The Three S's of China: Strategies To Tap Into China

The following we believe are the fundamental driving strategies for companies to work with or in China:

• Sourcing (or outsourcing)

This is the first and outmost strategy employed by companies leveraging low costs in China which include, but are not limited to, labor and benefits, materials, real estate, energy/utilities, tax (or incentives), environmental costs (or lack of). Some have estimated that for every dollar of products imported from China, six dollars of corporate profits are generated by US companies.

• Supply Chain

Many companies are drawn to China not by choice, but by the need to stay plugged in a customer or industry supply chain. Please refer to 'China Re-defined' for more explanation.

• Selling

Despite its domestic market woes, GM became China's top-selling foreign automaker in 2005 (surpassing former No. 1 Volkswagan, another foreign automaker). Cases abound in the marketplace where foreign firms (particularly the Japanese and German) witness huge revenue and profit growths in China (click here for more info on this).

But where do selling opportunities exist? They exist if you have something to offer that the Chinese want or need but don't have/can't make/don't know. While many things may seem obvious, such as an American education or degree (that is why Chinese students represent a significant source of income for American universities), some may not. Please contact us and we will explain where and how to spot them.

Another strategy worth noting, although it is not a mainstream one yet, is 'Subsidiazation', where a company uses its China operation profits to subsidize another core business of theirs in their own domestic market--rendering the latter a 'cost leader' in order to gain market share and, in the long run, ultimate profitability.