China has risen and is here to stay. China is no longer emerging, but has emerged (or re-emerged) in a big way. This is not a trend or a blip – and the way business is done globally has shifted.
You need to rise to the “China challenge”
The “China challenge” is affecting us all in different ways. If we step back and look at things from a macro perspective, American stock markets are affected by fluctuations in China’s economy, as we saw when the Dow plummeted by 1000 points last summer.
Even at a micro level, real estate prices in some prime urban centres, such as Silicon Valley or Vancouver, British Columbia, are soaring due to heightened foreign investment. Western-based companies are feeling the severe competitive impact of China’s aggressive expansion plans in both emerging and developed markets. Now other emerging competitors are following suit.
Market dynamics have also changed.
Doing business in emerging markets can no longer be ignored as an essential part of a company’s growth plans. It is no longer a novelty, but a necessity.
Business, however, is done differently in emerging markets, from customer expectations to competitive dynamics. Product superiority is no longer the primary success factor; it’s no longer a game where ‘my box is better than their box so I should win the business’. Chinese companies understand this. They understand what it takes to win over emerging customers and therefore often win the business. This new level of competition is often leaving Western-based companies caught off guard.
Therefore, it is imperative that Western-based companies acquire a better understanding of Chinese (and other emerging competitors’) sales and marketing strategies and tactics, and in turn, modify their own global expansion strategies in order to be more successful.
Don’t just go global, be global
We need to get smarter about what to expect and adjust our strategies and tactics accordingly. I experienced this first-hand while leading a CEO-sponsored competitive sales support program at Cisco Systems in Silicon Valley.
There are a number of aspects to be cognizant of when competing with Chinese companies, such as severe price discounting and exceptional financing plans for customers. However, for the purposes of this article, I want to focus on their effectual use of politics to influence business decisions from the top down.
The Chinese government’s involvement in business has greatly assisted companies expanding outside of China, serving as ambassadors in trade agreements and influencing business decisions from the top down.
China incorporates specific deals into trade agreements at the highest levels – Ministerial and Presidential. When the discussions are about multi-billion dollar trade deals that help the development of a country or allow market access, a specific company deal worth millions of dollars seem marginal in the bigger picture, so others often permit them.
Naturally, when the Chinese government provides visibility and opportunity to the nation’s companies in other countries, the benefits are significant. The financial backing of Chinese companies by the government greatly accelerates customer acquisition and global expansion.
However, these two areas of influence are not always well-received by other nations and competitors given the business practice boundaries they cross, even by WTO standards. This tension was highlighted in a recent Forbes article: The China Factor: The One Thing Hillary And Trump Have In Common.
There is consequently a fine balance between the benefits and broader repercussions of government involvement on a larger global political scale.
Nevertheless, the use of politics in influencing business decisions (particularly in emerging markets, but also in developed markets) is not going away, and cannot be ignored by companies in other nations that want to be successful abroad.
The word ‘politics’ often has a negative connotation, especially in the West. And it’s not only governmental politics, but also organizational politics. Nevertheless, incorporating politics into business practices is essential in this new economy, despite how undesirable it might seem. Politics are inescapable.
Understand the importance of politics in business
You need to walk a fine line when incorporating politics into the business practices of your global expansion strategy, while also staying true to your own ethical boundaries and principles. And your choices will change over time as your strategic goals evolve.
We saw this when Google decided to retreat from China in 2010 over censorship concerns – affecting over 1.5 billion people by withdrawing their access to information. However, Google recently announced that they are reconsidering that decision and reinvesting into China today. One major reason for this consideration is that the market size and market access potential is too significant to ignore.
The world is getting smaller and larger at the same time. Different countries are evolving, growing and bringing large population masses with them, which creates a greater addressable market and exponential demand for existing goods and services. Hewlett Packard’s Meg Whitman took a similar approach, when she sold off 51% of HP’s Chinese server business to a Chinese partner as a concession in order to maintain access to this market.
There is an interesting back-and-forth that happens with allowing open market access, then taking a natural protectionist step back. Your company must be prepared to make these tough decisions based on longer-term goals and financial implications.
And so, we must all learn how to do the political dance in order to promote market access and support global expansion goals.
We’ve addressed political dynamics at a high level, but what can you do to deal with competitive challenges of a political nature from your working level?
How do you address the influence of politics on your sales activities abroad?
1. Know and understand that politics are expected and acceptable with emerging market customers
Politics play a significant role in the decision-making process, so adapt quickly to this business environment.
The cultural boundaries of some countries may differ from yours. You need to respect your own ethical and legal standards, as well as WTO rules, but at the same time get creative offering and demonstrating that additional value that emerging customers are seeking.
Simply spending more time and effort on long-term relationship building is a big start in that direction. Demonstrate that you are interested in their business for the long-run. Western-based companies often fly in and out after a few days and expect to close the business. It doesn’t work that way.
Show interest in their bigger, longer-term development goals. How can your company help them evolve and grow over time? Will you have local support staff available to guide them through whatever transition your product, service or local investment might entail?
2. Learn more about what government services are available to you
Connect with your regional trade commissioners who have relationships with your international customers and who can get you an introduction or put in a good word. They can also give you a heads up on upcoming projects, as well as political dynamics that may influence your success. There are also trade missions that can facilitate expansion explorations, as well as international development banks that can help you get the funds your customer needs in order to acquire your product or service offer.
3. Get your company’s Government Affairs group involved
They can use their connections to government agencies to defend you in circumstances of extremely unfair business practices.
Politics in business can be complex, difficult and awkward, but there are actions you can take to manage the ride on this new wave.
For more detailed advice and specific strategies and tactics, see the recently released Wiley book, The China Factor: Leveraging Emerging Business Strategies to Compete, Grow and Win in the New Global Economy.