State of Delaware
John Pastor’s international business career began in the private sector. He started as a clerk at Schenkers International, a major global logistics and transportation company, and climbed the ladder of success to the companyâ€™s board of directors. Pastor was then recruited to become president of Pandair, another international logistics company. The company had lost more than $6 million in the previous year and required a dynamic individual to return it to profitability. In 18 months, the company was turned around and sold to a competitor.
Starting his own private consulting firm, Pastor provided international merger and acquisition services to U.S. and European businesses. Concurrently, he was appointed as the first executive director of the newly formed Delaware World Trade Center. For 15 years, Pastor has used his international expertise to assist expansion of Delaware’s economy through international trade. His leadership, hard work, and relentless drive to increase international trade have greatly benefited Delawareâ€™s business community.
U.S. companies, including small- and medium-sized firms (SMEs) have the opportunity to expand in the Asian markets. Companies conducting business in Asia, specifically in China, need to understand the socioeconomic and cultural environment in that part of the world. Successful business is accomplished differently than in the United States. One major influence is personal relationships. People like to know who they are doing business with. Whether you are selling or buying, for a long-term relationship to succeed, a personal relationship should be developed with a Chinese partner.
U.S. companies have numerous resources in the United States to assist them in developing and maintaining business with international buyers and suppliers. Large U.S. companies already have established their subcompanies in China. These companies now sell their products in China. The companies also license manufacturing of their products in China and other Asian countries for sale locally and in the international markets.
The apparel sector in China is a major source of revenue for SMEs. Large apparel companies use some of the best high-speed manufacturing machinery to produce a large volume of products. Opportunities are there for U.S. and Chinese SMEs to work together profitably.
A U.S. SME interested in selling or sourcing a product must develop a relationship with a local partner or partners. If you are selling a product manufactured in the United States, you will need to identify the target market sector. Generally, U.S. manufactured apparel is higher priced then locally produced apparel. Therefore, it is necessary to determine how the product will be sold and through which marketing channel.
A major client base in the Chinese apparel market is teenagers. The growing middle class in the cities has higher incomes. Furthermore, parents wish to provide their children (usually just one child) with a better living standard than they endured, thus creating a generation of spenders.
U.S. SMEs generally try to do business with their American staff and resources. Selling in the international marketplace is different than domestic business. During the past 15 years of assisting companies in their international business, I have found failure is a result of certain mistakes made by the U.S. business person. The following is a list of the most common mistakes:
You will note I have provided eight (8) failure examples. The number eight (8) in Chinese culture is very positive; learn not to make these mistakes.
Here are eight tips to consider in order to succeed in the competitive international marketplace:
SMEs Can Expand and Grow in the International Marketplace
Large apparel manufacturing companies are located in various cities throughout China. There are also networks of SMEs that manufacture products. These networks generally are organized by a business person (a procurement organizer) who will take an order to supply a line of apparel. A buyer will place the order for a specific item that must meet quantity and quality requirements. The procurement organizer’s business is to collect products from many SMEs, combine the various quantities into a larger order, and transport to the buyer.
For example, a buyer may place an order for 10,000 Western-sized white cotton shirts. The size requirement could be 20 percent small, 30 percent medium, 40 percent large, and 10 percent extra large. The procurement organizer will in turn subcontract production to individual SMEs in several small villages within a close geographic area. The SMEs would work independently to manufacture a designated quantity of a specific size shirt. At a prearranged time, the procurement organizer would travel to the villages to collect the manufactured shirts and ship the entire quantity to the buyer.
This buyer could be just another middleman in the transaction. The social-economic environment in China is based on personal relationships. Therefore, the person contacting the SMEs in the villages would have a personal relationship with the local community. One important criterion is the ability to communicate with both SMEs and the buyer. There are numerous local dialects, and language skills are essential to succeed.
The best opportunity is for the U.S. business to visit the country, view first-hand how business is conducted, and learn about the local business practices. Maximize your opportunities and profit by eliminating middlemen in the transaction process.