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(Last updated: 30 Nov 2007)
Distributors, agents and local representation are a critical part of an export strategy for China. China can be a complex business environment, often very different from Australia or other Western markets. Therefore, Australian companies need strong in-market representation to enable them to understand the idiosyncrasies of the market, marketing and distribution channels, buyer identification, product support and relationships with key government agencies in the market.
In general, most exporters will start by engaging a Chinese company to be their agent or distributor. Chinese companies importing products need to have an import licence. However, if local agents or distributors do not have import licences, Australian companies can import through an import-export trading company. Australian exporters should confirm with their potential business partners which import approach will be used.
As the business develops, consideration may be given to appointing a full-time employee in the market, most likely a locally-engaged Chinese person. If business continues to grow and expand, consideration might then be given to posting an expatriate manager from Australia.
It is particularly important to choose your local partners wisely, as these decisions can make or break your business. Identify and check the bona fides of potential in-market representation. Obtain a number of different opinions and background views on potential partners before making your decision.
Australian companies should be wary of people and companies that promise the world, constantly saying they have good 'guanxi' (Chinese term for relationships and connections) with senior Chinese officials; and are overly pushy to seal a quick arrangement to represent you.
The key factor is to ensure you have someone who knows the market very well and can grow your business in China. Companies should look for in-market representation that has a good 'fit' with the company, business operating style and good alignment in business objectives for the China market. It is vital that these mutual objectives be understood, agreed and monitored in an ongoing manner.
Ideally, the Chinese partner should be in a position to provide a range of possible inputs to the business partnership:
- A physical site (ie. office, plant, land for development, etc)
- Comprehensive local market knowledge in the area of business activity
- Distribution networks, import license or access to import systems
- Access to raw materials
- Commercial and political connections
China is a very large and diverse market with varying levels of economic development across different regions. It is virtually impossible for one Chinese company to cover the whole market. Therefore, you should consider a number of different in-market representatives covering different parts of the market (eg. north, east, central and south China).
Chinese business practice is heavily relationship based, so Australian companies need to be willing to spend time in the market with their business partners. You should also consider bringing your business partners to Australia to develop strong relationships and trust, on which very good business can be achieved.
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