Five Tips to Help Multinationals Succeed in China

Companies That Come to China Without a Strategic Long-term View Will Be Shut Out of the Market, Warns Ogilvy PR's Scott Kronick

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BEIJING ( -- Listen today to global business leaders discussing growth and one word is certain to come up--China. Companies of all shapes and sizes have turned to China as a possible option for growth.
Scott Kronick
Scott Kronick
And why wouldn't they? With robust economic growth over the past decade expected to continue well into the future, if your company offers something China needs, you no doubt have a market here.

Yet most business leaders unfamiliar with China do not realize the time, resources and planning required for business success. Here are five tips.

1. Work to understand and connect

Don't be mesmerized by the size of the market until you understand the regulatory body overseeing your industry, and plot the decision makers you must target .

In China, the government is omnipresent and regulates all industry. For a business to operate, multiple levels and units of government regulators must approve every business decision. These units form a complicated network, at times without an overarching body to act as administrator or coordinator.

The ambiguity is intentional, allowing the government some wiggle room in determining how it regulates industry in China. The first step for businesses is to understand the regulatory bodies and to work to determine the key decision makers and influencers who reside in such departments.

The good news is that China's legal environment has become more transparent and clear over the past decade, although the framework for how businesses are regulated continues to evolve.

2. Align with China's priorities

Success does not depend on how good, high quality or cost effective your company's product or service is. It begins with the Chinese government 's priorities for the people and the economy, and then considers how your company's product or service addresses that need.

Let's not forget that the Chinese government first and foremost wants domestic industries to prevail. However, opportunities do exist for multinationals that understand what is needed and how to engage with the government.

For example, IBM's Smarter Planet campaign defined how technology can impact life in the future and its relevance to cities and critical industries. The campaign positioning in China is not about IBM as much as it is about the impact of technology in helping countries, cities and industries operate in a smarter way. This is something that resonated in China and has paved a pathway to partnership opportunities for tIBM.

3. Establish "partnerships" and share best practices

Think how a partnership for your company can be aligned to the government's goals. Showing how involvement from your company can raise the overall level of an industry is a start. Whether a partnership involves an ecosystem effect, where your company's involvement will raise the level of the entire industry, or investment which results in jobs, all such messages speak to a broader strategic approach and a sense of information sharing.

Another area of partnership that is increasingly popular is the global expansion of Chinese businesses, a.k.a. "China Outbound." Over the past several years, state-owned enterprises have required senior managers to attend training programs to help domestic enterprises "go global." Some multinationals with successful China businesses have understood this and found a way to "go global" together with China.

For example, mining giant Rio Tinto and the Aluminum Corporation of China (Chinalco) have launched a joint exploration project in Guinea, Africa. The partnership is greatly valued by the Chinese government as it meets an urgent need of the government to gain competence and experience in global expansion.

4. Prepare for long-term engagement through corporate social responsibility

One thing that is certain in China is that companies that come without a strategic long-term view will be shut out of the market. One approach to conveying long-term interests is through corporate social responsibility (CSR).

Since the mid-to-late 1990s, multinationals in China have been met with rapidly-increasing expectations from government, media, and other stakeholders to assume ever greater social responsibility. There are many reasons for this, including the sheer economic need to overcome the enormous environmental and social costs that have come with leapfrogging 30 years of development.

Within this context, companies are expected to do more than what is required by law to address such issues. For companies, it's important to pick the right cause that aligns with the priorities of targeted government stakeholders, while simultaneously linking with the company's strategy.

Examples of strategic CSR that are closely positioned with the government include Coca Cola Co.'s efforts to invest in schools and education and Pfizer's strategic investments in research and development and partnerships to help the country with healthcare reform.

5. Focus on Building Reputation

5. Know that the government cares about working with successful and reputable companies. Their thinking: "If you are a company that is reputable, you present less of a risk." Risk-free resonates with officials at every level of government.

In managing your company's reputation in China, do not be shy about sharing facts and figures about your size, success, fame and tenets that have made your company great. Reputation also extends to how you operate in China. While we recommend flexibility in operations and understanding market forces, this should not impact anything that changes the basic principles in the way you conduct your business. There is a term in China called guanxi, which refers to relationships.

Many people will tell you that guanxi is critical to success. Our view is that it is certainly important to have the right relationships in place, but great relationships without a company that has a strong reputation and a principled way of doing business will not succeed in China.

Scott Kronick is president, North Asia at Ogilvy Public Relations Worldwide, based in Beijing.

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