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Collaborating for Business Success in China

Strategy

Victoria University's Dr. Val Lindsay draws on a recent research project to illustrate how sector-based collaboration can play an important role in NZ Inc.'s success in the Chinese market.

Recent research by a team from Victoria University on building a sustainable competitive advantage for New Zealand service firms in China and India1  shows that combining forces can be a powerful way for these firms to compete successfully in these markets. China is currently New Zealand’s second largest export market; however, we face a substantial challenge in meeting Government’s goal of tripling exports to China by 2015.

The research report, published in March this year, suggests ways in which this challenge can be met, with collaboration playing an important role. The study reports on the insights of managers from seventy firms in New Zealand exporting services or service-intensive products to China; it also reports on findings from their China-based customers. Six sets of recommendations emerge from the study. These address challenges relating to building New Zealand’s commercial visibility in China, improving firm-level capability, and building long-term competitive advantage.

The report suggest that resources and efforts should be directed toward improvement at three levels. First, the strong relationships built around New Zealand’s diplomacy in China, including the FTA, need to be enhanced and leveraged. Second, we need to build firm and managerial capability for conducting business in China. And third, New Zealand must focus on the strategic priorities identified in the study for the China market, in order to be competitive in the long-term.

According to the findings, implementing these recommendations requires a multi-level approach – that is, one involving the coordinated activities of Government, Government agencies, industries, and firms and their managers.

Where does collaboration come into the picture?

Fundamentally, although not always explicit, it underpins many of the responses to meeting the challenges outlined above. To focus on two key aspects: first, collaboration is important to build New Zealand’s strength in China; and, second, collaboration can help firms overcome the challenges of entering and conducting business in this market.

Regarding the first point, customers in China suggest that New Zealand firms must have a long-term vision and gain greater visibility in the market, if they want to have a sustainable business future in China. Too often, successful New Zealand companies fall below the radar because there are just not enough of them to build reputation in their particular industry. To counter this disadvantage, their Chinese customers recommend that New Zealand promotes its strengths in sectors where it has particular capabilities2  - and this requires our firms working together. It seems that sector-based collaboration is a key to success in this market.

Why Sector-based Collaboration for China?

There is substantial evidence around the world to show that collaboration among firms, especially small and medium-sized (SME) firms, produces better business outcomes for both the group as a whole, and the participating firms. Although there can be downsides, particularly if some members of the collaborating group do not contribute as expected, benefits of collaboration tend to outweigh the potential disadvantages.

Benefits include the opportunity for collaborating firms to pool resources to achieve higher production volumes for large orders, access more information on foreign markets, share distribution and marketing costs, share ideas for innovative new products or services, build networks, enjoy stronger bargaining power, and many others. Customers in China particularly appreciate having access to customized or integrated solutions that can often best be provided by supplier companies working together. Such flexibility can be an important competitive advantage for these firms.

Most New Zealand firms are in the SME category, and have limited resources and capacity for achieving these kinds of benefits on their own. Collaboration for these firms makes sense, especially in the context of China.

So, given the obvious advantages, to what extent are New Zealand firms collaborating to build sector-based opportunities in China? It seems that the findings on this question are mixed. The aviation sector is achieving some good results in China through collaboration among a number of New Zealand firms, and other sector groups are present, or seeking opportunities, in the market. There are also some examples of small numbers of firms joining forces to target particular market niches.

However, most respondents in the study agree that if New Zealand is to improve its trade with China, much more inter-firm collaboration is needed. If this collaboration is focused in particular sectors, New Zealand can showcase its capabilities in China, and, most importantly, build commercial visibility and reputation in these sectors.

Now to the second point. Aside from the challenges of pursuing sector-based opportunities, managers face many other hurdles relating to entering the China market and managing the firm’s day-to-day operations there. The following highlights from the research illustrate how firms can overcome challenges, with many lending themselves to collaborative approaches.

Key Points for Succeeding in China – Further Opportunities for Collaboration

  1. Ensure thorough preparation and knowledge; do your homework, know about the country, the industry, the market and customers, the key players, the culture and protocols, role of government; undertake due diligence etc; and develop a strategy for the market.
  2. Draw on existing New Zealand talent and experience in these markets, utilizing links with New Zealand managers based in China, as well as organizations like KEA. Also draw on the experience within the Chinese Diaspora in New Zealand.
  3. Ensure that the ‘value proposition’ being offered has a place in the market; make sure the market is ready, that the product / service is competitive and offers something unique and valuable to the customer.
  4. Take time to build relationships with the right people; get to know them, know their contacts, their capabilities, reputation, commitment; build trust etc.
  5. Be committed – and for the long-term; demonstrate commitment to potential and actual business partners or key contacts; build trust and collective vision for the long-term.
  6. Demonstrate commitment by having a physical presence in the market; employ a New Zealand expatriate, or local company representative, who is committed and available to the customer 24/7; keep a sufficient skill-base in the market to address customer service needs.

In summary, collaboration has an important role in improving New Zealand’s business engagement in China. Awareness of the business opportunities in China has increased markedly over recent years. For New Zealand, the China opportunity beckons, but the window is starting to close. The research discussed here highlights the urgent need for New Zealand to engage more effectively with China. The report provides recommendations for business managers and government agencies on meeting the challenges and achieving this critical goal for New Zealand’s economic future. Collaboration among firms is a fundamental part of the solution.

Dr Val Lindsay is an Associate Professor in International Business at Victoria University of Wellington.

To read the "Services Success in Asia" summary report please click here

For more information about the "Service Success in Asia" research project please click here.


Footnotes

1 “Service Success in Asia. Building a sustainable competitive advantage for New Zealand service firms in Asia: Spotlight on China and India.” (Report available at: www.international-services-research.vuw.ac.nz)

2 Sector-based opportunities identified in China include horticulture, agri-tech and agri-science, creative, dairy, legal services, education, infrastructure, food and beverage, and ICT.