I’ll “Shrink to Grow” – the accurate oxymoron

March 23, 2020
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Shrink to Grow the accurate oxymoron - WFOE in China | PTL Group

The Coronavirus crisis is shaking international markets, provoking a significant slowdown. Businesses worldwide are seeking practical solutions to navigate the rocky terrain ahead, survive the crisis and prepare for future growth. China is already showing signs of recovery, and in spite of it being the root that the virus stemmed from, it should be the first place to examine, when devising the day-after plans.

There is a lot that can be done, especially during times of crisis. The forced halt from the never-ending race from deal to deal, allows us to sit back and reevaluate our business model in China.

We are all intending to reduce costs during this slowdown, but reducing cost is merely one aspect. Keeping the business stable, efficient, well balanced, closely monitored and under control, is equally as important.

PTL Group’s clients continue to operate and maintain their competitiveness in China, even during the Coronavirus epidemic, largely thanks to the platforms we provide them with, which enable them to both lower their expenditures and minimize risks whilst remaining active in the Chinese market. By outsourcing key areas of their China-based operation, many international companies who employ a WFOE structure in China are now able to focus on their core business activity.

Through this business model WFOEs cut office and staff costs and at the same time utilize their resources, concentrating on growing their business in China. Instead of maintaining expensive in-house operations, these business entities employ local sales teams that benefit from PTL Group’s financial, logistical, administrative and HR services, with our support team always at an arms reach. By adapting operational management structures to a more pragmatic and lean business model in China, smart strategies can turn into a beneficial reality.

The results leave no room for doubt:

After streamlining processes by using PTL Group’s platforms, our clients’ operations in China remain stable and virtually unchanged, while their operational costs decrease substantially.

Some of our clients have managed to cut up to 75% in operational costs within a two-year timeframe.

Cost saving is not the only contribution WFOEs can benefit from in this model. By partnering with PTL Group, they also experience enhanced control and risk management, as our staff report directly to the WFOE owners and implement ownership policies with maximum transparency.

Shrink to Grow - the accurate oxymoron - WFOE in China - PTL

So, where do you start?

One way to start is by conducting an operational audit of your local entity in China, in order to identify where you could cut costs and improve procedures. An operational audit conducted by a third party will reveal all the inefficiencies and risk factors present in your China operation.

An independent third party will provide you with an objective assessment of which functions can be merged or outsourced to other service providers, which facilities can be reduced and which suppliers can be replaced. An outside auditor can help the local GM to make tough decisions aimed at making the business healthier and stronger.

The current situation in both China and the wider world, has left many businesses struggling to keep afloat, and perhaps now more than ever, it is essential to optimize operations. In this sense, here are few projects we have been working on since the outbreak of the Coronavirus:

  • Negotiating with landlords over the reducing of rental fees, terminating office leases and retrieving rental deposits.
  • Negotiating with employees over revising bonus payments, adjusting KPIs and yearly targets.
  • Handling employment termination cases, compensation negotiations and calculations.
  • Terminating WFOEs’ office lease, re-registering the address in a new, more cost-effective location and moving the WFOE staff to PTL Group’s shared offices.
  • Supporting small businesses with the implementation of the government benefit packages, including VAT and deferred social benefits payments.
  • Assistance in cases of employees who could not return to work due to traffic restrictions.
  • Reducing logistics, finance, admin and HR functions, and outsourcing them to PTL Group’s team.
  • Evaluating with clients the possibility of developing e-commerce sales methods either instead or in addition to any existing sales channels.

If you’re faced with any obstacles in your business activities in China then please contact us.

In these challenging times, it is important to both prepare your business for the worst but hope for the best. At PTL Group, we help nurture and secure a business’s operational roots in the Chinese market so that in the future it may rest in the safety of shade.

[This article was originally published as a LinkedIn post by Arie Schreier]

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