Thinking of selling your product in China or India? TON Tuesday was another hit this week as the panel explored issues around bringing your products to Asia. The challenges and rewards were explored through a panel discussion featuring Mike Manson, CEO of TaraSpan, Ying Hou, National Vice-Chair of China Initiative from Gowlings Lafleur Henderson LLP, Marvin Hough, MBA, Executive in Residence of the Telfer School at the University of Ottawa and Mark Bolger, Regional Manager of Asia at Export Development Canada. Here now a summary of the discussion.

If you are contemplating taking your company to Asia, this session is a must-read!

 

First, a little perspective from the Chair of the discussion, Walter Knitl, in the form of the following statistics comparing China, India and Canada:

 

	China	India	Canada
Area in Sq. Km	9,596,961	3,287,263	9,984,670
Population	1.34 B	1.16 B	0.033 B
GDP in 09	$8,791B	$3,561B	$1,287B
GDP Growth (2010 est)	9.6%	7.7%	2.7%
Imports in 2009	$921.5B	$253.9B	$305.2B

Question: What are the key opportunities and market segments in India?

Mike: There are huge market opportunities in India and big companies just weren’t represented there. You name a sector and there’s a market. For example, consider telecom. Every month in India there are 12-14 MILLION new subscribers. People who had never had a cell phone before. And consider that everything in that supply chain is required from the towers to the retail set-ups. Infrastructure, banking, retail, security – it’s all booming.

 

Marvin: Companies selling to Indian – the ones doing really well – are security, fraud detectors…with Ottawa and so many great tech companies, we are well positioned to succeed. It’s not that we don’t have the right technology.

 

Mark: I often get asked, “If you had to choose between China and India as a place to export to…” and they both offer great opportunities. However, China is looking for niche technologies right now. Their economy is still state-driven so bio-tech, clean environment technologies, ICT opportunities – less on telecom but more on knowledge-based technologies. Regulations can be an issue – but special effects tech, on-line or cell phone gaming opportunities are there and you can get the licensing opportunities in China.

 

Ying: With regard to licensing it is different. For example, a drug company that didn’t think to develop business in China years ago, did not bother to get a patent for their product in China. When they did come to market it was too late. You should patent now, to protect your future. IT and life sciences are both very important industries in China right now.

 

Mark: IP fear is huge with those looking to market in China. It’s not that there isn’t a process – it’s following the process yourself. Their patent and copyright laws are very different in some key areas. For example, the sleeves that protect coffee drinkers from the hot liquid aren’t patentable, but the FUNCTION of protecting people from hot beverages IS.

 

Mike: In India, we get asked about software sourcing developers and IP there goes way beyond anything we see here. Companies seem more afraid of what could happen in India, yet they leave their local doors wide open! In India, if you’re a software developer, your computer has no way for you to remove information. There are no USB ports, no networks – NO way to get information off your computer.

 

Marvin: policing and regulations are very strict in India to try to make companies feel comfortable.

 

Question: How long does it take to get a patent?

 

Ying: In China, you file a patent and it is fairly easy. There are Utility, Invention or Industrial Design Patents. Invention patents take a bit longer, but you can file a Utility Patent instead – it is cheaper and easier.

 

Question: Where in India should you go to do business?

 

Mike: The finance hub is Mumbai, the government hub is New Delhi. There are 5 ‘tier one’ cities with 15-20 million people, and many ‘tier two’ cities that are bigger than Toronto with around 5-6 million people. The largest centre for IT is is in Punai, a Teir 2 City, and InfoSys has more than 25000 engineers on a campus there.

 

Marvin: 2^nd or 3^rd tier cities in India are bigger than most of our cities. Infrastructure in these cities is really gearing up – water, power and airport upgrades are all required in order for India to continue to compete. Trade missions are ramping up in these 3^rd tier cities. In Tier 1 cities you are often hitting a well-beaten path…don’t think of 3^rd tier cities as too small. If you’re involved in infrastructure of any kind, that’s where you should be.

 

Mark: Where you want to be really depends on your product. There are major centres for IT…but these are also major areas of intense competition. Look at your buyers and play in secondary or tertiary cities where there is less competition – it’s still a large market! Fastest growing areas are out in the country and government is putting money there for investment. Don’t forget Hong Kong – it’s great for several reasons: it makes a great test case for Asia for your product, and it’s a great launching pad for your entry into Mainland China.

 

Marvin: If you are preparing to go to India or China you need to do more than find an agent. You have to develop your Canadian network and leverage that for advice, connections, market research, business culture, etc. You also have to recalibrate your business plan for this new market – it’s going to take at least 3 times as much time and money as you think it is to see a return on your investment.

 

You will hear that it’s about presences and relationships. If you aren’t willing to set up a presence there, you are at a severe disadvantage. Patience, Planning and Seizing the Moment. You will be surprised by how much you have to negotiate to win the deals.

 

Mike: The best advice: Be Committed to the Market. You can’t go over, get a bunch of business cards and think you’ve built relationships. To get them to take you seriously you have to invest. The world is knocking on India’s door right now. For example, Prince Andrew is in India four times a year for the UK…it’s very much a relationship market.

 

Mark: For China, any place in Asia, the commitment has to be there and at the executive level. The Chinese are looking for a family-type relationship. In business and in friendship for the long term. Use the Canadian Trade Commissionaires. They have a strong presence in China and India and they can help you find contacts, give advice, etc. Don’t get distracted by vast numbers…target your search and your market. Don’t let your guard down on your ethics – do your due diligence.

 

Question: What is the biggest hurdle to doing business in Asia?

 

Mark: Attitude: You have to spend time and money there to build a presence. If you don’t have a strategy for these countries as part of your plan, you need one.

 

Marvin: Understanding – the culture; understanding if you are getting anywhere in the business relationship; understanding the bureaucracy. Don’t rely on just one agent…the connections are just too vast for one agent to be able to handle it all. An on the ground presence is required and your agent is critical to your success and must be aligned with you.

 

Mike: An early hurdle is the one within your own company. The preconceptions of people are a huge hurdle. India has changed a lot in the last ten years, but the executive buy-in on your team has to be there. Also, you have to take the time to foster the relationships.

 

Question: How do the countries compare in being savvy in business dealings?

 

Mike: Canada has some fantastic technologies. From a marketing standpoint, we fall down. India is very brand-oriented. For example, no one in India knows Mitel – they know other brands, but not Mitel. Also, the level of entrepreneurship in India is amazing, as well as the youthfulness of business leaders. Companies considered “mid-size” in India are making $2-3M a year and are run by very young people. We have a lot to learn on that side.

 

Marvin: Canadian companies haven’t been prepared for these markets because we’ve been concentrating on the US. I see us as being a bit dis-jointed. Less inclined to work together. They want to be independent, but with a market like India, you need to leverage team effort. We are not as aggressive as we need to be. We need to get into those 2^nd and 3^rd level cities and develop a presence.

 

Mark: You used to deal with the State-run agencies but in the last ten years we now deal with private industries that have western-educated leaders. So the number one thing I hear from Chinese companies is, “If the Canadian company had only listened and been a bit more accommodating to our needs…made some slight adjustments to their product…” Also, I hear that Canadian’s never actually ask for the business! They had the best product, best offer, but they just never asked. And I haven’t just heard this once or twice.

 

Question: What’s one myth about doing business in Asia?

 

Mike: There are 300 million English-speaking Indians and they have four times the vocabulary of the average Canadian! All my dealings in India are in English. There are more English-speakers in India than there are in the US.

 

Marvin: it’s not just about patience – it’s about finding your way through and seizing the moment. Go the extra mile to win the business. Sure there is paperwork and bureaucracy, and government contracts can certainly test your resolve, but the business culture is changing.

 

Mark: There is a myth that your commercial contract clearly defines your relationship. No. That’s always open to negotiation and discussion – and that means any clause of the contract.

 

 

Question: What’s the ROI given the huge market versus the expense of a local presence?

Mike: It’s all about the scale. You are offered a scale you can get no where else in the entire world.

 

Marvin: Measuring the scope and timeframe for the ROI. If you’ve been working in the US and want to diversify, you have to recalculate your business plan and understand the return can be 3-5 years out. Long term potential within the market, plus growth in the country – it’s hard to ignore.

 

Mark: consider the product. If you’re a small company with a standard product…probably not a great market. It will be copied and your investment won’t last. Niche technologies may play better.

 

Question: How much money do you invest?

 

Mike: at least six figures for a small company, on an annual basis.

 

Mark: Better to partner here in Canada or work with reputable company who can represent your product in China. $50-100K in 1^st year to explore the market.

 

Marvin: Consider the time and the human resources for visiting companies. You need CEO presence in the market on a regular basis.

 

Mike: There is financial support – the Ontario Ministry of Trade can fun up to $50K, EDC has an Export Express program to help with new market entry…

 

The next TON Tuesday will be held on April 13^th at Gowlings on Elgin Street and will feature a panel discussion on mentors, coaches and advisory boards – why you want one and what they will do for your start up!

Tags: business, China, India, TON Tuesday

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