Business planning in China
A business plan is a universal tool for predicting the future well-being of both you and your business. It is a proven tool for developing business and economic goals and ways to achieve them, minimizing risks-especially when you and your company are at the very beginning of the road or are approaching a certain Rubicon (expanding or modernizing production, choosing new areas of activity, developing markets or products), and the situation urgently requires an informed decision.
Of course, preventive planning can not serve as a guarantee against mistakes or failures in the future, but this does not mean that it is unnecessary or superfluous. On the contrary, just five percent of the project cost spent on planning allows you to save up to half of its total costs!
If you do not want to miss a profitable opportunity due to incorrect calculations or invest money in a loss-making project, you need to understand that the development of a business plan is a separate painstaking activity. In order not to make mistakes in it, you need to have a lot of experience.
This is especially true for such a specific area of business as foreign economic activity, where the People’s Republic of China firmly holds the palm in terms of incomprehensibility and unpredictability.
Our work is based on the methodology of the UNIDO (United Nations Industrial Development Organization), which prescribes the following structure of the business plan:
Description of the company and industry
Description of products (services)
Marketing and sales of products (services)
Project focus and effectiveness
Risks and guarantees
In practical terms, the work is structured in the following order:
Study of the marketing environment of the target market, assessment of the relevance of the project.
Analysis of the competitive environment. Search for potential Chinese partners, buyers, suppliers
Development of a promotion strategy and an overall action plan
Legal, tax, and economic specifics of the project
Detailed project algorithm. Calculating the economy: budget and payback. Sales markets. Terms of implementation.
Project management and staffing.
International aspect of the project (import-export, customs, logistics)
Potential risks: ways to minimize
General recommendations and conclusions.
The business plan will also take into account the specific circumstances and critical indicators for each individual case. Therefore, you need to formulate the tasks as accurately and in detail as possible.
An organic part of the business plan is a Marketing Research-a service that can be ordered separately if necessary.
Tactical business practices
The most common variant of a tactical business scheme is the so-called “tax planning”, which, in order to reduce the cost of a product or service, primarily uses the advantages arising from differences in the tax legislation of different countries. If we talk about China, then the most common here is export-import through a company in Hong Kong. For all its apparent simplicity, it is necessary to take into account the following circumstances:
At customs, too, there are people for whom all these schemes with “underestimation-overestimation of the cost” are not “a secret behind seven seals”, and an effective antidote has long been invented for them
The scheme itself is a kind of bone structure that does not allow you to take into account and play with the nuances that, in fact, represent the” know-how ” of tax planning
Without taking into account all the details of a particular business in relation to specific tax, production, procurement, export, and other economic and private circumstances, it is impossible to develop a viable, effective plan that allows you to achieve maximum economic goals.
Extensive experience and opportunities always expand the angle of view on the problem, which allows you to take into account and systematize facts and phenomena not only superficial but also deep, hidden from the “naked eye”.
For these and a number of other reasons, the professional consultants of Lang Yeon Consulting have generally abandoned schemes in relation to business planning, considering the business of each of our clients as a completely unique case. Our recommendations in this area are a detailed practical development of a general stratagem, outlined in the business plan or ideas of the client. As a result, you get a fully justified step-by-step variable instruction, following which you can achieve the maximum set goals in various ways.
If the lack of options is an unpleasant thing in principle, then for business, the lack of alternatives can be generally disastrous, especially when it comes to China. Being tied to a single supplier, counterparty, or manufacturer almost inevitably leads to serious losses over time, no matter how cloudless the cooperation may seem at the beginning. The same applies to various exclusive rights that other businessmen rush to award the Chinese partner they like. The Chinese side will certainly take advantage of its position as soon as it feels your dependence on it. The easiest way is “price blackmail”, when suddenly, after receiving the next prepayment, the Chinese counterparty unreasonably increases the prices twice, after which he “stands in a pose” – they say, you don’t want to – don’t buy! Or another case when the Chinese product suits you in all respects, but the company already has dealers in the Russian Federation, and the factory refuses to work with you directly. It is even more difficult to avoid falling into a no-alternative loop when an order is planned to be placed in Chinese production.
In these and similar cases, you will need to develop a workaround scheme for purchasing, supplying, manufacturing, and exporting that would free your business from mono-dependence with minimal losses or even profit. We strongly recommend that you develop such a backup option before you sign your first delivery contract from China. So you will not only protect yourself from the unpleasant situation of “pinned to the wall” in the future but also get an additional strategic trump card, the timely removal of which from the sleeve during the negotiations will allow you to get the best terms of the contract or cooperation from the Chinese side.
Generally speaking, there are exactly as many variants of tactical business practices as there are variants of business activity, which, in turn, is a manifestation of the creative potential of a person, characterized by an infinite amount. Therefore, to solve specific problems of your business, we recommend that you seek individual advice from the best specialists of Lang Yeon Consulting.