Fred Dunayer: Welcome to the SCORE small business success podcast, Been There, Done That! To get free mentoring services as well as to see the wide variety of resources available for small businesses visit our website at www.score.org or call 1-800-634-0245. Here is your host Dennis Zink.
Dennis Zink: Episode number 5, international trade, exporting. Fred Dunayer joins me in our studio today as co-host, SCORE mentor and our audio engineer. Good afternoon Fred.
Fred Dunayer: Good afternoon.
Dennis Zink: Our guest today is Charles Steilen, we call him Chuck, which is what he prefers. Welcome to Been There, Done That!
Charles Steilen: Thank you, thank you.
Dennis Zink: Having worked in sales and new product development at Kimberly Clark, Chuck completed his PhD in marketing from the University of Oregon which he also served as professor of marketing at the University of Illinois and Georgia State University. He has also been a consultant to US companies. For 28 years Chuck has been a professor of international marketing at the Chinese University of Hong Kong where he was a consultant to multinational and local corporations on international trade and to other organizations and governments throughout Asia.
Chuck was also a marketing columnist for Hong Kong, South China Morning Post newspaper. He has provided marketing and export training for 125 small to medium sized Hawaii businesses and exporting advice to the Hawaii export council. He also served as Dean of the College of Business at Hawaii Pacific University. As an international marketing consultant Chuck led a US mission to Hong Kong and Beijing last year.
Today Chuck serves as a columnist for Manufacturing Today magazine where he writes about exporting. He is also Vice President for business development for Sister Cities Association and its eight foreign sister cities.
Chuck, welcome to Been There, Done That!
Charles Steilen: Thank you, looking forward to this meeting today.
Dennis Zink: Good, just as a starting point I know you have a very interesting background, why don’t you explain what led you to move to China? Tell us about how many years you’ve been there and Hong Kong.
Charles Steilen: In 1975, I was a professor at Georgia State University and had started my own consulting business in Atlanta. Things were going along, there was a recession in 1975 however. One day a letter came and I opened the letter and it said, “Would you consider coming for two years to the Chinese University of Hong Kong to help us develop our graduate school of business?” I thought it was a joke at first, that one of my friends had set this up. I called my friend and I said, “This is a great joke,” and he said, “We are not smart enough to think of this as a joke.” The phone rang and it said, “Did you get our letter? Will you come?” About 8 seconds later I said, “Yes, I’ll be there soon.”
In August of ’75 I took off. I went and bought a map, I had to find out where Hong Kong was. I went to a restaurant in Atlanta called Hoho, I had no idea what it meant. I said, “It looks like I’m going to go get some real chop sui,” the guy who owned the restaurant said they don’t have chop sui there. That was the beginning. That changed my entire life.
Dennis Zink: Oh my gosh. Talk about exporting; why would a company want to consider exporting? Is the US market large enough?
Charles Steilen: The US market is large enough and that’s one of the problems that many of the small and medium sized businesses only sell to an area, the Midwest or the East coast. They finally wake up and say, “We have to expand our sales. Maybe we can go to the West Coast.” If a company can do that and do it successfully, then they don’t have to export.
The other thing too is exporting does cost a few dollars to do. The third thing is the fact that a lot of companies don’t have products or services that are needed by the overseas markets. With those things in mind you don’t have to export. However, there are countries in the world that are expanding population wise, there are countries that have pretty good economies these days and given the state of the US economy, and given the weakness of the US dollar, that shows that there are some opportunities for American companies to engage in the foreign marketplace.
Dennis Zink: Okay. For those companies which have never exported before, what are the various methods by which they could begin this exporting process?
Charles Steilen: A lot of different ways to look at this. One is the new way and that’s to go on the internet, find overseas markets and you can even get a list of distributors. You can go to export.gov which is the US department of commerce library. It will tell you in every country in the world what are the main names, what are the economic development plans and what are the kinds of American products that would work in that foreign country.
If you want to pay the US government a few dollars more they will actually do some marketing research for you in that country. They’ll find what the nature of your product would be in that country, they’ll find you some alternative distributors. In fact, you might never leave the United States if you can line up a distributor over the internet and begin to sell your product that way. I am not recommending that but I do have friends who advertise to me, I have never left the US, and I’m selling my products to country x. That’s one way.
The other way is the traditional way of a trade show. You can sign up for a trade show. Some trade shows are pin pointing in one particular country, others will have an international trade show. You can go to the Hong Kong international trade show on any product in the world and you will find buyers from almost every country that will go to the international jewelry show or the electronic show etc. It’s another way.
A popular way in the states is to go on a trade mission. Export Enterprise Florida will organize regular trade missions, they just did one to Brazil, they’re doing one to the Dominican Republic. You can sign up for a trade mission, they’ll take you down there and they’ll introduce you to some potential distributors and then they’ll bring you back. There is an easy way to do this, I have just done this on my own. You can identify a country whereby in your town has a business association, for example we have the sister cities here. We have seven foreign cities we can develop potential business relationships in those cities.
My brother lives in the suburb of Chicago called Wheeling. The Korean Cultural Center for America is in his suburban town of Chicago. They have only now realized maybe they could now do business with Korea. You have, in Miami, you have all of these offices set up by the countries in South America that are trade offices. You can go down there and get some information so that you can pick a country and try to identify some sort of association in that country and go over there on your own and build a relationship then start looking at the opportunities.
I’ve just come back from my sister city in Italy. The sister city in Italy, Treviso, set me up with 14 business development calls. Every one of those companies in each town. There are ways to do it, they’re not more expensive, but it gives you the chance to build a relationship with somebody.
Trade shows, what do you do? You pile a bunch of brochures into a suitcase, you practice your sales message, you see a thousand people in five days, you collect a thousand business cards and then you come back and do what? You wait and hope that somebody was there who remembers you.
Trade missions, you don’t have the chance to really build that relationship. Each way of doing it, each channel has its own pros and cons. I recommended some friends here if you’re taking a vacation, go to an interesting country and then do your homework before you go to that country and set up the personal meetings while you’re enjoying the country or visiting the country and then get to know some of the business people.
Dennis Zink: Then buy a card scanner while you’re at it.
Charles Steilen: Always bring a lot of business cards.
Fred Dunayer: And deduct it from your taxes.
Dennis Zink: What are some of the other sister cities by the way? You mentioned several of them.
Charles Steilen: We have Merida in Yucatan Mexico, Perpignan in France, Hamilton in Ontario Canada, Dunfermline in Scotland, Vladimir in Russia, and Treviso Province in Italy. (also not mentioned here are: Santo Domingo in Dominican Republic, Tel Mond in Israel, Xiamen in China).
Dennis Zink: Once an exporter begins the process, how do they determine what their future objectives should be in the international arena?
Charles Steilen: One of the first things that has to be done is people have to make a semi commitment to themselves. A semi commitment has to be under the word control. I have built my own export model and I use five points of control for a potential exporter. When I ask Americans if you want to go do business overseas what is your objective, would you like to make an export sale or would you like to develop a market? 90% of all the American businesses that I ask that question of have said, “I just want to make an export sale.”
What control is there when that’s all you want to do, is make an export sale? You have no control whatsoever. Sign up for a trade show, go on an international trade show, collect the 500 business cards and then hope and pray that somebody is interested. If you’re not doing anything more than wanting to make an export sale go to as many trade shows as possible and I guarantee you eventually you’ll make an export sale.
The second thing under the control factor is to establish some criteria in selecting a distributor. In the first example I gave you, you don’t have a criteria, you just want somebody who wants to represent you. You’ll get a lot of people in that country that say, “Yes, I’d love to represent you.” Set some criteria in advance. What are the type of criteria that you are looking for in order to have somebody to represent you over there?
The third issue of control is to provide some sort of service support. For example, if you have to have a brochure translated, you cover the cost of that. If the distributor needs some help on promotional advertising, get together with the distributor. You handle part of that. If you feel you needed some more marketing research in that country, you cover the marketing research. Now you’re providing additional services for the distributor.
The fourth area of control is where you handle all marketing efforts. You handle your own sales force, your own distribution strategy, your own promotional approach etc. You are now in control of all your marketing activities.
The fifth way to do it is to control everything. Control the manufacturing, control all marketing. When a company like Coca Cola goes overseas what do they do? They go with the bottler and they create foreign products for that foreign market. Not only is Coca Cola going to sell Coca Cola, they’re going to sell chrysanthemum tea, soy milk, etc.
Proctor and Gamble is a good example. They set a factory up in China, initially it started with three or four products and I asked them a question years ago about shampoo, in America we call it Pert. I asked the Proctor and Gamble people what does Pert mean in English? They had no idea what it means. If you’re trying to go into China and you’re using a brand name that you can’t even define in English, I don’t think you want to use that brand in China.
The word for Pert, same product, is called Rejoice in China. That’s a lot easier to say and translate than Pert. The sanitary napkin in the states is called Always. What does that mean? In China translate the brand name to Whisper, Chinese women are very conservative, so Whisper is a very nice name.
Those are the four areas of control. You have to decide at a point in time how much control do you want to take. A lot of companies will start at step one, just get me into the market with a distributor. Then they’ll build to step two, then they’ll find a different distributor. Then they’ll be into support the distributor in a better way. Then eventually companies like Proctor and Gamble, a friend of mine was a distributor in Hong Kong and I told him years ago, “You better get out of being a distributor because they are coming, they will take control of all the elements.”
That’s the kind of thoughts you want to plant, say how much control, how much control do I want to actually take? Most American companies say, “Just get me a distributor and I’ll be very happy.” Then five years later what happens? Something happens.
Dennis Zink: You’ve hit a lot on distributors there, and many companies apparently do export through a distributor into a foreign market. What’s the best working relationship between them and the distributor? The best way.
Charles Steilen: Build a working relationship. That is the best way. You cannot just appoint a distributor and then hope that that distributor makes some sales and then he sends you the order and you ship it out and the next year he makes some more sales. Some of the Chinese distributors are quite interesting because they do not want to look too good for you. One of my friends who is a big distributor says, “I will never increase the sales of an American product by more than 20% per year because if I start to look too good he is going to want to come in and do it himself. I’ll look for 15% and 20% increase in sales.” You have to have the relationship.
The thing I try to drive home to most American companies is the strategic planning has to be inputted by both sides. The distributor has to provide the input and the manufacturer has to sit with the distributor and also provide the input. The strategic plan should be worked out with input from both parties. The likelihood that this does happen these days is very small but that’s what should happen. There is an agreement on do we need advertising, what should be our pricing strategy, do we need to do some promotional support, what is it that we need in order to grow the business in that country?
The relationship, working together, planning together, executing the strategy and then monitoring the distributor, somehow knowing that distributor is actually telling you what is true. Chinese companies in Hong Kong have had to send me to Singapore to monitor their distributors in Singapore and I’m amazed. Sometimes the distributor in Singapore does not even bring the bottle or can out of the sales bag. Sometimes we bypass the major retail stores.
You have to monitor the distributor because otherwise they will tell you almost anything that you want to hear, except what they will tell you at the end of the year is if you want to increase your sales, if you drop your price by 15% I think as a distributor I can do a better job for you. If you don’t know what’s going in the market what are you going to do? You’re going to believe him.
Fred Dunayer: That touches on some interesting topics in terms of the cultural and relationship development process. Given that most Americans don’t have a large knowledge about how other countries operate, when one of our companies goes over there and wants to develop a distributor relationship, how do they go about dealing with language/cultural differences? Is that where someone like yourself comes in or are there other ways to bridge that gap?
Charles Steilen: There are many people in every country that can help. English, as you well know, is now spoken by a lot of countries in the world. There are 300 million Chinese right now that are studying English. The distributors that we have lined up with our last trip into Beijing all spoke English. All the distributors in Hong Kong speak English, so language is not necessarily a problem but if it is you can always find a translator for you.
The problem with using a translator is that they have to know the jargon of your business. The first time I was giving a lecture and I said, “Think about market segmentation,” the translator had to stop and say, “What is segmentation?” you have to be very careful of the technical terms and the language of your business, the language of your product line, but there are translators available.
Culture, the things that I always advise Americans on and we hear of sayings in America, for example we say, “I think it’s time that we can now get down to business.” There is another saying called, “Let’s put our cards on the table,” another saying is, “I’ll meet you halfway.” As soon as you put your cards on the table, the Chinese are sitting there holding their cards waiting to see what your cards are.
One of the things I’ve learned to say working inside a Chinese organization is patience. Build the relationship first. Do not start asking for the order, keep the product in the briefcase for a while. This is something that we as Americans, we’re very impatient people. We expect change to happen tomorrow. If we make a business presentation we expect to get a yes or no, but with the Chinese they will wait you out, they’re patient people, they want to get to know you. They want to get to know things about you, so don’t be afraid to initially ask questions about the family and your children and yourself and your relatives and where you’ve lived in the past. Don’t rush the game.
Dennis Zink: Is there a way that a company can continue to grow its business in any foreign market?
Charles Steilen: What happens after you’ve entered a market? The question is, are you looking to improve your market share in that business or are there new users of your product that could come in, and be customers? How about your competitors’ customers, are they willing to give up that brand loyalty with the competitor to come in and switch over to your brand?
You need to have a proper analysis within that country to know exactly what your position is in that market. Again, it goes back to what we were saying before. If you’re only looking for a distributor to represent you and you’re only looking to make a sale, you have no idea what your position is in the market.
Where I am involved with companies, yes we look at the market position, is there an opportunity to grow the business? What is happening to the economy in their country? Are there new players coming in from overseas? What competitive advantage do you have over anybody else? The analysis phase is critical.
Proctor and Gamble today knows exactly its position in the market and for a while more money was paid to it than any other overseas supplier in China than any other company. They know the market. Small companies they can get to know the market, hire an intern from one of the universities in the city in which you’re working, brief the intern, this is not rocket science, this is just knowing what’s happening in the market.
What are the attitudes of potential customers? What are the attitudes of your existing customers to your brand? Are there needs for new products? Unless you take a proactive approach it’s unlikely that this distributor you have hired is going to be feeding you that type of information.
There are potential areas to grow the business but you have to get the information.
Dennis Zink: Are those interns inexpensive?
Charles Steilen: In America for an intern you just pay the minimum wage over here.
Dennis Zink: Is there such a thing as an ideal model for doing business internationally and if there is, can you provide examples of companies that apply this ideal model?
Charles Steilen: Let me give you two examples, one of which I had just spent two hours with is an Italian company. The other is a Hong Kong company, Hong Kong, Chinese. Let me start with the Hong Kong company. Let’s say that you go to New York and you open an office. You’re a Hong Kong, Chinese person. You open an office in New York and in New York you hire Americans to design clothes for American women. You also hire an American retail strategist. Now you are designing products for American women, designed by Americans.
After they design x number of products, they take those products to Target or the GAP or The Limited. Target says, “Yes, I like this one, I like that one, I’ll take 1,000 dozen.” GAP says, “I’ll take another 1,000 dozen,” now you’re controlling the supply chain. You control 5,000 factories in China. Now you’re designing the Americans for the American woman, you’re designing an American product, you’ve had a retail strategist that is merchandising it the proper way and you’re manufacturing it all in China.
This is the ideal proposition. In Italy two weeks ago I was talking to a company that makes a motor for opening doors. I said, “To what extent is your distribution in the United States? he said, “We have an office in San Antonio, Texas.” My question was, “Why San Antonio?” he said, “Have you ever been to a ranch?” I said, “Yes I have,” he said, “Have you ever seen the size of the gate that they push those cows through?” “Yes I have,” he said, “It’s hard to get electricity out there. We have a research and development facility in every major market in the world. We design the product for that market. Also, do you live in Florida?” I said, “Yes,” he said, “Do you have a few gated communities in Florida?” I said, “Everywhere.” He said, “We know the American market in terms of the kinds of gates it has. We use our R&D facility in each country to design our motor for the gates in that country and we then take it to the manufacturer back in Italy but we control the sales side in the foreign market.” I said, “I am impressed, this is one of the few cases I’ve ever seen where the manufacturer is designing the product for the market, controlling the manufacturing in his own country and then controlling the sales operation. ”I almost got down and genuflected and bowed.
I said, “Seldom, will you see an American company do this, the American company is traditionally designing products for Americans and then take them overseas and say, “Hi, we’ve got this.” What you’re seeing now on the other side that was Haier, which is a Chinese white goods manufacturer. This is one of the few times where the Chinese are now moving into branding their products and Haier is a test case for coming to the states and taking that brand into this market.
Dennis Zink: That’s Haier as in H-a-i-e-r?
Charles Steilen: H-a-i-e-r.
Dennis Zink: They make televisions and refrigerators and?
Charles Steilen: Yes.
Dennis Zink: I’m familiar with that.
Fred Dunayer: I think I’ve got one of their refrigerators. It works fine.
Charles Steilen: The other example, and I’ll do this quickly is the US Department of Agriculture which controls the supply chain of oranges and lemons and strawberries and brings those overseas. They do a good job of exporting. To me it’s so interesting to see a couple of companies design the product for the foreign market. Control the manufacturing back into home market and control the sales operation in the foreign market.
When I’ve gone in as a consultant in two countries, I have had to design consulting management training for the Indonesian market that will not look the same as it might be for the Korean market. In the way of delivery, totally changes when I have to work in Indonesia or Thailand or Korea, you change the delivery approach, totally. The Philippines is another different country, maybe the same product, totally changed the delivery of the approach.
I try to adjust my own consulting work to approach that particular country. Although the product is the same, training, you design the approach, you train people differently in the Philippines than you do in Korea.
Dennis Zink: To what extent does the US department of commerce offer assistance to potential exporters?
Charles Steilen: They offer a series of ad hoc activities. As I said, export.gov is a very good service provider of information. I just wanted to find out, we have sister city also in Israel. I wanted to see what the issues were in Israel so I made a list of the five or six major product lines that are being taken in Israel. This is something that we can think about as a sister city.
You can get information on the products and the market. You can then get assistance on identifying a distributor, you have to pay for this though. They will find you potential distributors so that if you want to put together a trade mission as I did last year in going to Hong Kong, what we did, we contracted with the US department of commerce office, they call it the US commercial section. They provided a speaker introducing our 11 Hawaii based companies to Hong Kong and then they aligned us up meetings with individual potential importers, distributors, partners, for each of those 11 companies.
They did the same thing in Beijing, they came in and they gave an initial presentation and then they gave us the directions for each one of the 11 Hawaii companies to meet with the person that they were meeting for. As a matter of fact most of the meetings were held in the hotel where the distributor came to the hotel. That, pretty much is what they do. They provide information, you can buy the gold key, which allows you to get the marketing research and get some assistance. They do a pretty good job of that.
What is lacking, however is that nobody is educating the Americans on the specific areas of opportunity. If you want information you have to go to export.gov. If you don’t even know about exporting you won’t even know where to go or to start with. Whereas in working for the Hong Kong government years ago we made sure that people knew about what the markets were.
Dennis Zink: Chuck having spent over 30 years based in Hong Kong what is it that allowed China to so quickly become a key player in the export business?
Charles Steilen: Even under the communist umbrella so to speak, they offered one trade show every year. It was called the Canton Trade Fair. They had the biggest center I had ever seen indoors, they had every product that China manufactured, they had boats, a crop duster airplane, peanuts, every imaginable product, carpets in this huge, huge auditorium. That was our first attempt to try to deal with the west.
I had a client of mine, so I was allowed to go to the trade show. Mr. Deng Xiaoping, a very smart man, after chairman Mau passed on, 10 miles from my apartment in Hong Kong across the border, we have a border, there still is a border to China. There is a rice field. Mr. Deng came down one day and he said, “It’s time that we figure out this market stuff.”
He took the rice field and he said we’re going to build a special economic zone. He tore down the rice field and up came 25, 30 miles of a special economic zone. What you were allowed to do as a foreign country, if you came in and set up a factory inside the special economic zone, hired the local workers they would give you a break. I can’t remember the initial break it was like 50-50, 50% of what you manufactured could be sold to the domestic Chinese market, 50% that had to be exported out.
If you had to import raw materials you got a break, a tax break on those raw materials. This thing is now probably ten million people, it’s a city in itself. When he came down before he died and he saw that special economic zone he then said, “This is where we’re going.” There are now five or six special economic zones.
Our sister city in China is called Shao Min. Shao Min is a special economic zone so when DELL wants to manufacture computers in China where do you go? You go to the special economic zone because you’ll get the breaks there. Now it’s a much higher ratio of what you can sell into China. The special economic zones were the beginning.
The biggest importer of Chinese products in the United States is Wal-Mart, Wal-Mart is very smart. Wal-Mart also gets allowed to open as many department stores in China as they want? Why? They’ve got the buying office there. The buying office buys … everything that you see made in China, is bought through Wal-Mart’s buying office over there.
A good friend of mine used to run the K-Mart office. Use Wal-Mart, and K-Mart to control the supply chain in China so that the little Chinese guy doesn’t have to do anything, just send it over to Wal-Mart and see what they say. If they have a good price we’ll buy.
Hong Kong trade development council, as Hong Kong had to go back to Chinese rule, the run up to 1997, which was the date that we went back, 1997. Ten years prior to that we moved all of our factories out of Hong Kong into the southern part of China. I used to laugh when my friends in the states would say, “the Chinese are taking over, when are you coming back?” I said, “Look, we are taking over. Hong Kong people are going to take over the southern part of China.”
Now you re-engineer Hong Kong to provide the production support, product design, packaging, marketing, shipping, distribution support, to all the factories that we initially moved over the border. Of course Taiwan, then sees that light and they are in the southern part of China as are U.S. manufacturers.
The US, Taiwan and Hong Kong had been the biggest investors in the southern part of China. Now you control the supply chain. What you do is you locate a market overseas. What market overseas might need let’s say ceiling fans? It would have to be a hot city, a hot country. What you do is you get all these ceiling fan manufacturers to take a quarter of a page, half page, full page ad in the ceiling fan directory published by the Hong Kong Trade Development Council. Then you send that directory to every importer, major retailer of ceiling fans in the world.
Then you identify a foreign market where ceiling fans are used. Why don’t we then set up an international trade show in a hot market for ceiling fans? Or host the international ceiling fan trade show in Hong Kong to bring in everybody. We segmented the market on the basis of products years ago. Our first catalog was actually bigger than the Sears catalog. I had to carry it around and I couldn’t carry it anymore. When I’d go talk to companies I said, “I just can’t physically pick it up.” What they did then, they segmented it by product, product, product. product.
They know the market, they know who the distributors and importers are, they have it set up now electronically, they have trade shows. Every day in Hong Kong there is an international trade show. This is a totally integrated strategy that has helped China move forward.
Fred Dunayer: Fascinating strategy. If you are doing business in China, is there a difference between doing business in Hong Kong and doing business in the rest of China?
Charles Steilen: Yes there is. Hong Kong has the British legal system which we still have. Hong Kong dollar is linked to the US dollar so there is no fluctuation of currency. You have expertise within Hong Kong that knows China and speaks the mother tongue dialect which is Mandarin. It’s pretty easy to go register a business in Hong Kong, it’s very inexpensive to register your business in Hong Kong and it’s a good way to see how a Chinese city operates even though it’s a little different than mainland China. But it gives you a good introduction into this swimming pool so to speak.
Then you can find a reputable distributor that you can deal with because that reputable distributor is registered in Hong Kong. Again that legal system is a real legal system. You are going to do business with people who are playing by the rules of the game, you are dealing in a currency in Hong Kong which is tradable and linked to the US dollar and then use that as your springboard into China. There are a number of products that do not have to pay import duties into China if you are a registered company in Hong Kong. You get a break on certain products. I don’t have a list of them but it’s easy to get hold of the list.
Dennis Zink: China is a really hot topic and has been the in the US. Do you see opportunities for US businesses in the future development of China?
Charles Steilen: Yes, there are many, many and because there are many of them I’m going to have to get out a couple of pieces of paper and look at them. This is an article that I’ve just written and submitted to Manufacturing Today. Let me identify first of all what the problems are in China. In meeting with many of the Chinese up in Beijing last year, I felt sorry for them because they are sitting there, they run science parks there. The science parks in Beijing, in Hong Kong are huge operations. It’s intended to build new products, they use technology.
As I was there, there was a riot in one of the factories. Then the riot consisted in a factory of 87,000 workers in one factory. They were rioting against wages and the guys were almost in tears up there. It was on television right in the science park where we were meeting with some people in Beijing. They turned to me and said, “Chuck we’ve got to get out of this low cost stuff it’s killing us.”
He said, “Those Michael Jordan shoes that we manufacture what are they? $150 US retail in the states. Our guys are making 15 cents.” He said, “Help us, help us in this.” The first thing I would come up with I said, “There is a need to shift from an export dominant economy to a domestic demand driven economy.” This is what the government, the federal government, the national government is trying to do. This is what the governments within the provinces are trying to do. They know they have to get out of this low cost manufacturing business. They need to move from this low cost manufacturing to a higher value added economy.
What you are seeing now in China is a huge effort to develop the retail trade in China. That’s building a domestic economy. As you go marketing you start building products that are, have value, technology products. That opens the door to American companies. I said, “Because of this retail focus, companies providing these types of finished goods as well as from manufacturers of those products and processes that are suppliers to a regional equipment manufacturer of the finished goods. This will be a business opportunity.”
Second issue; China is faced with a huge aging population and they really don’t know what to do with it, about it. There is an incredible need to move, to improve healthcare, to improve education, to have a better distribution of wealth and to improve the environment. Air pollution and water pollution are terrible there. What does this do for America? It opens up opportunities for civic types of medical and healthcare products, healthcare management and software systems and the offering of expertise and training in the various healthcare areas. Right now it’s not legal for a US company to open an assisted living. This will change very quickly.
We’ve already talked on occasion to Tidewell. They have been to China many times to investigate the opportunities there.
There is a need to improve the managerial capabilities of Chinese citizens. They need to develop new customers, new products, new markets. They need people that understand distribution, they need people who understand market. I did a lot of work there 25 years ago and I was just scratching the surface. Many American universities are now set up with campuses in China.
The need to expand and improve the service sector of the economy. The services sector is projected to be 47% of GDP in five years. There is an opportunity to set up point zone service organizations or to train individuals in order for them to develop a more professional service economy such as employment services, training services, assisted living, restaurant and entertainment, business research. All this, to me, are specific areas of opportunity that an American company could develop but as we have discussed, the process of developing that is very important. You just can’t run over and say, “Hi, I do this.” You’ve got to build that relationship, find those right partners over there, work with those partners, build a strategy together and you may be successful at it. But the world knows that this is also happening.
Fred Dunayer: I think one that one of the main concerns that manufacturers in particular, have about doing business overseas, particularly with China, is patent and trade secret violations. Have you seen much improvement in that area? I know that there is a lot of products for sale on E-bay out of Hong Kong but to buy that same product in this country is a whole lot more money and it’s basically the same product.
Fred Dunayer: The legal system. It’s easier to set up the legal system to start with, but when you don’t have any judges or lawyers, what do you do? You start from scratch, 1980s starting from nothing. Starting from nothing in the early 80s. Where do you begin? They need a legal system, they know that. But then what? Who will be the judge? People have to become lawyers. Who’s going to be advising people? Who will be the judges? Yes, the growing pains are such that that’s what you experience, but for an American company to presume that you can go in and manufacture a product or sell a product that it won’t be copied is very naïve.
Therefore you make sure that you’ve got a good lawyer. As we were talking earlier I said get good Shanghai lawyer. We equate Shanghai to being what New York is in the states. Beijing is to Washington DC, basically you need a good Shanghai lawyer. I’m joking about this but it does help. A good friend of mine is a Shanghainese lawyer. What she did was to go to the North Western University law school. Now she is the kind of person that if I were an American company going in, I would find a Shanghainese educated lawyer who also happens to have a law degree from Northwestern. That’s about as good as you can get.
The problems exist today. It will change, but it’s going to take some time to have the right people in there who understand the law and then can practice and execute the law. Yeah, it’s dangerous.
Dennis Zink: What advice would you give a US company, say a Florida company, relating to international business?
Charles Steilen: Do your homework. Start planning and preparation, start getting and acquiring as much information as possible. Tell your wife or your spouse, let’s go visit country X next year for our vacation. I’m going to go to Brazil for Christmas and New Year’s. I’m going to go to Brazil and Uruguay. I have a friend, a lady friend, she hasn’t been back to Brazil. She is from Brazil. I said two birds with one stone, two birds with one stone. I will go back, I’ve been to Brazil before. I will go back and enjoy Brazil, however, I will also be doing some basic investigation. That’s what has to happen.
The more you investigate the more you get to know the country and the culture, the more you do your research the more you begin to test out emails to people down there, see how they respond. The more confident you will get. But if you can never change that attitude of I just want to make an export sale. You’ll never, ever get any farther than that. Some companies are successful at just making an export sale. For myself, having worked in 17 countries now, I’ve done my homework before I’ve gone and it has been a great experience.
Dennis Zink: Chuck that was just fantastic. Thank you for enlightening us about international trade and China. The information was just incredible. How would someone reach you to get more information?
Charles Steilen: You can call me on 941-556-9113941-556-9113 or you can email me at firstname.lastname@example.org.
Dennis Zink: Great, thank you.
Fred Dunayer: Thank you Chuck.
Fred Dunayer: You’ve been listening to the SCORE small business success podcast, Been There, Done That! The opinions of the guests are theirs and do not necessarily reflect those of SCORE. If you’d like to hear more podcasts, get a free mentor, view a transcript to this podcast or would like more information about the services we provide, you can call SCORE at 800-634-0245 or visit our website www.score.org. Again, that’s 800-634-0245 or visit the website www.score.org.