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How To Do Business With Chinese NEP – Huawei – ZTE?

Building Relationships with Chinese NEP

Building-Relationship-Huawei-ZTE

There are many articles in the internet that talk about the importance of building relationships if you want to do business in China. If you want to win supplier contracts for NEP, connections play a huge role. Still, it is more important to understand how well your product and service competitiveness can serve the NEP’s business objectives.

The Chinese put great importance on knowing a company and its stance on channel distribution of the NEP before entering into a business partnership. They believe that the only way to find out whether a person is trustworthy or not is by getting to know them face-to-face. They often say, “Let’s become friends first. Allow me to understand how you will support me, then do let’s do business.”

Understanding and being responsive to their requirements, actual objectives and the problems they are trying to solve will be fundamental to your success. In order to achieve this, you need to be well experienced in communicating with your counterparts or have someone from your staff to become the mediator to help you achieve this. Preferably someone who can communicate using their language. After all, clear and concise communication will help you a great deal.

Many foreign companies normally build transactions and if they are successful, a relationship will ensue. However, the Chinese businesses believe that prospective business partners should build the relationship and trust first and, if successful, commercial transactions will follow.

Gifts

Most Chinese businessmen like to give gifts. This is their way to express friendship and gratitude for a favor done. However, for Chinese NEP, the topic of giving gifts should be approached carefully because you can not provide gifts without any reason. Small gifts can be presented as a souvenir, but expensive gifts or dinner meals should only be provided as a celebratory reason after both parties have concluded an important transaction or project together. In no circumstances should gifts be presented to individuals before the agreement of an important order or contract.

Entertainment

Work and social life tend to remain separate in the West, whereas much of a Chinese person’s social life is used to further personal and business relationships. In China, three-quarters of business deals are sealed outside of work. Tea houses, cafes, restaurants and other entertainment premises can all be locations where discussions and important deals are made. In offices, meetings are usually for stating the obvious facts and presenting the formal and standard information. For sensitive or crucial information and for important breakthrough negotiations, many of these are achieved outside of working hours.

Banquets have traditionally been an essential part of doing business in China, although the practice varies depending on where you are and who you are dealing with. Senior people who have not previously made an appearance may be present at a banquet. It is possible that they are the key to the approval of the business in hand but are too senior to be involved in the actual negotiations. The banquet is an opportunity to impress them and get a feel for how things are going.

Meetings

When arranging a meeting, it is advisable to provide your counterpart in advance the details such as the objectives of the meeting, names and ranks of the participants and specific areas of interest.

Business meetings usually start on time and it is good practice to arrive at the location earlier than the agreed time of the meeting. Formal introductions are standard and it is usual to be introduced to the most senior person first, followed by the rest of the group in descending order of seniority.

There may be people from several organizations present at the business meeting. If it is not immediately apparent who is the most senior person in the room, it is a good idea to try to discover this by asking about the relative roles of those present in the organization and then to address remarks to that person. Another pointer is that the person opposite you at the meeting table will normally be the most senior Chinese person present.

Business cards are essential since at the beginning of the meetings, there might be people you have not met before. It is customary and helpful to exchange business cards when being introduced so you will have an idea as to who’s who.

When offering your business card, make sure to do it properly. With both hands, present your card with the Chinese side faced up. Spend a few seconds examining the cards you received. This shows respect for the card’s owner. Don’t write on the card as this shows.

Be well prepared to conduct the meeting in Chinese if it is the preferred language of your Chinese NEP counterpart. Prepare in advance the answers to the top 3 or top 5 questions you expect them to ask. You have to know which buttons to push at the appropriate time. Get the meeting to be a dialogue rather than a one way presentation. Make sure that the stakeholders are engaged to the discussion and address the issues they bring up in order to leave a lasting impression. If the meetings lack conversation or the stakeholders look disinterested, you are in trouble.

Sophisticated PowerPoint and video presentations with multiple illustrations are the norm for many successful Chinese companies. If you want to leave a good impression, take the same approach. Dual-language presentations and handouts in Chinese are useful and effective.

Chinese NEP also like to see case studies of operational projects using your product, preferably in China or a neighboring country where conditions are similar. Client lists featuring major companies and enterprises will create good reference points for the Chinese counterpart.

Negotiation

At a certain point in the sales process, you will need to sit down and negotiate with the Chinese NEP. Before going into the negotiation, one should always get their homework done and understand the details around the deal such as the BATNA, the time sensitivity of the project and who are holding the cards.

You should also be prepared with possible options you could use just in case. If the negotiations suddenly become out of hand at some point, be confident and propose options and values to get them to agree to certain terms.

Negotiations should be done in a comfortable language and it is likely going to be in Mandarin. Due to cultural differences and techniques employed by the Chinese NEP, it is best for you to get a Chinese partner or staff who can speak Mandarin fluently. An effective communicator can help express your points properly, avoid miscommunication, prevent deadlocks and work out a mutual beneficial solution.

Chinese negotiators are known to be resourceful and have a wide range of tactics to make sure the negotiation benefits them well.

• Threatening to do business elsewhere – Foreign negotiators may be pressured into making concessions when the Chinese side threatens to approach rival firms if their demands are not met.
• Using friendship to extract concessions – Once both sides have met, the Chinese side will remind the foreigners that true friends should reach an agreement of maximum mutual benefit.
• Showing anger – Despite the Confucian aversion to the displays of anger, the Chinese side may put on a display of calculated anger to put pressure on the foreign party just to create fear of losing the contract thus, giving way to what they want.
• Attrition – Chinese negotiators are patient and can stretch out discussions in order to wear down the opposing party. One should be well aware of this tactic and the best approach is to also be patient until you can sort out your differences.

Be prepared to get all agreed details on a contract which both parties have reviewed before the end of the negotiation. An agreement with Chinese NEP typically choses foreign jurisdiction such as Hong Kong or Singapore and are generally enforceable.

Lastly, keep in mind that getting an agreement done and signed is just the beginning of the business relationship. Both parties have to adapt to each other during the months of work and will have to jointly review the relationships and transactions at a later date to see if it benefits qualitatively.

Partnering with Huawei and ZTE – Is it a real market expansion opportunity or a poor go-to market strategy?

Huawei ZTE Partnership

Partnering with Huawei and ZTE
If you are in the telecom industry, Huawei or ZTE could be an opportunity or a threat to your business. Either way, you wouldn’t be able to ignore these tech giants.

According to Huawei’s rotating CEO Eric Xu, the company is expecting their 2016 revenue to reach RMB 520 billion ($74.8 billion). This will be a 32% increase in revenue in comparison to the previous year.

In 2015, Huawei reported a RMB 395 billion revenue, surpassing other key global competitors such as Ericsson, Nokia and Cisco Systems in terms of global sales. This is quite a significant milestone. Huawei, across its different business units, is leading in its respective market segments and will provide a solid market across China, Asia, Europe and South America in the coming years.

On the other hand, ZTE Corporation’s revenue rose to RMB 101.2 billion ($14.5 billion) in 2016. The RMB 1.17 billion increase in revenue from the previous year was bolstered by the company’s carrier networks and consumer technology businesses.

Although both of these China tech giants are in the telecom sector business and have been growing quite significantly, there are key differences between the two.

Huawei and ZTE’s differences in a nutshell

While Huawei is privately owned, ZTE is a public listed company in Hong Kong and Shanghai bourses. Majority of ZTE’s shareholders belong to the Chinese state. Huawei and ZTE’s headquarters are in Shenzhen, but their management styles are quite different.

Huawei follows a very systematic and western oriented management process style with emphasis on efficiency, discipline and strict code of conduct. On the other hand, ZTE office has a feel of a government and a less systematic management style in comparison to Huawei.

Both companies have sizable market shares globally in their respective market segment but Huawei has the edge in terms of market reach and customer relationships.

New revenue and market expansion opportunity

The two companies both have great market reach especially in Europe, Africa, Asia, South America and of course, in China. These tech giants pose a significant opportunity for other tech companies to distribute their products and services.

Whether it is a legacy product or a brand new product with a market potential, one must study and analyze which one of these tech giants should be your go-to-market ally.

One thing you should consider is if Huawei or ZTE have a similar competing product or a substitute product to yours. It is quite possible that they do. Now, there is still an opportunity to gain from partnering with Huawei or ZTE. These tech giants do not rely solely on their own homegrown products or from only one supplier.

Huawei uses multiple qualified suppliers even though they have their own products. This is called the hybrid approach. The market and customer requirements are invariably complex and a single home grown product cannot satisfy the entire market so these tech giants need several suppliers that they can rely on.

Also, these tech giants have a huge number of staff but they have maintained a high utilization rate and profitability rate for their respective product lines and business units.
There are also few more things to consider. Who are Huawei and ZTE working with on this product segment? What is the procurement value per annum? What are their real views and business plans for this product in the next one, two or three years? There are many questions to be answered before one can gauge the viability and potential of Huawei and ZTE as a go-to-market channel strategy.

One will need to get accurate insights or real information. In actual meetings or formal communication channels, Huawei and ZTE staff are discreet and disclose too little in order to maintain a warm and friendly engagement status with foreign tech company representatives.

Your intellectual property, will it be safe if I partner with Huawei and ZTE?

More often than not, we get this question from our clients. The short answer is, it depends. Before we go deep in discussing about IP infringement, we have to discuss about IP value. The value of your IP is only as good as you can monetize it in the fastest way possible in a short span of time. Your precious intellectual property (if it is indeed valuable) shall have new competing products/IP within a short span of time if other market players see a significant opportunity for it. In the high tech sector, other new entrants or giants in this market space will invest heavily and win the market share before you do.

Sitting and protecting your IP without an alternative channel for the same market access or reach to win new customers is not a smart move. If you go down this route, the expected value of your IP or business will devalue as competitors come out with rival products and technologies.

We once had a software solution client who was too afraid to license or distribute its products via Huawei in fear of home grown solution. Our client fully understood that the product only has an 18-month window of opportunity before its rival catches up in terms of software functionality and performance. We estimated our client’s loss of about $30 million in terms of revenue and a good number of new customers.

IP infringement does not only happen in China but almost always everywhere else. IP infringement happens because there is a significant value in doing it as well as lack of an efficient measure to make the infringer accountable. Huawei and ZTE gets negative press because of the allegedly high profile IP infringement cases in the past. While there is a risk with regards to potential IP infringement, there are sensible ways to protect your IP from being compromised.

Thoroughly understand your market and barrier of entry in order to understand your reward vs. risk should you want to work with Huawei and ZTE

The verdict :-

Whether it is will be a successful partnership or otherwise, one need to gather sufficient accurate information and conduct a risk vs. reward analysis. If you ignore the potential or did not form a successful relationship, your business will risk unnecessary cost and loss of opportunity to your competitors.

If done properly and effectively, these tech giants could be one of your biggest customers or channel partners for many years.