China continues to grow … and still offers plenty of possibilities
Large consulting firms have been in China for decades, investing in what is now a large and fast growing market. But there are still ample opportunities for small to mid-sized firms in China, if you understand the nuances of the market.
"Things happen very quickly in China," says Mark Stevens, CEO of the 40-person marketing and consulting firm MSCO. "There are no labor unions, no bureaucracy. There are no permits. Anything is possible; it's more capitalistic than America. Once the powers that be decide to do something, they want to do it immediately."
Have a Big Idea
"You need to start with an idea," Stevens says. "Some rush into China to explore or exploit the emerging opportunity. But they will see through that. Culturally, they are excellent at executing a strategy, they just go for it. But they need a big idea or otherwise they're in a passive state."
In Stevens' case, he's found success in pushing a message around ROI marketing and brand building, a new concept throughout much of China because of its history of state-owned industries that were built around production quotas and not Western profitability metrics.
Jay Riskind, Chairman of 25-person BTS Asia, has also found tremendous growth after founding his firm two years ago. His firm is consolidating the local transportation industry within China by focusing on helping business travelers navigate outside of the big cities of Beijing, Shanghai and Hong Kong. His company provides travelers access to business necessities, such as: air, car and hotel reservations, guides, translators, and cell phone communication.
"You can live off of one good idea here, as long as you're the best and build a sustainable, competitive advantage. You can ride that wave from the first-tier markets to second- and third-tier markets," Riskind says.
To date, most of the consulting activity in the country has focused on the more mature markets within China. A.T. Kearney, for example, generates about 80 percent of its revenue in China from clients in the first-tier cities. However, there are significant opportunities in the lesser-developed regions—and far less competition.
Target Second-Tier Cities
Given the pace of growth in China, a second-tier market may not be second-tier for long. "The Chinese government has set up its political infrastructure as a vertical meritocracy. The way one moves up from the provincial all the way up to the central government is by having success at one's local level. Among local government leaders, it is very competitive. And they use all of their resources to attract as much business for their locality as possible," Riskind says. "They are very aggressive and are always looking for opportunities. It's a green field. And they are looking to build relationships for the long term."
There are many cities across China that are ripe for this kind of expansion. Among the 50 largest metropolitan markets in the world, 12 are in China and just three are in the U.S.
The central government is helping the development of the second- and third-tier cities by heavily investing in transportation. The government just released plans to open 45 new airports and 200 new hotels over the next five years, many of which are outside the country's three best-known cities.
Between now and 2020, the Chinese government plans to spend $64 billion on 97 new airports. Currently, about 61 percent of the country's population lives within 60 miles of an airport. By 2020, that number be 82 percent, the General Administration of Civil Aviation of China says. "Five years ago, I thought this was a market that could not be stronger," Stevens says. "But it has grown exponentially since then."
—Jess Scheer
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