Weekly Bulletin November 2011
Any software company with ambitions to grow surely must consider the China market – because that is where the growth is going to be for the foreseeable future.
The opportunity in the UK and Europe is mediocre at best, with UK GDP growth outlook for next year of 0.6% and Europe 0.5%. (European Commission 10 November 2011)
In contrast, China is trying to manage down its rate of GDP growth from the current more than 9% to a five year target of 7%. Many commentators think that 8% is more realistic. The previous five year plan had a growth target of 7.5% and the actual over the period was 10%!
The current plan aims to rebalance the economy from its dependence on low tech exports to an environment of high tech development and the encouragement of domestic demand.
This gives an increasing opportunity for foreign companies to supply the market – both domestic and industrial.
But this fast moving market is not easy. There are major cultural and legal differences to be aware of and adjusted to. And of course the Chinese work ethic is paramount.
A glimpse of the Chinese way of thinking comes from Jin Liqun Chairman of the Supervisory Board of the China Investment Corporation ( arguably one of the most powerful financial men in the world) referring to China and the West - “ We work and you enjoy” .
He also commented at a recent conference in Germany, referring to the European economy: – People need to work a bit harder and longer. And they should be more innovative. We work like crazy. (Ouch!)
It is into this stimulating environment that foreign companies of the right calibre can find growth opportunities and succeed.
The Chinese have a great sense of urgency in all walks of life and they have the capacity to surprise the West with their pace of change.
This is illustrated by the docking of the Shenzhou-8 with the Tiangong-1 orbiting module on the 3rd November 2011.
Since 2001, China has moved from 25 years behind US in the space race to launching 20 commercial satellites into orbit in 2010. This has been achieved in spite of an American embargo on the exchange of space know how.
On a more down to earth arena, the internet usage and the penetration of mobile phone is racing ahead. China, at 485 million, has the highest number of internet users in the world. (The United States has 245 million and the UK 51 million). They have some 277 million mobile web users and after a late start they have some 47 million 3G mobile users, with the commercial opportunity for advertising that it presents.
Social media is all pervasive. RenRen – the Chinese equivalent of Facebook, was ranked first in a brand image survey by CBN is moving into the B2C space. Sina Weibo, the Chinese equivalent of Twitter, with some 250 million users and claimed to be adding 10 million users per month, is reported to be due to launch in the United States soon. DangDang, an online book store claims to have more titles than Amazon. Microblogging is taking off as a commercial medium. Christine Lagard, the MD of the IMF joined Sina on 6th November and within a day she had 28,000 fans.
The key message is that the Chinese market is moving fast in all directions, both business and consumer. For software businesses, it’s a difficult market and all the right steps need to be taken:
Good market research to understand the market, the key players and the opportunities. IPR protection is an issue in China – but it needn’t be a problem if addressed properly.
All the marketing materials must reflect the Chinese design culture – which often is quite alien to Western eyes. Web site must be Chinese designed and not just translations of Western ones. They must be fast loading to attract a high ranking on the major search engine, Baidu, which has almost 80% of the market.
The Chinese buy on brand, so investment in brand development and reinforcement is important to foster brand loyalty – not just in the consumer sphere but also the business environment.
Above all, business in China is based on relationships. A good solid relationship is the foundation for business success. This is put succinctly by Grace Ueng, (a graduate of MIT and Harvard Business School and CEO of Savvy Marketing Group) “A personal relationship is more effective than a contract, which may or may not be enforceable”. To build up good relationships takes time, but it is an essential prerequisite of sound business. And don’t forget the government at whatever is the appropriate level – national, provincial or municipal - they must be on your side if you are going to succeed.
So, from the space race to social media, the Chinese economy is racing ahead. Some sectors are easier to penetrate than others of course, but any company with a good product and a great desire to grow should not ignore the opportunities in China.
To discuss further how to plan your move into new markets and achieve business growth, please call me on 01536 771440 to arrange a Free-No-Obligation Consultation. To find out how I can help you and your business visit my www.terryforsey.com.
About the Author: John Pickuphas extensive and long standing experience in the IT industry. His early career included industrial engineering with an American electronics company in the United States and the UK and overseeing a chemical development project in Japan for a British chemical company (an early example of outsourcing!). After a career in sales and marketing management with IBM, he founded Avington Systems, a software marketing consultancy. A wide range of projects included the setting up and running of the UK office of a Canadian software company. He has addressed IT industry events in the United States on the UK and European software market and taught a software marketing course in Beijing. He has a Bachelor’s degree in Chemical Engineering from Birmingham University and a Master’s degree from the Sloan School of Management at the Massachusetts Institute of Technology. john@avington.com www.avington.com
