GB Club learns about doing business in China

Publish Date: Monday, April 12, 2010

Shanghai, Guanzhou, Beijing... all trade roads are leading to China, at least that's the direction for Neogen Corporation.

The company has close trade relationships with China; it sources production materials and sells products to China.

Developing and nurturing this relationship was the focus of the keynote speech by Charles Bird, Director of International Sales and Food Safety Diagnostics at Neogen Corporation, at the Global Business Club of Mid-Michigan luncheon held on March 31.

With the world's leading population, China has as much demand for quantity as it does for variety of goods and technology. Neogen feeds a niche of this market, and according to Bird, there are numerous trade opportunities in China for other local U.S. businesses.
 
Bird stressed the need for trust and open communication when developing international trade relationships with distributors and suppliers. "Those are some of the key ingredients to success in foreign trade," he said.

Trade partners have to lay out trade expectations before starting business. Bird advised traders to reach a consensus in price, quality, required trade equipments, staff training and delivery schedules to reduce frustrations when trading overseas.

"Everything, including the overseas selling price of your product, needs to be set prior to starting business," said Bird.

A U.S. business selling in China will need a modicum of local presence to ensure trading will run smoothly. 

A possible pathway is appointing local agents or distributors.  Most businesses shy away from international trade for lack of sufficient information on finding the right distributors or agents.  Bird outlined various ways of identifying potential suppliers and distributors including referrals, in-country interviews, on-site audits, and getting information from the U.S. Chamber of Commerce, among other strategies.

Other pathways include setting up representative offices in China, which become a company's own business administrative base.  According to Bird, this strategy works best when the parent company is dealing in multiple products or processes in the host country.

Creating a wholly owned foreign company is another channel of trading in China.  It is by far the most popular option for foreign companies wishing to set up in China, said Bird.

Lastly, Bird talked about establishing a joint venture in China.  "These work best after a period of trading with a local partner," Bird said.  "However, the success of your joint venture largely depends on finding a partner you can work with."

All these avenues require permission from a number of Chinese government agencies.

The Global Business Club of Mid-Michigan meets six times a year to focus on global issues important to mid-Michigan businesses.  It is sponsored by Michigan State University's Center for International Business Education and Research (CIBER), the Greater Lansing Regional Chamber of Commerce, Lansing Community College, Michigan State University College of Law, Foster, Swift, Collins & Smith, P.C. and the Michigan Manufacturers Association.

 

Emma Ogutu

Graduate Assistant

MSU-CIBER