Otherwise there is no guarantee that a would-be exporter will find a market, let alone make a profit. Research is crucial to formulating key decisions about which markets to approach and how.

“The big picture is turnkey from A to B,” says Lisa Goodhand, Director of China Operations with China Blueprint, a Sydney consultancy. “How do I get my products from Australia to a country like China, what are the government regulations, the legal infrastructure that supports importing my products and what are the implications, how do I communicate with consumers and understand the market for the product and what it looks like through the consumer’s eyes?”

The downside is that obtaining this information takes time and often money. “It’s going to take from 12 to 18 months to go from nowhere to in-market and many companies either haven’t got the patience or the money or stamina to keep going that long before they get a sale,” adds China Blueprint’s principal David Thomas.

He says that culturally Australian businesses tend to think small: “You get your product in the market, get some cash flow going, keep your stock low, start with a small operation and build up. The problem is that in China none of those things are respected. They want you to be big.”

The lesson? Find out as much about the intended market before entry because how you enter is as important to business success as the product itself.

“Market research has to be part of an overall operational plan,” says Austrade’s Queensland state manager Cheryl Stanilewicz. “Intending exporters need to sit down and work out what the cost benefit will be to them. We always encourage clients to think about how they want to build their business, how an international export strategy will help them do that and how it needs to be sustainable.”

She recommends would-be exporters view gathering information as a step by step process. “You develop a shortlist of markets and create a structured search outline in terms of demographics and markets, then drill down as much as you can to identify opportunities and trends in that particular industry for your product or service,” she says.

On your own

A lot of general information can be gathered from the internet. Stanilewicz says Austrade suggests clients search online for basic data regarding import duties, regulations, distribution channels, market size and growth, citing CIA – The World Factbook as a good souce for information on market size and demographics.

But both Stanilewicz and China Blueprint warn not to rely overly on the internet as a source. “You’ve got to be able to differentiate between what is propaganda, what’s sales and marketing, what’s people with their own agenda,” Goodhand says, and Stanilewicz too advises caution, especially when contacting potential buyers.

Factory Girls is a modern account of the lives, loves and day to day challenges of the women who work in Chinese factories in modern China’s factory hub, Dongguan. Leslie spends countless hours with some of the local workers, who left their rural hometowns to find work and money in the big smoke.

The reason I like this book, is that all too often people get caught up in the day-to-day business of international trade and manufacturing and forget the human element to this equation. They forget or have no idea in most cases what goes on behind the scenes away from the flashy trade fairs, glossy magazines and glorious websites. Sometimes, knowing what really goes on helps you to make better business decisions and fewer unrealistic expectations.

The people side of manufacturing

Manufacturing is a process that requires many elements. It requires the sales team to take your order, the sampling team to interpret your specifications and then the manufacturing team to take instruction to mass produce your goods. Before they start though, they must communicate with one or many sub-suppliers who deliver the raw materials required. Once delivered and prepared, production can start as soon as the production line staff have been educated about the product requirements and what their role is on the production line.

There will be many departments inside and outside the factory that need to talk with each other. On the production line, the production manager should oversee the production and if he has given good instructions there should be no problems. The quality manager should understand the desired outcome and then watch the production to make sure the goods are to specification and ensure the materials supplied are the right colour, shape, quantity and quality.

Once complete the packaging team is then responsible to safely package your goods with cardboard, foam, glue, strapping tape and so on. They then hand over to the logistics team who liaise with your freight forwarder to pack the goods onto your container and then deliver it to the port where it will be shipped.

I would happily testify that no one worker on the production line would have had the opportunity to travel overseas. In most cases, people lower in the administrative chain, would not have even ventured into a high-end western style supermarket or 5-star hotel. Next time you demand ‘I want it to Australian standards’, think about whether they really know what you are talking about?

The key to successful manufacturing and thus importing is knowledge, training and due diligence. In part, your Chinese manufacturer will take on this role. But you will also need to share this information depending on the factory’s exposure to the way us westerners want things —yes, you need to get involved!

Next time you contact your manufacturer, think about what happens after you place that order? Who is the person talking to you on Skype? How do the managers educate their employees? Why is their written English better than their spoken? What happens if someone doesn’t come back from their Chinese New Year holiday? Who suffers when the sample is not right, the client demands a refund or the production team forgets an important step in the manufacturing process?

—Lisa Goodhand is the director if China operations at China Blueprint

China is geographically well positioned to Australia, and our goods and services, technology and education exports are in demand. The Chinese economy is in good shape, and consumers are looking to Australia to provide new, innovative and quality goods. Australian SMEs are flexible, innovative and customer focused, and their products and services are perfectly suited to the Chinese market.

China challenges for small business

Exporting to China has huge potential but planning, high risk and unforeseen costs can mean a quick and sudden death to a new project, or even the end of a small company that is financially constrained. The problem is, Australian SMEs do not know how to tackle the challenges in taking their business to China, or how to manage the risks. SMEs should take an assertive, yet conservative approach and seek proper guidance when commencing any new export project, as China in particular is not for the faint-hearted.

The question is, how do SMEs get their export projects off the ground without huge cost and high risk to capitalise on this opportune time, and is it even possible?

Many Australian SME business managers are ambitious, innovative and pioneering. This ability to self-empower often makes them impatient, such that their China research revolves around a quick search on Google, and snippets from the latest ‘who made it in China’ text. It is not uncommon to hear about a business owner who has set their sights on China, jumped on the next flight to Shanghai, spent in excess of $5,000 and come home with little more than consolidation of their dream, but still no idea where to start. The Chinese have an appropriate saying for this (Yu su ze bu da) ‘欲速则不达’ ‘Haste makes waste!’

Starting an export project is complex. Where do you start and in what order do you address all the business requirements to develop a fundamentally sound business? New exporters complain that service providers cost money and tend to be segmented – ie there is no one-stop shop, not even at the government level – and it can be hard to determine what is really needed and where money can be best invested. In part this is true, but the cost to seek good advice is not prohibitive.

Speak with an expert first and foremost. Money is better spent seeking professional research, putting in place measures to protect and secure IP and have a consultant work to develop the all important foundations. Setting in place a strong foundation, will allow you to hit the ground running when the business takes off.

Exporters thinking about taking their goods/services to China, should think about:

• Research: find out if there is really a market for their goods, and in what format?
• Understanding the challenges: what are the rules and regulations of exporting their goods to China, and what are the associated costs?
• An action plan: how will they structure their business, should they find a distributor or set up an office in China?
• An export team: who are the people who can help them achieve their goals, and at what cost?

China is many markets

China is not one market, but many markets. Ask any mainland Chinese and they will tell you: “Chinese people are not all the same, but different depending on where they come from.” Each province and township has their own likes, dislikes and cultural differences. These differences must be understood and addressed by SMEs that wish to export into the China market.

To achieve this, an individual SME will require specific targeted research so that they can address these regional issues. This research helps identify suitable markets, set pricing to ensure competitiveness, and provide information on local tastes and taboos. Ongoing research, such as focus groups, will also help to identify new trends and opportunities for product diversification and innovation as the export project evolves.

Of equal importance to the new exporter into China is their legal advisory team, who need to be well versed on the complexities of the local Chinese legislation. Legal advisers can instruct on business set up, tax compliance, staffing, contracts and also be helpful with general business negotiations. It is important that the legal team have a strong understanding of not only Chinese law, but also local business practices, as well as having Chinese lawyers and speakers on their team.

Global management consulting firm McKinsey predicts that in China “more than 350 million people will leave the countryside by 2025, creating more than 23 megacities with populations upward of 5 million”. Australian exporters should take note, as these new urbanites will create new demands for goods and services as their tastes become more sophisticated and their salaries start to grow.

At the onset, hiring a China team to help research, plan and enact may seem costly. SMEs should consider this as an investment into their future rather than an expense and the growth of a sustainable business. This work can be outsourced and is more often a variable cost rather than a fixed ongoing one, which means when cash flow is low, projects can be put on hold. Equally, the cost may also be subsidised by dollar-for-dollar cash reimbursements from the government, for export marketing activities.

If you are an Australian SME with a product or service worth selling, then you should be in China now, or at least seriously considering it, as the opportunity will never be better than it is today.

—Lisa Goodhand is director of China Operations at China Blueprint (www.chinablueprint.com.au), a business advisory service specialising in China.

If you would like to learn more about exporting to China, China Blueprint and Think Global Consultants is hosting an 8-day China Immersion Tour (November 21-19, 2009). See www.chinablueprint.com.au or www.thinkglobal.com.au for more details, or to register.

A video of the launch is available on YouTube: 88 Day China Marketing Challenge