish representation, train distributors and so on.
If that all sounds like too high a cost, then probably it’s too soon for your business to consider entering the China market – you just don’t have the resources yet.
6. For Western companies which are succeeding in business with China, what are the attitudes which count?
MG: This is a question I’ve been asking a variety of British SMEs recently – what does it take to be successful in China? Here are some of the things they have said: good business practice, flexibility, credibility, approachability, trust relationships, and TIME.
There is no secret ingredient that’s needed for success in China, but what is essential is a commitment to build quality business relationships for the long-term. I think a helpful way to understand this is in terms of “friendship”. Chinese partners want to do business with trusted friends wherever possible – is your business ready to do what it takes to build those kinds of relationships in China?
I’ve written more about Chinese business friendship, its cultural causes and implications, in a piece called “Chinese business relationships - are we strangers or friends?” You can download that free from my website.
7. How is China business marketing consultant different to a translation agency or a trading company?
MG: A China business marketing consultant can help you establish whether there is actually a place for your product there, how you need to present that product, and what platforms will work best for marketing it.
A translation company can translate your website and other materials, and a simple trading company can add your product to their list, but neither of them can answer these crucial questions – how do Chinese people make decisions about buying this kind of product usually? How will they make those decisions next year? Do these things vary between regions, or other market segments? Specialised China marketing advice can make all the difference.
8. Can you point to any big unexploited market areas or developing trends in China?
MG: There are many, but I’ll just highlight one – healthcare management. China is desperate to learn from the West about how to improve its design and management of hospitals, dental care and care-homes for the elderly. In fact, this afternoon I’m meeting with an architectural practice (DWA Architects) to ask them about precisely that.
They are part-way into a big care-home project in Shunde, near Guangzhou, and expect to be doing much more work in China in the next few years. I’ll be asking, why do they think China feels the need for their services? And what are they learning from the experience of managing such big project there?
CBBC and UKTI both agree – there are many, many opportunities to partner with health- and elderly-care providers in China right now.
- Located in: Portsmouth, UK
- Specialize in helping businesspeople understand Chinese worldview, values and culture; advice regarding building good relationships with Chinese partners; support for business meetings and trips (planning and debriefing)
- Provide targeted market research and market intelligence reports
- About Matthew Grandage: I’ve worked for 15 years in China, and have lots of experience of managing Chinese staff and building relationships with Chinese business partners. I’m an experienced trainer and presenter too.
- Other specialists: our network includes experts in China trade, digital marketing, IP protection, Chinese-English translation
- Clients: SMEs of any kind anywhere in the UK, though because I’m a mechanical engineer I find myself drawn to engineering companies especially.
Matthew Grandage [email protected]