Do You Have What It Takes to Do Business in China?
I wrote a guest post for GigaOm Pro on why it is so hard for most US Internet firms to succeed in China. GigaOm Pro is $79/yr, and after spending a couple of weeks using it I’d say it is well worth the very reasonable price.
GigaOm excerpted my post on its free site, which you can read here. Some (though far from all) of the key points are:
1. Invest in Experience — The highest priority is to line up advisers with experience in China, from venture investors to lawyers to accountants to, in some instances, market-entry firms. It’s critical to understand the competitive, regulatory, and legal topography of any given industry and sector. If you can’t afford to do the proper market-entry work and due diligence, then you probably can’t afford to operate in China.
2. Prepare for Regulatory Complexity — On a revenue basis, operating in the PRC tends to consume a vastly disproportionate amount of management bandwidth. One reason for this managerial overhead is the government’s penchant for regulating media and communications. Several government bodies share jurisdiction over the Internet, making licensing and permitting a time-consuming and frustrating process. U.S. laws also present hurdles. Public or soon-to-be-public companies need to undergo rigorous Sarbanes-Oxley disclosure requirements as well as increased risk exposure under the Foreign Corrupt Practices Act.
3. Expect Copycats — Chinese developers and engineers are skilled, fast, plentiful and much cheaper than their U.S. counterparts. Imitation in China is more than flattery; it’s expected. However, China does have laws that protect patents and intellectual property — but only if you apply to the relevant government agencies and, in most cases, do it before you’ve entered the market or even engaged in discussions with potential partners.
For most US Internet firms, especially smaller ones, you are better off focusing your resources on winning in your home market. And for any wags who want to be snarky in the comments, I am very aware that if I had what it took right now I would not be spending so much time blogging about it…
Related posts:
Gaming, Internet, Regulations, china
[...] Internet companies which want to enter the China market on his blog Digicha.com, which is titled Do You Have What It Takes to Do Business in China? In the article, he lists three factors as being most [...]
“And for any wags who want to be snarky in the comments, I am very aware that if I had what it took right now I would not be spending so much time blogging about it…”
LOL