Asiais a market worth many billions of pounds to western businesses and more and more companies are seeking to take advantage of the opportunities. However, those seeking to break into Asia have had to learn how to trade on the continent.
Chinais a good example: the people running Chinese businesses value human contact above everything else. Only when they respect a potential customer will they truly engage.
One company which shows what can be achieved, even by a relatively small business with 30 workers, can be found in the English town of Lichfield, where Charter Automotive has been making significant breakthroughs into the Asian automotive market.
Charter Automotive, which recently merged with a similar company in Milwaukee, US, exports 97 percent of the valve keys and synchro gear inserts which it produces in Lichfield for use in engines and manual gearboxes.
Producing a million units a day from the Staffordshire factory, it has been able to secure contracts with most of the top 20 automotive companies in the world, including those in China and India.
Global Sales Manager Gary Brereton, who is regularly invited to address business meetings on how to trade with Asia, says: “In September 2003, I went to our MD and said: ‘give me five years and £50,000 and I will see if we can break into China’.
“We were already trading abroad at the time — about 75 percent of our components went abroad — but I felt that China’s rapidly emerging automotive market represented great opportunities for us.
“Five years on and China now has a major automotive sector so it makes sense for us to export to them. We expect 25 percent of our sales to be exported to China by 2013.”
For Brereton, the process required patience. “It must have taken 18-20 weeks’ worth of visits — two years’ worth — before we won a contract.
“The Chinese like to build up a relationship before they will place an order,” he adds.
To strengthen the link, the company set up a 2,000 square meter warehouse and distribution center in the country, not far from Shanghai, employing four people. “We took the decision not to manufacture in China because it made as much sense to manufacture in the UK or in the US. The Chinese value quality as much as cost and we produce quality components here in Lichfield,” Brereton says. “One concern for companies trading abroad is maintaining the supply chain and, by having control of our own distribution in Asia, we achieve that.
“Also, the Chinese like to deal with a ‘local’ company — one that is on the mainland. They like being able to pick up the phone, ring a local number and talk to someone in Chinese. Having a Chinese base also means that the Chinese can pay in their own currency rather than worrying about translating that into sterling or dollars.
“It makes sense for us to be in China and we can see ourselves expanding further.”
Another of Gary’s messages is that companies cannot achieve all this on their own. In his case, one of the organizations that helped is the Birmingham-based Midlands World Trade Forum, a networking organization for West Midlands SMEs, which offers advice, mentoring and other support.
“We are seeing companies considering trading abroad because their home market has declined and they see the potential of seeking out other markets. However, it is important that they understand the market and research it before they make the move,” says Executive Director, Glenis Poletti.
“Some companies may find themselves keen to work abroad, but not sure how to go about it. By finding someone to mentor them and help with advice, they can learn from people’s experience and mistakes.”
Charter also worked with UK Trade and Investment (UKTI), the Government organization which helps UK-based companies succeed in the global market by providing a single source of comprehensive advice, support, information and access to funding.
Steve Morrison, UKTI International Trade Adviser based at Southern Staffordshire Chamber of Commerce, says: “One of the things to remember when dealing with China is cultural and business etiquette.”
Another challenge is red tape. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said recently that unnecessarily complex customs and border procedures cost companies money. It estimated that it takes three times longer to complete export procedures than in developed countries and wants to see that change.
Noeleen Heyzer, Under-Secretary-General of the United Nations and Executive Secretary of ESCAP, says: “The hidden costs of trade are high. Timely publication of trade regulations, simplification of trade procedures and documents, and improving coordination between relevant government agencies within and across borders can go a long way towards increased connectivity and integration of the region.”
The benefits of surmounting the challenges are massive, as UK Trade & Investment Chief Executive Sir Andrew Cahn, one of those working to secure trade deals with South Korea, explains. “The market will be worth an extra £17 billion to EU business — it’s another £11 billion to Korean business.
“The potential gains of such a deal for British businesses are huge.”