Some features of today’s China are a slowing down growth rate, stagnant stock market, and uncertain real estate market, leaving wealthy Chinese few tools to maintain and increase the value of their assets. As a result, though they face restrictions on moving cash assets overseas, many Chinese people still figure out ways to get around these restrictions. In 2014, the amount of cash assets transferred reached US$324 billion.
With the Chinese Yuan’s addition by IMF into the SDR basket on Nov 30th of 2015, Chinese authority will expedite its agenda to free up this currency to flow in and out of the country. The Pilot program is under review to remove the foreign exchange control in six cities and municipalities (QDII2) with eligible individuals, and if this program goes smoothly, it might apply to the entire country in a few years. A CICC forecast indicates that will free up 41Trillion RMB or 7Trillion USD equivalent of cash asset to invest overseas.
According to the FT study, 42% of the wealthy Chinese cited the U.S. as the preferred destination for their cash. They indicated much of that investment would go into businesses, commercial investments and financial products. This will create a tremendous opportunity for many US financial institutions. The question is now, are you ready? A financial institution may want to audit itself with the following perspectives:
- Product and Service: Are you selling to individual or institutional investors? Do US regulations allow Chinese investors to buy your product or service? Even if yes, what are the required compliance standards?
- Marketing: Selling to Chinese individual and institutional investors does not mean you can simply move your current marketing program to China or translate your English materials into Chinese. It means an overhaul and redesign of your marketing program so it is more suitable to Chinese context. As a result of China’s Cyber censorship, instead of getting information from Google, Facebook or Twitter, China has Baidu, WeChat and Microblog. Some US companies’ websites may not be accessible from China due to their IP server, and you may need to consider moving your website to a different server or creating a mirror website in China. You may consider starting from building a few HTML pages for business development purposes, which will then be upgraded to include the major social media when your client base expands in China. With 10+ years experiences with the China market, TE+A is one of the few agencies which can provide one-stop services to such US financial institutions. Such a client has just contacted the firm in the past week and TE+A may see more and more in the coming years.
- Operation: A financial institution should make sure their current infrastructure and system supports Chinese investors, from directly after the point (or preferably even before) their RMB is converted to USD. There are a few online finance companies that have developed an online marketplace where Chinese investors can invest overseas products. Working with these companies might be an inexpensive way to enter Chinese market (this only applies to products for individual investors).
To best compete in this new China market, every aspect along the value chain should be examined in order to server this brand new client segment. It is better to have this internal audit and evaluation done sooner than later, before you risk losing out on this huge opportunity.
Gary Qu, COO
How Shall China’s Large Financial Institutions pick their Overseas FoF Partner?
One of our clients and I have been doing research in the past one and half years on large Chinese financial institutions, particularly capital management institutions, on how to develop overseas fund of funds (FoF) products for their investors.
One obvious weakness of these institutions is their lack of knowledge on overseas FoF market. In order to develop FoF products, the institution should have capabilities in asset allocation strategy, category strategy and how to pick the right fund managers. All these require know-how that could only be accumulated through many years of operation. Working with an overseas partner is becoming an automated solution to most of these institutions.
When talking about partnership, Chinese people believe in “门当户对”or only work with people from “equal ranking or social status”. As a result, their first target will be world leading institutions such as J.P. Morgan, etc. People usually make this decision under such assumptions as: 1. They assume their investors will appreciate products from these world leading brands; 2. Without clear strategic reasons, working with the leading brands will always be a safe option to the fund manager.
These two assumptions seem to be quite prevalent among people we talk to. But are they valid assumptions? Not necessarily in my observation.
First of all, when Chinese investors buy an investment product, they trust the brand of the Chinese institution, not the brand of the product. This mindset is very well reflected when Chinese buy wealth management products from a bank. They trust the bank won’t run away with their money, regardless of what the product itself is about. Such mindset is shared by many investors in China, particularly those people who are not very sophisticated with investment.
What could this message imply? It implies that partnering with the large brand may not enhance credibility to the Chinese institution from their investors. Moreover, under this pattern, the Chinese institution could, in most cases, only sell standard products under brand names of these dominant partners, and end up becoming a distribution channel/platform for their partners.
A potential alternative is to partner with a relatively small, but boutique overseas institution. Many these institutions, like my client, have been operating over 2-3 decades and accumulated sufficient know-how, which makes them a good partner to develop customized products for the Chinese institutions through white labels. This will allow the Chinese institutions to sell a self-branded and well-tailored/differentiated product to their investors. This will gradually build values into their own brand without losing much autonomy. Many small to medium overseas institutions are happy to be a silent partner in order to share “China opportunities” with these large Chinese institutions. So it is time to take a second look of your overseas FoF strategy.
Think Differently— An SME Strategy in China
In 2012, China’s State Council publicized the guidelines to promote the movie industry in China. At that time, movie theatres in small cities were still neglected by their investors. My brother and I grew up in a small coastal city named Penglai. The only cinema in the city was shut down in early 1990s when people all shifted to owning TVs. That was a big disappointment to my family with movie-going traditions.
We instinctively felt that this would be a good investment opportunity for us, however, as individual investors with limited funds, we did not have extra resources to conduct a classical due diligence to verify our idea.
We then started observing the market and tried to find sensible indicators in lieu of a direct due diligence. What we found was the following:
- Targeted consumers of movie cinemas in today’s China are in the 18-35 ages of the younger generation. This generation was brought up under the huge influences of western culture: KFC food and Hollywood movies. Targeted consumers of these two businesses are highly overlapping.
- Before approving a franchisee in one place, large brands will mostly make thorough due diligence to audit the market. As a result, franchises like KFC, McDonald will be a perfect indicator to determine whether a small city may be able to support a cinema.
Penglai already had one KFC in 2012, and luckily, we found a great location for a cinema near the KFC store. This proved to be the most successful investment we did in my life so far, which has been growing over 60% YoY for the past 3 years.
This is an interesting example showing how SMEs may conduct their businesses differently than those of their MNC counterparts and achieve satisfactory results.
This story also offers an inspiration on how a US/European small brand may enter into the China market. China has over 2000 cities in the same ranking as Penglai, some are relatively poor and some are wealthier, but they all have huge growth potentials (read my prior LinkedIn post on China’s 5-year plan). Xi Jinping has recently pledged China will end poverty by 2020, and most of these people are currently living in the small cities or counties. Driven by this plan, we can expect more and more cities will join the wealthier club in the next 5-10 years. One trend in consumer market is that the new wealthier population will start seeking foreign brands which could be a showpiece of their wealth.
Instead of taking the same “Top-Down” entry pattern as the large foreign brands (starting from large cities like Beijing and Shanghai) which have a well-designed business model, small brands might find less resistance and easier entry in the wealthy small cities. These smaller foreign brands can fill the price gap between the large foreign brands and small local brands. This strategy will also help to avoid bloodshed head-on-head fight with the established large brands in larger cities.
Trungale, Egan + Associates
“Mirror, Mirror” or Knowing Yourself and How You Appear to Others and Why a Blog can Help You, and Your Audience Get a Clearer Picture of Your Brand PART II
Since the posting of our last blog I recently participated in two brand-building exercises with two of our key relationships that are in different industries. The events had very different objectives. One was the on-boarding and cultural emersion of a new team of front line sales representatives and relationship makers. The other consisted of the refinement and delineation of the company’s mission, vision and core values. The working sessions were attended by the leaders and department managers of the organization and were facilitated by a trusted, highly credentialed consultant who specialized in behavioral science, organizational communication and change management.
In both cases, I not only gleaned new, critical snippets of client knowledge, but also received a clearer view of our own company and brand. Like many groups, we actively manage and promote our brand and have done well communicating it, but we always push for continuous improvement. A willingness to listen to constructive criticism, and more importantly, seek it out, is a powerful business practice.
The first workshop I attended with our clients focused on personality types and persona selling styles. Along with the rest of the group, I took the Myers-Briggs personality test. The confirmations of certain traits gave me a clearer view of who I am and how deeply I am intertwined with our company culture. I was able to see firsthand how others reacted when my personality style was discussed. These reactions varied from ones of surprise, to disagreements, to even hearty affirmations. These reactions showed me that how you are perceived comes down to the points of contact and interactions people have with your brand. Gaining insight into how congruent these two audiences view your brand and your opinion of the same, amount to the powerful business practice mentioned earlier: the willingness to listen to constructive criticism and seek it out.
The other workshop I attended was a daylong working session that made great strides in crystallizing a company’s mission, vision and values, as well as developing consensus thoughts from key stakeholders. We have worked with this client for over a decade and have helped them build their business and evolve their brand, so I looked forward to a passionate and collaborative day… I was not disappointed.
Structured exercises of this kind benefit from high levels of engagement from highly informed participants. Honesty and the level of safety a participant feels to champion dissenting opinions is, in my mind, the linchpin to the effectiveness of these efforts.
As I reflected on the status of our brand and how it is perceived, I looked at it in two distinct ways: how a prospect experiences TE+A and formulates an opinion of us, and what are those clients’ experiences?
Once you establish your message and gauge audience perception, where and how do you take the next steps?
All of these questions are important to answer when trying to discover the “self” of your brand and even more so important when trying to discover your brand’s “true self”. Drilling down to what it is your brand actually stands for and the face that you put forth towards your clients will not be an easy task. Balancing the Id and Superego, while also finding the right amount of constructive criticism to take by incorporating the realistic tactics of the Ego is a key tactic. On top of all of that, you have to know how to combine this together without losing the essence of what your brand is and what you want it to be. However, one ideal is what makes all this effort worth the while: By knowing yourself, you know your brand. Security in self and security in brand go hand in hand.
Knowing exactly how you are perceived is never an easy task. There are many ways of going about finding the truth beyond your own personal thoughts. Even then, it’s possible you are going to miss some vital insight, either from not having enough constructive criticism, or by letting the Ego overlook what has been given to you. It is an ongoing process that you must commit yourself to and be resolute in performing. Your brand might not be the “fairest of them all” just yet, but with a bit of insight and perseverance to change, your “happily ever after” brand image is not such a fairy tale after all.
Recently there was a business headline that ran in the news that read: “US$1.3 billion investment from a Chinese real estate company into Texas oil fields”. People living in Chicago may have heard of another investment from China’s Wanda Group in the city’s waterfront residential project last year (2014). On the other side of the coin: multi-national corporations (MNCs) operating in China see less and less of the conveniences that they used to enjoy in various fields, including tax incentives, subsidies, or leniencies on inappropriate business conducts. Due to this several MNCs have left China and chosen to go back onshore. Underlying these facts is a belief that golden age of foreign companies in China is coming to an end.
In order to understand whether this is a valid judgment, we shall take a look at the economic development stage China has gone through. China started to open-up and reform their business practices in early 1980’s, when China’s industrial infrastructure was extremely backward and had to rely heavily on foreign technology, brands, and management to help build its industry. Through this process, and by mid-1990’s, the country had built expansive manufacturing capabilities. Thanks to the low cost of labor and resources, in the following decade China not only provided foreign MNCs high production efficiency, but its huge domestic market as well. This was a period when Chinese saw quick income increases, and the emergence of a middle class. Such development has led China into what some people called “the middle income trap”. Many people have suspected China has started losing its competitive edge in the exportation of manufactured goods while also being unable to keep up with economically more developed economies in the high-value-added market.
Does this mean an end of China opportunity? How will China evolve and implications to US SMEs?
Since the new administration took office in 2012, China has made efforts to upgrade its manufacturing industry from the current cost-driven mode to more value-added model. Such transformation is supported by the efforts led by the State Council which has initiated a series of policies to encourage creativity and innovation. This trend can also be seen with consumers seeking more and more customized services/products driven by the internet and mobile internet. Although this poses challenges to large MNCs which are traditionally used to serve the mass market with large volume of standard products/services, it provides a new opportunity to small and medium enterprises (SMEs) which have special advantages in a niche market and are usually more flexible when dealing with customized demands. Such opportunities span across the entire value chain of a company, from supply, operation, even to marketing.
Foreign SMEs can now increase their competitiveness in the market by incorporating China-centric element into their strategies. For instance, with the improved product quality of Chinese suppliers, foreign SMEs are now able to source more reliable product materials from China. In the meantime, foreign SMEs with specialized technologies/products will find more clients and consumers seeking niche market products and services in China. One of the most recent requests I received was from a Chinese electric vehicle maker seeking US technology partners to help improve the design and performance of their vehicle. The market will soon begin to see more and more collaborations of this nature across the two countries.
However, China also poses a variety of challenges to any prospective foreign entrant. These challenges include, for instance, language barriers, culture difference, varied business practices, etc. All these challenges will lead to certain risks for the new entrant to navigate and overcome.
China Market Consulting of TE+A took this risk with our Shanghai office back in 2006. We will now start delivering this service in Chicago this year by getting closer to our clients. TE+A plans to run an offline monthly event every second Tuesday, and people interested in the event can register through: www.meetup.com/ccclub, which is our official event webpage named “Chicago China Club”.
Our mission is to facilitate business transactions between US SMEs and their Chinese counterparts through active engagement with both parties throughout the entire process of transaction. Bridging the cultural gap between China and the US is only the first step. There are many more to take and with the help of a firm like TE+A that process can be that much more effective and simple.
Chief Operating Officer
“Mirror, Mirror” or Knowing Yourself and How You Appear to Others and Why a Blog can Help You, and Your Audience Get a Clearer Picture of Your Brand
As we have recently launched our new website, I’ve been thinking a lot about our brand. What we stand for, what makes us different, and how we can best articulate and promote our values and service offerings? At TE+A, we help guide our clients through this process, so we decided to put ourselves through the same paces and determined a blog was an excellent channel to share our thoughts.
One of the biggest current trends in content marketing and SEO is leveraging an industry related blog. When we advise with our clients, one of the key channels we review, and often come to recommend, is exactly that. If you are like us, and decide to commit your company to writing a blog, you may find that one of the main advantages of this endeavor is not just who will read it or the SEO uptick. It’s knowing yourself better.
The duality (and length) of the title for our first post attempts to create a tighter framing of the topic of branding and a blog, rather than just discussing knowing yourself and your brand as a general topic. It encompasses seeing both the positives and the negatives and moving forward from that point.
When representing the collective that is your organization, you strive to tell your story and make your position known to your target audience. However, you do so with a purpose and as the de facto spokesperson for your brand. A blog is a perfect platform for this type of communication. So how come the words didn’t just jump onto the page when I sat down to write this? Why didn’t I get a visit from one of the Muses as I often do? Why did it seem much easier in principle than it did in practice? The answer is that knowing yourself (aka – your brand) isn’t exclusive to how you see yourself. It’s also about how others see you and the dialog that exists between you and the marketplace. Many people want to be “the fairest of them all” when they reflect on themselves, but few, if any, are. So I took the road less travelled and decided that I would not succumb to vanity, one of the poorest substitutes for objectivity, and what I found was refreshing. Bottom line, if taken to heart, a blog helps you crystallize your brand messaging and helps to frame your core beliefs.
Knowing yourself and how you are perceived sounds simple on the surface, but once you get below the veneer, it also entails some soul searching. Some people are less able (or willing) to admit that they need help staying accurately informed of how their audience views them. Finding the right balance between how you ideally want to be perceived and how you are actually perceived can be challenging. However, the benefit of wrestling with this challenge is well worth the effort.
It starts with a close and thorough self-examination… or checking yourself out in the proverbial mirror. This requires more discipline than many people realize because we do not always get a clear picture of ourselves when we look in the mirror. You need to objectively look at yourself and let narcissism take a back seat to reality. This is similar to literally looking at yourself in the mirror. When we look at ourselves in the mirror we actually see an inversion of ourselves – it’s a mirror opposite of us — that’s why when we see a picture of ourselves it looks different. The same phenomenon occurs when we hear ourselves speak or, heaven forbid, hear ourselves sing. (Despite my lyrical knowledge sometimes I, sadly, find my own voice lacking in skill.)
It is instinctual for us to think of ourselves as better, or having more finely tuned qualities in comparison to others. On the other side of this coin, there are also those who are overly critical of themselves. In the terms of Sigmund Freud’s analysis of the psyche, we are torn between our Id, the former, and the Superego, the latter. We battle our narcissism and our altruistic or humble ideals. When looking in the mirror we have to account for these opposing forces and rely on our realistic mediator, the Freudian concept of the Ego, to guide us to a healthy combination of self criticism and self appreciation. If we stray too close to the Id or the Superego, we risk viewing our reflections in the mirror as a biased, fictitious truth.
Like in the Camera Obscura, we have to remember that even looking in a mirror, the reflection is not as it seems. One must be aware of these reflective flaws in order to truly know oneself, and thus, know one’s brand. How do you view yourself? How do your current and potential clients view you? You can’t be tricked by what you see in your reflection but must be aware of what obscurities are present. Mirror, mirror on the wall, you’re probably not the fairest of them all.
Rather you should listen to what people think of you. Understand how you are perceived, understand and communicate your business offering and goal to all relevant audiences, understand your SWOT, define your message map / value props, stop the “It’s all about me” and start a conversation with your audience and listen to their insight.
Companies constantly leverage experts in fields like marketing, management consulting, and research and conduct everything from focus groups to existing customer interviews to secret shoppers and diners, intercept interviews at point of sale, and social surveys. All of these take a significant investment of time as well as money. So how do you get the right balance between an accurate gut check on public perception of your brand and a reasonable budget? The answer is this: it’s different for everyone. There is no one prescription for all. It’s a process that requires you to work with your organization and your clients or customers. What is this process like? We have examples soon to follow in Part Two of this blog.