Suitable for Growth - All-in for China Page 3

Suitable for Growth |

he most significant and perhaps surprising observation
from the SfG project has been the importance of internal
barriers in the companies. An SME setting out to enter the

Chinese mid-market will typically be concerned with bringing
down costs, finding local partners, protecting against copycats
and other such external hurdles. But, in fact, the first keys to
success are to overcome internal barriers and align the company
around a whole-hearted China strategy.

The extreme nature of the Chinese mid-market doesn't leave
room for a half-hearted initiative that doesn't go all the way for
China it's all-in for China to succeed. There is enormous po-
tential in the Chinese market but it is not a free ride. Unless
companies realize and accept the extent of the commitment
that is needed, they will not succeed in lifting this potential.

The SfG project has identified 4 main preconditions for success,
which any Western company should ensure are fulfilled before
starting the journey.

The four A's of success are:

1) Ambitions at the Danish headquarters top management
sponsoring the initiative must truly aspire for success in the
Chinese mid-market.

High priority on growth markets. Emerging markets with
fast growth must have higher priority than developed
markets without growth despite the obvious difference
in size and importance for the current business.

· Right China

mindset top management must reset their

historical misconception

of China and seek new, first-

hand impressions of China.

Autonomous mandate to the Chinese subsidiary the
employees closest to the market must have freedom to
operate and their voice must be heard.

2) Agility of organization the organization must be flexible

and adaptive to the challenge.

Readiness to (re)structure China organization the com-
pany may have an existing, but inadequate organization
in China, hindering future growth in the mid-market.

· Willingness to accept

different mindsets traditional

ways of operating in developed markets may not apply
to emerging markets, so the organization must embrace
different mindsets with respect to working procedures,
branding, etc.

3) Access to market insights the needs of the customers in

the Chinese mid-market differ radically from those found in
other markets, so availability of market insight is crucial to
avoid traveling blindfolded through new uncharted territo-
ries.

· Courage to

distrust existing market knowledge estab-

lished assumptions in the organization must be chal-
lenged with fact-based analysis of the market.

· Opportunities to get

close to the customer it's neces-

sary to be in direct contact with customers to understand
their specific needs.

4) Availability of resources top management at HQ and the

project team in the local subsidiary must align expectations
of the resources that are required. The strategy must be car-
ried out by the best possible business development team.

· Encourage

entrepreneurial spirit the project team needs

to act as entrepreneurs and draw attention from top man-
agement to attract resources.

· Allocate

sufficient resources top management should

not fool itself into thinking that it is cheap and simple
to succeed in China. They need to invest the necessary
resources to a dedicated project team.

Executive Summary

This report documents the preliminary findings of the Suitable for Growth project the SfG
project. The project follows six Danish Small and Medium-sized Enterprises (SME's) who are
currently in the process of entering the Chinese B2B mid-market.

Misconception may be Chinese make poor quality, our brand is well-

known, China is one big market, we can sell our phased out products in
China, you can't do anything about IP violation in China, we are better
than the Chinese.