China’s Captive Market Captures Foreign Businesses

Fear is not the best way to run a business, yet running a multinational company with an office in mainland China leaves you in a strange limbo.

If you want to relocate, you are afraid to follow through because you presume – not without reason – that China will retaliate if you leave. Not only that, but you are afraid to even say that this is what you fear, for the same reason.

Don’t take my word for it. Ask the anonymous chief executive for Asia at an anonymous company, who declined to let The New York Times print his name because of the legal repercussions that can arise from openly criticizing China. He did say, however, that many companies now are “just convinced if they open that R.&D. center in China, every technical secret they’ve got will be copied, every patent exploited.” (1)

The Times further reported that several multinationals have left mainland China for Singapore, while still others express the desire to relocate but hesitate because of reprisals. Such action is far from unheard of. Jardine Matheson reincorporated in Bermuda in the 1980s and delisted from the Hong Kong Stock Exchange in the mid-1990s. In return, Beijing penalized the company for more than a decade, making it difficult for it to invest in mainland China in any substantial way.

Some companies report having difficulty convincing executives to move to China because of air pollution and limited educational opportunities. Given the climate of fear, however, it seems likely that the real reasons for dissatisfaction run deeper.

I have limited sympathy for the companies that now wish they were less exposed to China. They couldn’t resist the lure of a captive market of over 1.3 billion people. And they couldn’t seem to comprehend, though the risks were already knowable and known, that they would become captives themselves in turn.

Belatedly, however, companies are beginning to realize that choosing China for their Asian center of operations was a decision that held serious drawbacks. A survey of over 500 companies, released in May by the European Union Chamber of Commerce in China, registered an atmosphere of pessimism about Chinese profit margins. (2) Barriers to non-Chinese businesses are well known, both in Europe and the United States, and they seem likely to limit growth there.

China lacks freedom of information, freedom of expression and a legal system free of coercion. These three freedoms – a Chinese-sounding phrase if there ever was one – are essential to good business management in the modern world. But companies stampeded into China over the last 20 years for fear of missing out. Now, like it or not, in many ways they find themselves stuck.

They might get lucky. China might evolve into a more open, democratic and free society. It has happened before in places like South Korea. For a brief moment in the 1990s, there seemed to be hope that it was happening in Russia, though today Russia is an arguably worse environment for business than China.

More likely, however, multinational companies will find themselves divided on opposite sides of the chasm that is opening between China on the one hand and its Asian neighbors and their Western allies on the other, who are threatened by China’s increasingly aggressive territorial claims and protectionist impulses. China is big, but it is not an easy market for foreigners, and it could increasingly cost companies business elsewhere in the region.

For now, however, multinationals already have big problems with their Chinese offices. Major companies have faced complaints from Chinese authorities about everything from food safety to “unparalleled arrogance.” While facing prosecution, foreign companies can also find themselves lambasted by the Chinese press. Companies cannot rely upon the force of law to keep them out of trouble in China when authorities there will act in the best interest of the ruling elite regardless.

We can also be sure that whenever an American or European CEO today visits his company’s Chinese headquarters, he carries no data of any significance on his laptop and uses a smartphone specially scrubbed for the purpose – or, in some cases, a low-tech flip phone without Internet capabilities at all. To carry any sort of intellectual property into China willingly is tantamount to surrendering it to the Chinese government.

It’s a heck of a way to do business, but it is the way these companies chose. Now they have to live with it, or suffer the consequences of leaving.

Sources:

1) The New York Times, “Looking Beyond China, Some Companies Shift Personnel”

2) Bloomberg Businessweek, “Is the ‘Golden Age’ for Multinationals in China Over?”

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Solicitors’ Guide – Instantly Cross Sell More of Your Legal Services to Your Clients and Prospects

Often when I attend a new solicitors practice to help them with their marketing, I am amazed at the lack of thought that has gone into promoting the services of the law firm. From the outside of the office there is often very little evidence of the services that the law firm can provide for passers by, there are no posters in the windows and the signage is old or tatty. Some simple changes can be made to the practice both internally and externally that can significantly improve the cross selling of your legal services to your clients. I will start by looking at the outside of your offices and then walking through the building and looking at your marketing communications. By the end of it, if you implement the changes I guarantee you will see results.

Your Premises

Let’s start with the first thing your clients see when they visit your offices. This is your chance to promote your services completely free of charge to the outside world. Are you making the most of it? Can you answer yes to all of the following questions?

  • Do you have brightly illuminated signage (all bulbs working)?
  • Do you list all of your core services clearly on your exterior signage?
  • Are your telephone number and website address displayed?
  • Do you have an A board outside of your offices with thought provoking and changing posters inside it?

If you cannot answer yes to all of these questions, act now to make immediate improvements and make the most of that passing trade. One final point on this section is that in this day and age you have no excuse if you still shut for lunch. In a tough economic climate you must be open at every opportunity possible, and if you take the time to make the changes above you need to be open to make the most of your passing trade.

Your Reception Area

Once a client or potential client enters your reception area, they are a captive audience. You can now sell your services to them and they expect you to do so. First things first, remove every single item of printed material that is not your own. Now is not the time to promote other local businesses or charities. By being a successful practice you will have far more opportunity to give to reception, but do not do this in your reception area.

Do you:

  • Have at least three different types of promotional materials for all of your services? Eg a brochure, direct mail postcards, and legal help sheets?
  • Have advertising posters on the walls?
  • Have testimonials and case studies praising your services?
  • Have a receptionist who is trained to cross sell your services?

Your Client Communications

Now we move onto your communications with existing clients. How can you cross sell your legal services to your existing clients in your client communications?

  • Add a PS to every client letter promoting one aspect of your service
  • Enclose a different promotional item with client letters every month (eg Wills in January, Personal Injury in February, Moving Home in March (in time for Easter)).
  • When your clients send you a thank you letter, thank them in writing and ask them to recommend their family and friends to you for the same excellent service.

Conclusion

When the economy tightens, you need to do all that you can to win more business as cheaply as possible. Cross selling more of your legal services to existing clients and prospects is one of the easiest ways of winning new instructions. Take the action above and you will be well on your way to winning new business for your solicitors practice.