Many of our clients, international companies operating in China, chose to begin their Chinese operations prudently. They decided to first focus on studying the market and establishing a sales array. They achieved it by outsourcing operational tasks such as accounting, HR or supply chain management to an external proficient service provider experienced with the local market. Later, some companies choose to further rely on outsourced professional services even after establishing their own local company in China.
We asked our clients what led them to outsource back-office functions in China. Here are the top 5 factors:
- Enjoying the benefits of solid local company
- Avoiding barriers and strictly doing business
- Maintaining flexibility while exhibiting stability
- Saving resources and focusing efforts
- The “Sales incubation” platform
Let us elaborate on those factors:
1. Enjoying the benefits of solid local company
Local Practice – When initiating market entry in China, international company usually have a modest local presence. Relying on professional services provider, well informed with local standards and regulations, enables the international company to operate efficiently from day one.
Local Knowledge – utilizing the benefits of a solid local company’s supply chain management, financial management and local manpower, prevents rookies’ mistakes. Those are costly in China, and are almost inevitable due to the differences in language, business culture and work practices, as well as frequently changing regulations. International companies, running business in China, often face difficulties handling the vast amount of documents necessary and exhausting bureaucracy demands as well as Chinese meticulousness. When a professional team – specialized in international companies’ Operation Management in China – like PTL GROUP – is carrying the load for your company, you acquire professional knowledge you need to gain.
Local Facilities – international company with modest local presence in China can appreciate accessorized shared offices, warehouses, manufacturing lines etc. That way, attention can be focused on establishing sales and distribution channels; building customers’ service or technical support – if needed
2. Avoiding barriers & strictly doing business
Companies at the Market Entry phase, occasionally encounter difficulties when they need to conduct business using local currency. On the one hand, the scope of business in China does not justify the investment of establishing a local company that would operate using local currency. On the other hand, when beginning to work with Chinese clients, some of them are reluctant to use foreign currency, or are not permitted to do so. How can you receive payments? How can you transfer the money from China?
At those situations, companies realize they need a third party to perform those transactions for them.
3. Maintaining flexibility & exhibiting stability
Flexibility – companies that operate in china are obliged, on occasions, to adjust their scope of operations, either as a result of market expansion and growth or as a necessary reduction due to efficiency requirements. Regardless, the change is costly and involves adjustments, additional training and lost time.
When operational services in China are outsourced and provided by a reliable service provider, change is easier since the provider already have the necessary infrastructure and personnel needed to adjust their services to any required change.
Stability – advantages of outsourcing are clear when a company encounter crisis. International companies that were either sold, had their management replaced or faced other organizational crisis, went through the hard times without compromising their sales in china or harm their reputation in the Chinese market. Due to clients and suppliers’ interfaces with the operational service provider – businesses demonstrate stability and reflect reliability in front of Chinese clients and distributors, which is a major issue here.
4. Saving resources & focusing efforts
Outsourcing operational services enable Sales managers to engage in sales. It allows your representative in China to focus on business development and on building pipeline. Without outsourced professional services to support him, company’s representative in China might be overwhelmed by bureaucracy and therefore will struggle to allocate time to reach sales goals.
Outsourcing Accounting, HR, Marketing or Supply chain management is choosing the efficient economic option. Comparing outsourcing costs to recruiting and employing local professional staff, their management, training time as well as taking into consideration employees overturn in China, you realize that outsourcing saves you headache and is the pragmatic option.
5. “Sales incubation” platform
When all business services are given under one roof, the whole is greater than the sum of its parts. International companies find an experienced Chinese “home” surrounded by professional community that could offer good advices. Local employees enjoy local work environment and local HR management. Suppliers and distributors appreciate the professional established local point of contact. PTL GROUP’s ‘Sales Incubator’ platform enables you to enter the Chinese market responsibly at a minimum cost.
For 18 years we assist international companies to run their operations in the Chinese market. We will be happy to assist you as well. Read more about the Market Entry operational support we offer in China or contact us.
Good luck with your Chinese adventure
PTL GROUP Team