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Nurturing Business Relationships in China Workshop
Business owners looking for ways to build successful relationships with distributors in China heard from industry experts at a workshop at Auckland University Business School in December.
The Nurturing Business Relationships in China Workshop was aimed at SMEs (small and medium enterprises) and was jointly held by the Asia New Zealand Foundation and the University of Auckland Business School.
The workshop combined the first-hand knowledge of New Zealand businesses practitioners in China with the university's findings from its research project, Growing New Zealand Businesses (GNZB).
New Zealand Trade and Enterprise (NZTE) regional manager for China Glen Murphy and international market manager for yoghurt manufacturer EasiYo, Mark Ventress, shared their observations on how well New Zealand companies are doing building relationships with Chinese distributors.
Following the speakers' interactive presentations, GNZB research team members, Dr Antje Fiedler and Dr Ben Fath led a group work session on evaluating and selecting distributors.
Areas of growth in China – Glen Murphy
In his update on New Zealand business in China, Murphy said the economy is still growing and exporters needed to be ambitious. "To be taken seriously, you need to be aiming to at least double your growth every year.”
He said New Zealand companies in the fitness space are doing well, and the rapidly ageing population meant opportunities for exporters of healthcare goods and services are opening up.
With China’s middle-class expected to grow by an additional 200 million by 2025, other sectors with strong prospects for growth include premium food and beverages, leisure and lifestyle, education and technology.
Murphy said in the tech sector New Zealand companies need to be careful not to be blinkered by Silicon Valley and to recognise that China’s tech-sector is not only massive but also innovative.
“The venture capital sector in China is growing rapidly and presents a real alternative to Silicon Valley for New Zealand’s tech sector. It’s true, there are challenges such as different programme languages, but it shouldn’t be overlooked that the sector is very vibrant.
“China is going through a process of innovation and fragmentation, and if you can identify the right fragment, you can find the right business opportunity.”
Murphy noted that New Zealand businesses are now learning what it takes to succeed in China.
“The way New Zealand business is engaging with China is changing. You now see a lot more senior-level commitment with senior management making visits to China, which was missing before.”
Problems persist, however, including not taking a longer-term view and tending to, “look for single answers to problems - looking for a silver bullet," he said.
"In-absentia relationship management is still a characteristic of New Zealand companies who underinvest in marketing. Local distributors find this frustrating; New Zealand companies should be helping with that.”
Another area Murphy said needs more work is attention to pricing decisions. "Chinese consumers are very value-driven – for them, it’s not just about price. Lack of consumer understanding and lack of flexibility in customisation are also areas exporters need to work on.”
He sees other ways in which New Zealand companies are missing opportunities to partner more effectively with companies in China: "What we are not yet seeing is New Zealand companies following Chinese companies into global markets - they are still only thinking about China.”
Laying the groundwork essential – Mark Ventress
EasiYo’s Mark Ventress said once you’ve decided there is a market for your products in China, appointing a distributor is part of the marketing plan, but it shouldn’t be the whole plan.
He said while clear expectations and ambitious targets are important, so is the engagement and motivation of your distributor.
“When engaging with China, you aren’t just competing for product shelf space but also your distributors’ mind-share; so, think about your approach to brand investment. Nobody can market your products as well as you - distributor passion for your product is vital.”
He said it is important to think about what you are going to invest in the partnership before negotiations start and be in a position to jointly work out an investment plan.
Murphy advises companies to resist the temptation to jump at opportunities as they present themselves and to instead thoroughly investigate prospective business partners.
According to Ventress: "The more up front work you can do, the more likely you are to find the right partner."
He says a key piece of advice is to ask to see the distributor’s warehouse as it can reveal a lot about their capacity to market your products effectively.
The workshop was the first in a series that will continue in 2017 in Auckland, Tauranga, Hamilton, Napier and Christchurch. Details can be found on the Foundation’s events page.
If you're interested in taking part in an Asia New Zealand Foundation business programme workshop, please contact director of business James Penn.
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21 December 2016