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Top Ten Reasons For China Business Failure -- List After List

By Dan Harris and Steve Dickinson

ThinkChina Blog did a very interesting two part series recently detailing why US internet companies are having problems in China. The first post, entitled, "US Internet Companies? Top 10 Mistakes," sets out the ten mistakes US internet companies are making in China, according to Yeeyan, a website, which translates English blog posts into Chinese and Chinese blog posts into English. To see the original Yeeyan posts on this, go here, here and here). The top ten list is as follows: 1. US companies focus on elite white-collar workers and ignore Internet cafe users and users in smaller cities. 2. US sites work too hard at avoiding negative press, unlike their Chinese counterparts who welcome the publicity that comes with it. Managers of US sites are paid ten times that of local sites, making them risk adverse. 3. US sites use long term strategies, rather than "guerilla war tactics." They spend too much time and money on ?perfect? planning and they are not able to adapt quickly. 4. US sites focus too much on "process and protocols" rather than on the end result. They are not willing to "sacrifice professionalism or moral/ethical standards to achieve results." 5. US companies tell users what they want instead of listening to users. 6. US companies focus too much on building a quality product instead of "purely on traffic." 7. US companies focus too much on "building beautiful ads" instead of on ads that drive traffic. 8. US companies rely too much on email instead of on phone calls and face to face meetings, which the Chinese prefer. 9. US companies use "simple and elegant designs" which are favored by the elites, not "vibrant crowded" sites favored by the masses. 10. US companies usually hire MBAs and Chinese who are returning from the United States. In "My Top 8 List," ThinkChina sets out its own list:

1. Use success in the US as proof-of-concept. This leads to over-confidence. The fact that Google/eBay dominates in the US means little to Chinese consumers. 2. Failing to adapt website to local users. Partly a legacy problem, and partly the inability/reluctance to adapt to needs of users. 3. Heightened competition. When a large US player enters, it attracts attention. Everyone knows what you?re going to do given your existing business - competition is tougher than for a player laying low. 4. Corporate governance/control. Being public companies, there are rules to abide by which cost both time and money (Sarbanes, for one). A US company has more to lose in regards to negative press or any form of litigation. 5. Nature of a startup. Entering a new country is similar to starting up from scratch, in the consumer Internet space. There?s really little to leverage other than technology (which gets cheaper every day). Reality is that most startups fail. 6. Retention/Hiring issues. For emerging market like China, talents are hard to come by. Entrepreneurs prefer to work at pure startups where their upside is much larger. 7. Difference in business culture. Leads to misunderstanding and frustrations from both sides. Also, leads to distrust and miscommunications. 8. Taking things for granted. This applies to a lot of things, including the rule of law. Lack of ?survival instinct?.

What I find so interesting about these two lists is how many of the "mistakes" can be said about US companies outside the internet arena and how many of these "mistakes" I do not consider mistakes at all, but smart, long term planning. For example, I do not think it a mistake for US companies to target China's elites, at least initially. I also do not think it a mistake for US companies to seek the high road both in terms of their image and in terms of the way they conduct business. If US companies cannot make it in China taking the high road, I have serious doubts they can make it by taking the low road. US companies need to use their strengths in China and I do not see catering to the Chinese masses or engaging in immoral conduct as a strength for the typical US company. I actually think that Yeeyan's ten mistake list, slightly modified, would make a good list of why Chinese companies are having so much difficulty making it in the United States. Here's that list: 1. Chinese companies focus on a Chinese consumer, not an American one. 2. Chinese companies fail to realize that one reputation damaging mistake in the United States could doom them forever here. 3. Chinese companies fail to realize it will take time for them to make an impact in the United States and they are unwilling to spend the time and money necessary to do so. 4. Chinese companies focus too much on the end result (making money), and by doing so, they sacrifice the professionalism that would allow them to achieve long term success. 5. Chinese companies tell users what they want instead of listening to users. 6. Chinese companies focus too much making money in the short term, rather than on building the quality necessary to sustain themselves in the long term. 7. Chinese companies fail to understand how beauty and design might distinguish their product from that of their competitors. 8. Chinese companies rely too much on phone calls and face to face meetings instead of email. 9. Chinese companies fail to use "simple and elegant designs." 10. Chinese companies fail to realize their need to hire MBAs and those with local knowledge. What do you think?

Full post as published by China Law Blog on February 10, 2008 (boomark / email).