BizChina
- Details
- Hits: 834
Excellent podcast/article up on on Technomic Asia's Business Blog and Podcast, entitled, "Ding-dong … China calling: Direct Sales in China," on how direct sales just seem to correspond naturally to the concept of guanxi in China:
Historically, sales in China have been based on this guanxi … I get the sale, not necessarily because I have the best price or the best quality product, but because I have good guanxi with you. However, this is rapidly changing in China: while good guanxi is a necessary condition to successful sales, it is by no means a sufficient one — I now have to bring good products to the market at good prices. And for most industrial and consumer products companies, this is a good thing because it means that they can develop more “professional” distribution channels and get a broader sales footprint in China.So let’s go back to the direct-sales model … this is a model that leverages (and even celebrates) guanxi-based sales. Sales most often are made to friends and family (or the friends and family of other friends) and, while these product suppliers are certainly concerned to bring good quality products to market, I would argue that they are relying even more on the strength of their sales teams’ guanxi in their local area. The strength of the direct-selling model is that it goes with the flow of traditional Chinese culture, not against it, by making each sale personal. And all you have to do is multiply the large number of people in China by their growing disposable income and you understand why executives at companies such as Mary Kay, Amway and Avon are having a hard time controlling their excessive drooling.
One of the toughest things about selling a consumer product in China is getting it into distribution. The post nicely sets out how the choice is often between the traditional and more modern models:
This is a topic too large for one blog post but suffice it to say that China is in the midst of a sea-change in its retail channels, moving from a “traditional” model — dominated by mom-and-pop stores and small specialty stores — to a “modern” model dominated by the larger hypermarkets, “Big Box” and grocery chains. If you look at China as a whole, a slight majority of consumer products are sold through traditional channels; however, the growth is in the modern channels and particularly in the so-called “hypermarkets”, chains such as Wal-Mart, Carrefour, Rt-Mart, etc.
Both methods have their "issues." Distribution through mom and pops can be, as one would imagine, difficult to institute, and sometimes even chaotic. But distribution through the hypermarkets is also definitely not without its own set of problems:
However, what everyone is realizing is that these modern chains, while good looking on the outside, are often very difficult to work with simply because they are so big and wield so much power. The cost of doing business with them — what consumer products companies call “trading terms” — are often quite high in China compared to the rest of the world so while consumer products companies are often happy with the volume that moves through modern channels, they are not as happy with the margins (and multinational consumer products companies are ALL about the margins!). These companies are often finding that the hypermarkets are not all that good at merchandising and marketing themselves so consumer products companies often feel that they end up paying a lot in terms of marketing fees and not getting all that much for it.
The thought is that direct sales may be the best way to get certain products into consumer hands and that direct sales may make better sense in China than elsewhere. Because my law firm just started working on a very sensitive direct sales matter, I am going to bite my tongue on the legal issues surrounding direct sales in China and merely state that many in China's government are not terribly comfortable yet with this method.
Read more: Ding Dong, China's Direct Sales Calling. Instant National Guanxi?
- Details
- Hits: 794
Those who follow me on Twitter (@danharris) know that I "talk" about more than just China on there, and that is one of the reasons why I have not and will not add my tweets directly to this blog. I would guess about 70% of my tweets do involve China, with another 20% or so dealing with international law, business and political issues. The remaining 10% likely will deal with non-China law, movies, food, and baseball.
Since Christmas, I have been tweeting a fair amount on my dissatisfaction regarding America's airport terror screening. I have called for us to institute a system that looks to discern not only weapons, but terrorists:
We must "Israelify" our own airports by screening for terrorists, not just for weapons. http://is.gd/5JeSkHow Israel screens for terrorists.And how WE must start doing the same if our air travel is ever to be safe http://is.gd/5ISrs
Will this guy be on your next flight? Quite possible he will http://is.gd/5IRPF Let's start screening for terrorists,not just weapons
US airlines need to switch to El Al type security and that includes profiling. http://is.gd/5CtkG
And then today it happened and I tweeted the following: YES!!! US starts screening by country. We have chosen common sense over getting killed!!!! http://is.gd/5Lj3y
I am not an expert on security nor an expert on terrorism. But every single day I deal with international businesspeople from Asia and I know they are not at all happy with the way things have been going with respect to US security screenings and I know that unhappiness is costing us billions of dollars we cannot afford and that makes me very unhappy, on many levels.
Starting Monday, the United States will be instituting the following changes in its airport/airplane security:
Citizens of Cuba, Iran, Sudan and Syria, countries that are considered “state sponsors of terrorism,” as well as those of “countries of interest” — including Afghanistan, Algeria, Lebanon, Libya, Iraq, Nigeria, Pakistan, Saudi Arabia, Somalia and Yemen — will face the special scrutiny, officials said.Passengers holding passports from those nations, or taking flights that originated or passed through any of them, will be required to undergo full-body pat downs and will face extra scrutiny of their carry-on bags before they can board planes to the United States.
So why am I writing about this here? Because this directly and unequivocally impacts US business with China, and other Asian countries. Let me explain.
A couple years ago, a friend of mine, a very very prominent attorney from Korea, who is now actually a senator there and occasionally mentioned as a presidential candidate, came to Seattle to visit me. This person is (or at least was) very pro-US, as is his Korean political party, the Grand National Party. We had scheduled a 6:30 pm dinner, along with a Korean lawyer from his firm who was studying at the University of Washington law school, and the head of SK's Seattle office. This Korean lawyer (now senator) was due in at 5:15 pm and we figured he might be a few minutes late. A few minutes? He did not end up joining us until around 9:00 pm because he, his wife, and his two kids were all RANDOMLY pulled aside and questioned and searched for two hours. Two hours.
He was so mad, he could barely stand it and that night the four of us talked about how the United States had become fearful, crazy and had lost its way, and how actions such as these would eventually weaken our position in the global economy. This Korean lawyer insisted he had never been so humiliated in his life and that his vacation and that of his family had been ruined. He talked seriously about returning to Korea the very next day, and canceling the Disneyland portion of his trip. He swore he would never return to the United States and would tell others in Korea to do the same. He did take his family to Disneyland but he has yet to return to the United States.
About a year ago, a very similar (though not quite as bad) thing happened to a Chinese lawyer with whom my firm works. He too was furious and thought it ridiculous that the United States would single out a Chinese lawyer who has been coming and going to the United States for years. He told me that many of his Chinese clients were choosing Mexico and Canada for their American operations, largely because they could neither trust nor stomach the viccissitudes of US visas and immigration.
Talk to just about anyone from Asia who comes to the US frequently and I am sure you will hear similar stories.
As someone who very much wants the United States integrated into the World economy, both for selfish and selfless reasons, I have for years found the way we treat foreigners as counter-productive and nutty.
We have to play the odds and the odds are overwhelming that Korean lawyers are not terrorists. And guess what, the odds of a Madrassa student from Yemen being a terrorist are way way higher. Now before anyone jumps down my throat, let me make one thing perfectly clear: I am NOT saying that every Madrassa student from Yemen is a terrorist or even that a majority or even ten percent are. They are NOT. But, I am saying that the chances of that person being a terrorist are much higher than a Korean lawyer and it only makes sense that our security screening reflect that. And I do realize that as soon as we start screening for those who have been to Yemen, the terrorists will be sure to avoid Yemen and seek to co-opt Korean lawyers to carry their bombs for them. Those are risks with which I can live.
And I do understand the unfairness of extra screening for the person who travels to or comes from Yemen who likes the United States every bit as much as my Korean lawyer friend did and I feel for that person and wish it did not have to be this way. But, to put it bluntly, I favor our incurring that problem over our continuing to piss off a far larger (both in terms of numbers of people and economic impact) part of the world with the way we used to do things.
I have already sent emails to friends and clients in Asia explaining the new rules to them and how they can likely expect better treatment the next time they come to the United States. I have received a couple emails back, all positive. I have yet to hear from my Korean senator friend, but I expect a positive response from him also.
The bottom line is that the United States is sending out the message that those who want to do business with us will be welcome, while those we suspect are coming here to kill us will be thoroughly screened. I recognize that this change in our security screenings is far from perfect and I truly wish things could be otherwise because there is definitely unfairness involved. But I also see it as unfair to make everyone suffer needlessly and I think it is time we do something new. We have to.
And before anyone chastises me by comparing this new screening policy with how we treated the Japanese during WWII, let me say that I do see some similarities, but I also see enough differences to warrant it. My 12 year old daughter (good for her!) sees the new policy as racist, but I do not and if I did, I would be opposing it. The screening has nothing to do with race and everything to do with those countries from which terrorists inexorably tend to come.
Have at it people.
UPDATE: A leading travel blog, Joe Sharkey at Large, likes the new screenings and had this to say about it:
A couple of years ago, there would have been some howls of protest within the U.S. against any idea of “profiling” an entire nation, even one known to be friendly to terrorist organizations.My guess is, not this time. In my opinion, this is a smart move by the TSA. It obviously took some fast, smart footwork in coordination with other nations.
I haven’t yet seen the complete list, but the following countries are on it: Pakistan, Saudi Arabia, Yemen, Iran, Sudan, Syria, Cuba, Afghanistan, Somalia, Libya, Lebanon, Algeria.
Expect indignant yowls from those countries.
I say, tough. Suck it up.
The Hot Air Blog seems to like the new rules also, though wonders why Venezuela did not make the list.
Read more: US Starts Terrorist Screening By Country. I See Great Things For China (Asia) Business.
- Details
- By David Cao
- Hits: 828
When Wenzhou entrepreneur Hu Bin became the first Chinese investor in Dubai's World Islands project in 2007 and bought the 30,000 sq m "Shanghai Island", he was regarded by his hometown media as the nation's hero. However, two years later, his investment is being scoffed at as a loser's bet as work has come to a halt.
Dubai, a desert city built on a construction boom funded by billions of oil dollars, is now stuck in a financial crisis. And Hu's Shanghai Island project isn't showing any signs of work resuming. But Hu insisted that his investment in the petroleum-rich emirate was right. "I'm quite well and I still expect a rosy outlook in Dubai investment," he said.
Formerly employed by China Construction Bank at a Wenzhou branch, Hu built a broad personal network in the banking arena that helped him open a business in the early 90s to provide a private financing service. He later shifted his focus to property development, founding Zhongzhou International Group Co in Shanghai in 1998.
Hu Bin shakes hands with Nakheel, owner of the World Islands, in October 2007 after clinching a deal to purchase the Shanghai Island for $28 million.
- Details
- By David Cao
- Hits: 1090
SAIC Motor Co Ltd sold more than 82,000 cars of its Roewe and MG brands between January and November of 2009, up 160 percent over the same period of the previous year. Full-year sales are expected to hit 90,000 units, the company said.
The top Chinese automotive group, also partner of Germany's Volkswagen and US carmaker General Motor, SAIC plans to double the sales of its two wholly owned brands to 180,000 in 2010.
It will soon introduce several new models of its own brands this year, including the MG6 compact, Roewe A-class model and the Roewe SUV.
The company is also developing new-energy vehicles that carry its own badges. It will commercially produce the Roewe 750 petrol-electric hybrid in 2010, which uses 20 percent less gasoline.
In May the company will unveil its first plug-in hybrid electric car, the Roewe 550, which can save more than 50 percent on fuel consumption. The model will be put into mass production by 2012.
Also in 2012, the company will launch its own brand of purely electric-powered cars that have zero emission.
Last month, the company announced it will set up a joint venture with US-based A123 Systems Inc, one of the world's leading lithium-ion battery suppliers, to co-develop battery systems for its green vehicles.
According to Chen Hong, president of SAIC Motor Co Ltd, developing electric cars is an inexorable trend and auto manufacturers should prepare for the fundamental change.
SAIC has already successfully developed several kinds of new energy vehicles, including a dimethyl ether coach, hybrid coach, electric coach, ultra capacitor coach, hybrid sedan and plug-in fuel battery sedan.
The company plans to supply nearly 1,000 alternative energy vehicles to serve the World Expo this year, including purely electric-powered, as well as ultra capacitor coaches, fuel battery and hybrid vehicles. It displayed six new energy models for the Shanghai World Expo at the 2009 China International Industry Fair in November last year.
- Details
- By David Cao
- Hits: 1295
China International Capital Corp (CICC) topped the rankings of the underwriters of China's initial public offerings (IPOs) in 2009, making an estimated 1.23 billion yuan ($180.14 million) from fees, Bloomberg data showed.
The earning of the country's largest investment bank was boosted by underwriting the China State Construction Engineering Corp's 50.1 billion yuan IPO, the world's second-largest in 2009. CICC also took two other heavyweight companies public, China Shipbuilding Co Ltd and China CNR Co Ltd, raising 14.7 billion yuan and 13.9 billion yuan respectively.
CITIC Securities, the top underwriter in 2008, fell to the No 2 spot in the ranking, making 855 million yuan from IPO deals totaling 28.7 billion yuan, according to Bloomberg data. The third slot went to Orient Securities, which earned 258 million yuan from IPO deals worth 11.9 bllion yuan.
IPOs are among the most lucrative advisory businesses for Chinese securities firms as China has witnessed an IPO boom since it reopened the market last June after a 10-month halt blamed on the widespread global credit crunch.
Chinese securities companies saw an exponential growth in their revenues from the IPO business, making a total of 4.76 billion yuan from underwriting fees, doubling the 2.35 billion yuan in 2008. But the earnings still lagged far behind the 7.61 billion yuan made during the pre-crisis period in 2007.
More Articles …
Page 76 of 120