3 suggestions for Fortune 500 CEOs, Directors, and Investors, as well as those global companies who want to make money in China
Author： Tom Rich
3 Suggestions for Fortune 500 CEOs, Directors, and Investors, as well as those global companies who want to make money in China
First, let’s look at the background in china.
1. Messages travel fast in China. With a huge number of populations connected to the internet with their mobile devices as well as the flourishing of social media, messages, news, especially scandals, could be widely spread within hours.
2. Patriotic consciousness, awareness of justice and consumer’s rights are gradually raised among young and middle age in China. Most of them are now quite sensitive to unfair issues, particularly when they feel they are being treated as a stupid fool.
3. The bargaining power of customers are increasing. As China continues its opening-up to the world and many local companies are now able to produce consumer products that live up to their expectations, various kind of substitutes are now available in Chinese market while there are still many new entrants coming in.
With a better understanding of the situation in China, now let’s see what we can do to avoid losing money.
Basic rules for consumer products, or individuals as the end users of the products, taking good care of your consumers, by making good products and maintaining a good and long-term relationship with the Chinese, is vital important. Adopting the Everybody is Happy mode is a wise choice that would benefit everyone in the long run, while creating Not Happy customers will finally lead to Everybody is Not Happy mode.
1、 Don’t treat your customers differently, especially among different countries.
Samsung was one of the dominant players in Chinese smart phone market, account for 19.7% market share in 2013. In despite of being into the tensive competitions with emerging Chinese smart phone producers, Samsung killed itself by “discriminating its loyal Chinese fans”, as the Chinese consumers put it.
In 2016, Samsung introduced a new smart phone — Galaxy Note 7, a nice designed product. Unfortunately, there were some problems in its battery, cases of exploded phone when the phone’s temperature was increased in daily use were reported. Samsung began to recall its flawed products globally while kept selling this same mode in Chinese market claiming that the batteries suppliers for Chinese phones were different from any other countries.
Unfortunately, again, there were also cases of exploded phones in China and strong evidence that showed Samsung’s responsibility for this flaw. Besides, one consumer presented a solid examination proof from a third party to Samsung, and the customer was asked to sign a confidential agreement and would get compensation from the defective product.
As we said above, messages travel fast, especially scandals. That consumer released his story on line and boom, everyone in China was angry. Consumers accused Samsung of discriminating Chinese consumers and decided not to buy any Samsung products again. The retailing industries including e-commerce distributors stopped selling any Samsung phones for it would be a huge loss when no one was going to buy any Samsung explosive phone.
The CEOs and Directors had a strong incentives to recall its product if there are strict local laws or maybe a huge potential fines and compensations for their customers, especially in the US and the European Union — its major customers of this high end mode outside Chinese market. As for Chinese market, they might consider that there were more gains and less loss if not did so for China’s not well-established legal system for consumer’ rights. Well, their market share of the following 2 years shows that there were very short sighted. 0.8% at the end of 2017. And now, they are still struggling to try to come back to Chinese market despite of the current warm relationship between China and South Korea.
Product recall is always a good example for this, but there are still others. The effective way is to keep in mind that, don’t treat your customers differently based on maximizing temporary profits, you’re going to get nothing from that and lose your future profits and harm your own brand images for all of your products.
2、 Sincere apology to your customers when making mistakes rather than being ambiguous and making excuses. It’s very common around the world and there is no need to explain more on this rule. But for your reference, Chinese traditional culture is quite kind to sincere apologies unless you committed something unforgivable. It’s the attitude they would value first and then your timely improvement. A further recommendation is also helpful to remind you of being cautious about your decisions — there are always available substitutes for your loyal customers even if they have to take the switching cost or lower their expectations and therefore suffer for a while.
Admitting your mistakes, take measures to rescue and make compensation to your customers may be costly, and it may also generate a loss for your operating income of that fiscal year. CEOs always have little incentive to take those measures that would make the number of reports less attractive. However, the damage to your brand and the trust between company and customers will be relative profound and just like an invisible black hole to your future profitability. Recovering this could be more costly. The board of directors should create a mechanism for crisis management to avoid tardy reactions of CEOs towards these issues that may create huge risks in the long run for the company and its shareholders.
3、 Don’t get involved in politics, if being forced to and unavoidable, obey the existing international laws and stay with justice. This is an issue that few authors in business would like to discuss in an open platform. Business is better to be business and stay away from politics. But there are still some unprofessional ones, or maybe they are planning to get out of business to become politicians, which is different case.
To those who still want to focus on their business, don’t get involved in the games or wars of politics. If those issues are unavoidable, the wise choice is to obey the existing international laws and stay with justice.
Now comes to the critical issue on this suggestion. Hongkong, Macau and Taiwan are Chinese territories. It’s the common sense and written in paper for every country that has a formal relationship with China. There may be any political correctness in different countries, but obey the international laws and the mutual agreement between China and your local government, admitting these facts when you exhibiting the operating locations on your official websites and producing products, would not be punished by your local and international laws.
If you choose to go the other way, you may be favored by some local politicians and might gains some benefits from that. However, you will be heavily punished by Chinese consumers when they find out for hurting their hearts badly. Territory issues in not good game to play especially in China, a country that suffered for 100 years from foreign invaders. The same reason for the Jewish people to talk about their suffering history during world war II. No one would go and hurt the Jews’ feelings on purpose nowadays. Likewise, don’t do that to your customers in China. Unless you want to find out the outcome by yourself from your financial statements later.
You may also claim that, you might get into some trouble with your local government if you admit the facts in some cases. I would also suggest that, if you’re in the US, you don’t have to worry about that, it’s a great country with a well-established legal system, you won’t get punished by the government for obeying its written agreement with the Chinese government and the international laws just like Apple won’t get punished by protecting their customers’ privacy even the customer is a criminal. Besides, if you stay with justice, you would have more friends by your side, especially in China. If you get into trouble by admitting these facts, I’m quite sure consumers in China will support you and your sales revenue in Chinese market will later prove that.
In a word, taking good care of your customers is a good strategy and also essential to stay in a market. Making friend with your customers and maintaining a good and long-term relationship with them will no doubt help your business. From my point of view, these suggestions may also be applied in other countries in Asia and even around the world.
(Some pictures of the passage and the cover image are from Bing search.)