So let’s say you are a NY business owner and you’re watching demand for your services collapse around your ears. Structurally, your company is in OK shape. You’ve got retained earnings, your debt isn’t crazy, your spend is high but manageable. The only problem you’ve got is that your forward cash flow is looking very, very thin. You need to start thinking about new models – or new markets. Then you remember that trip to China a few years ago. Yeah… China. That might be the answer.
And you’re right. China might be the answer for what ails the B2B service sector in big US cities. But the question has changed.
China isn’t about cheap manufacturing anymore. It’s about high-level business services and market expansion. Except this time, the Chinese are buyers of the business services – and they are the ones expanding their markets to include the US and Europe.
More and more high value-added business services like lawyers, accountants, management consultants, software developers, and designers are going to be forging cross-border partnerships with their opposite number in China. In a typical arrangement, both sides will actively develop business in one-another’s markets. The top guys from BOTH offices will service high-profile clients in NY and Shanghai, while the Chinese office can bulk up its team with plenty of skilled, moderately-paid staffers who can do the basic jobs just as well as their American counterparts – for about 60% of the cost. Every high-value business service follows a similar structure – a few very expensive rainmakers out front, and dozens of overworked college grads in staff positions making the bosses look good. Whatever the field, there is always a back-office. Settlement clerks, AR managers, paralegals, logistics, researchers, bookkeepers, accountants, designers, and coders – this is the army that keeps modern law, accounting, advertising, and consulting practices going. New partnerships will develop to take advantage of the lower costs – and market potential in China. Chinese partners are going to want access to mid-range clients in the US.
This is a whole different ball game from OEM factory work or old-style Sino-Western JVs. Westerners walked into those agreements like the fat rich uncle coming to a poor relative’s wedding. We just wanted to get in and out as quickly as possible without getting ripped off too much.
This time both sides have more to offer – and more to lose. Westerners have to know what to ask for and how to structure this new kind of partnership. Your list of deal points and variables will now include:
- Marketing partnership
- Your access to China
- His access to US
- Staffing – how you’ll use it as a competitive advantage
- Quality control
- BizDev responsibilities
If you have a business plan that doesn’t include aggressively marketing your top-end services to businesses in major Chinese cities, then you have to scrap it and start over. Marketing B2B services to China just became a much higher priority for business owners and senior managers in the US. China may end up being one of the last markets standing – but it takes time to develop. Start looking at your options now.
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Please help with a research project by taking a brief, simple & anonymous survey about US-Mainland negotiation. http://app.icontact.com/icp/sub/survey/start?sid=6256&cid=355149
My name is Andrew Hupert, and I’m a teacher and writer in Shanghai. I am now working on a project for my International Negotiation class at New York University’s Shanghai campus (in cooperation with East China Normal University).
Thanks very much for your cooperation in my research. I would be happy to share raw data with any participants who wish to see it, and will publish my findings on ChinaSolved.com , ChineseNegotiation.com and DiligenceChina.com .
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