Local knowledge, global implications

Editor’s note: Laura Mitchelson is marketing director at Amber, a Shanghai-based research firm.

There is a well-liked saying in business-to-business research: “A strategy without intelligence is not a strategy, it’s merely guessing.” These words are especially applicable in China, which is attracting scores of companies that are interested in developing a presence in this rapidly-growing economy.

Smart companies are determined to get it right the first time when they enter China. This means they need to map the market and understand the supply chains and who controls things. Industry research or business intelligence research is a first step for most firms.

Some of the buyers of this research are based in Europe or the U.S., have never been to China and don’t have much intention of visiting. Others move here and some are Chinese themselves.

For any business manager, China is an exciting prospect, one that takes most Western managers out of their comfort zones and into a world that is non-English-speaking and somewhat of a curiosity. The pace of change across the majority of industries in China means that staying up to date with developments and translating that knowledge into solid commercial decisions about advertising, marketing, HR and operations can be a challenge that even local Chinese find testing.

Once you get past the breathless media coverage of super GDP growth rates and consistently bright economic prospects, you run into some of the deeper challenges of China. You find that you need detailed, reliable, accurate and timely business research. The question is, how and where do you get that? Following are some of my experiences as a gatherer of industrial data in China.

Grab an hour

I have no idea where Hu Tao Road is in Songjiang but that’s this morning’s destination. It’s about a 90-minute drive from the central Shanghai districts that are familiar to me. At Hu Tao Road is the Zhun Zhen textile factory where we are hoping to grab an hour with General Manager Mr. Sun to talk with him about what influences his purchasing decisions and what he thinks the increasing numbers of international players in the textile printing market should do about their relatively low market share. As he is a man with 35 years of experience in this industry, international training and impressive contacts within the industry trade association, we are pleased to get the interview.

The smart international companies in China realize that Mr. Sun and others like him hold at least part of the key to their success, that they need his insights and local advice to help predict the movements in this complex and rapidly changing marketplace. Macroeconomic data about rising GDP and double-digit growth has its place but it needs supplementing with hard facts about the situation on the ground, and that information needs updating on a monthly basis.

Cultural understanding

It is my belief that too many business decisions here in China are made by those who don’t have in-depth knowledge of China based on advice from those who also don’t really know China.

Many a book has been written on the importance of cultural understanding in any overseas market, and this is particularly important with China. Yet it is often more comfortable for a Western manager to ask other Westerners for advice on dealing with this new market (those who’ve cracked it ahead of them) rather than requesting advice from those for whom this is home. In our experience, a combination of the two gives the best result. Westerners’ and other international companies’ experiences are valid because how else can you establish the potential pitfalls of doing business here? Local advice is invaluable when historical perspective or cultural understanding or even a “local answer to a local problem” is sought.

The very nature of business intelligence means that much of what researchers discover is often new and sometimes surprising. This is particularly true of intelligence-gathering in China, where the rapid changes in the commercial landscape mean changes to commercial structures and processes and projections happen very frequently. Successful Chinese companies and managers are adept at being flexible to changes in the macroeconomic picture, being creative about managing change to their structures and processes and at learning from others (often international competitors).

Most companies in China operate on standard 9-5 working hours but with manufacturers there is often an earlier start time, earlier finish time and an extended lunch break, sometimes lasting from 11 a.m. - 2 p.m., so it’s worth bearing this in mind for initial calls and for arranging meeting times. If you arrange a face-to-face interview at 10 a.m., there is a good chance you will be invited to lunch as well.

When working in a different culture, especially one where “should” means “is” and where being ambiguous is the norm, the ability to read between the lines is important. Very few self-help-style books can assist in this area, since reading between the lines means understanding the cultural reference points and requires background on what is being discussed.

We once worked with a company that was focusing some of its detergent advertising on the concept that all children have a right to get dirty (implying that this is how children learn, grow and develop). This particular client’s problem came when it discovered that Chinese children learn, grow and develop through attending class in school and then attending additional classes after school. There is no space there for getting dirty playing and for this reason some rapid adjustments had to be made to a discussion guide for a focus group to steer things in a helpful direction for the client.

Respondents for a study can be from all types of social and educational backgrounds but can all be working in the same district. This phenomenon is particularly apparent in the first-tier cities, as Beijing, Shanghai and Guangzhou are collectively known. Here, there is a complex convergence of those with money and international background or experience, those with money but no international background or experience and those with very little money and no experience of anything outside one small area of the country. When this diverse combination occurs within one family (as it often does), it causes specific challenges to marketers and researchers. In the business intelligence arena, the progression from very low knowledge and awareness of international influences on an industry to full awareness happens very fast.

Protecting information is part of the culture as is a reluctance to be the one blamed for losing information. Traditionally in some parts of Chinese society, there is reluctance to take responsibility in a work environment. If there is any risk at all associated with individuals releasing information to a third party, research respondents will often choose not to. There is little incentive for a typical purchasing or operations manager or even government employee to provide information to an external party. Worse, there are cases where risk is potentially associated with doing so. As a result, since market research is relatively new in this market, interviewers have to do more reassuring about how “normal” the process is in order to facilitate meetings, interviews and informative responses.

Adding to this, the Chinese language is often vague where English would require one to be specific. Even in our office, when a vague approach is needed and where language is optional, we would choose to use Chinese, as there tends to be more flexibility.

Fragmented industries

China is divided into provinces, municipalities, districts, towns and villages. In a nation of fragmented industries set in a vast land with hundreds of local marketplaces, extracting comment on the nature of one industry across the whole country is unrealistic. So it falls to the researcher to merge the jigsaw pieces from across the country to build a national picture. A senior manager in a company in Zhejiang will often assume automatically that we are only speaking about Zhejiang province when we pose questions about the development of the industry in the coming five years or when we probe about consolidation. Pointing out that a national perspective is being asked for is unhelpful and can often lead to the respondent feeling a little ashamed of their lack of knowledge - as researchers know, this is not a good place to end up since most respondents become uncooperative at this point. It is therefore best to gently confirm whether you are being told about the local picture and just how local that picture is.

Countless variations

As researchers, you also run up against countless variations in regional business culture. For example, with companies in Beijing, sending a fax before calling can help a lot and more groundwork preparation is needed than it would be in Guangdong, down south. In Shanghai, more phone conversations are possible. In Beijing, a face-to-face meeting is often needed up front before a follow-up interview will be agreed to. This extends the timeline on many projects.

In our experience, it is the necessity of an initial face-to-face meeting which always proves difficult to communicate to clients outside China. That first meeting, although mainly only for pleasantries, is extremely important in many areas of business here.

Between the first and second meeting, there is often a complete transformation in attitude. Recently, for example, we met with education commission personnel to better understand the government regulations in a particular area. At the first meeting, we were greeted by a stony-faced director of the commission who had not read our brief, did not know who we were (despite our having called twice) and didn’t seem interested until we presented our client’s case and hinted at the types of questions for which we required his help. Our second meeting, 48 hours later, was a very different affair. By this time, our eight-page brief had been read, additional contacts had been prepped and were ready to take our questions, and there was even talk of cooperation and further assistance should we need it.

Distances are vast

As if we needed to mention it, the distances are vast in China. A national study can involve many hours on domestic airlines where the food and beverage offerings are often not as tempting as they might be - Nescafe and bread and butter, anyone? Most consumer studies will include the first-tier cities as well as at least two to three second-tier cities (typical choices include Chengdu, Shenyang, Hangzhou and Shenzhen). The average distance between these cities is over 600 km.

Sometimes, the clients cause the problems. They know that they need to know something about their industry but they often don’t know what that something is! How do you prepare to investigate a completely new and often alien market? For those used to conducting new market studies, there is a well-used list of assessment criteria that can be worked through but it is our belief that it is the job of your research partner in-market to be proactive in outlining the best approaches and flagging potential pitfalls.

Why do it?

So with all the challenges, why do we do it? Well, for one thing, it’s exciting. This is a fast-moving environment where the can-do business ethic rubs off onto anyone working in the market long-term. And, in a country often talked about as mysterious or certainly alien in its business practices, we find many of those we speak to open and keen to share knowledge. Market research as a discipline, and certainly this particular breed of business-to-business or industry research, is new to many of the respondents and that lends a certain amount of freshness to many of the interviews and discussions.

Finally, client variety is a big plus. You can work on everything from small, market-entry projects to customer satisfaction work with well-established Fortune 500 companies. And, as expert councils and strong business networks do not exist in China in the same way they do in developed markets, the role of the researcher is extended to that of communication channel. Everyone’s competitor is here in one marketplace so our role as information providers is heightened.

More frenzied

China’s growth, and the growth in interest in doing business here, shows no signs of abating. We expect the scramble for information to get even more frenzied, so we’ll keep packing our sandwiches for those long local flights and continue to be amazed by the revelations that come from this emerging powerhouse.