By Dezan Shira & Associates Industrial Zones (IZs) in […]MORE
Blueprint for Sustainability
Planning for the future
A long-term approach to achieving business sustainability in China doesn’t focus on instant profitability, but looks to continually expand margins and reach untapped markets to carry companies into the next decade. This requires constantly increasing efficiency and identifying new opportunities throughout the region and beyond. The ABC Group will effectively analyze the limitations of current strategies in order to position our clients for success in the long run.
Strategy starts at home
Before blindly jumping into a business venture overseas, companies need to develop a comprehensive plan based on thorough industry, supplier and demographic research. This starts with a Chinese Business Plan (CBP) and the formation of a China Initiative Committee (CIC) within each company to oversee all business initiatives abroad. ABC will help establish these critical elements while also laying the groundwork for more strategic decisions based on:
- S-I-L Objectives – Looking at business objectives in the short, intermediate and long term, gives businesses a timeframe for when to implement each part of their overall strategy in China.
- Budgetary Outlays – Based on the S-I-L Objectives, ABC will assist the CIC as it starts looking at expenses that will be specific to all operations in China. Creating a line-by-line budget will help determine which costs are being allocated most effectively.
- Procedural Flow Chart – This will define individual personnel responsibilities within the broader concept of the CBP. By clearly distinguishing roles, companies can avoid one of the most costly mistakes of doing business in China – using highly skilled employees to perform low-level tasks and vice versa.
- Anticipatory Troubleshooting – Separating good companies from great ones, preemptively preparing for unexpected business cycle changes within emerging markets will allow businesses to react and adapt quickly. ABC Group possesses the experience necessary to plan based on this imperative foresight.
The most dangerous yet avoidable pitfall that threatens any business venture in China is controlling expenses. Here are the most costly factors of doing business overseas:
- Manpower expenses – determining opportunity costs associated with making sure personnel is being used to their maximum potential is crucial to minimizing these expenses – e.g. highly-paid executives should not be overseeing foreign supply chains if another highly-qualified Chinese employee can be hired out of college to do the job at a lower salary
- Travel expenses – international airfare; air, rail and car transportation within the country; lodging and entertainment costs can quickly elevate out of control if not monitored and planned for
- R&D expenses – prototypes, low run production and marketing costs – these expenses are necessary but can be controlled by identifying the best partners for supply and quality control
- Claim resolutions – penalties due to delays in production and missed sales – these expenses can certainly by avoided by proper planning and using more efficient shipping and fulfillment partners
- Freight expenses – because suppliers often include a portion of these fees into the pricing structure, identifying true shipping costs is difficult but vital to controlling these expenses – we also work to increase efficiency to eliminate incurring late delivery or air freight costs and deferring liability to the supplier in case they do
The ABC Group has the know-how to identify effective measures to cut costs and allocate expenses, efficiently giving its clients the best chance for long-term success, including assistance with:
- Establishing infrastructure
- Market entry, active management and oversight
- Expansion within similar markets
- Finding ways to establish a footprint
For more information on ABC’s Blueprint for Sustainability, download the PDF here.