Boots on the Ground
NHO and Dansk Industri Asia Base tied up an agreement during the Norway-Asia Business Summit 2019 that provides companies from Norway with access to a Chinese entry service.
One of the biggest challenges facing Norwegian companies wanting to enter China is getting started. The market is brimming with potential, but the road to realising it requires businesses to navigate early difficulties that can quickly derail the entire process.
“It is rather challenging for companies who try to enter China on their own. Even big firms with lots of resources aren’t always able to successfully deploy. The issues are really multi-level,” Mr Tore Myhre, NHO International Director, said. “You have administrative procedures, such as registering a business, that aren’t simple. Then you have recruiting challenges. There are lots of practical challenges and the process can be costly. And if you don’t do it correctly, you could incur delays which lead to even more costs.”
With more and more companies digitising how they operate, there is a big
temptation to move into China without any physical presence. And while this may work in other markets, Mr Myhre is of the opinion that mainland success requires a commitment that goes beyond digital.
“Having a physical presence is a definite advantage in order to be taken seriously by the local market. It shows your long-term commitment. Having a presence in China is really the first obstacle you must overcome when entering the country,” Mr Myhre stated.
It is that understanding of the market that led to NHO signing an agreement with DI Asia Base that will provide Norwegian companies with access to the Danish organisation’s China entry services.
“When I first heard about the idea, I thought it was fascinating. The NHO leaders were very supportive about the collaboration and we had their backing since day one. It is something we’re very excited to launch,” Mr Myhre proclaimed “DI Asia Base is our sister organisation and we are obviously quite sure of their quality. We know this program works as DI Asia Base has been doing for more than 15 years and has had many success stories. We have also visited the offices and had meetings with the team from DI Asia Base.”
Mr Glen Mikkelsen, DI Asia Base Managing Director, explained that Norwegian firms have access to two distinct services the company provides.
“The first service is to hire staff through us to get ‘boots on the ground’ in the Chinese market without having to spend time and tie up capital in a company registration. This preregistration service can be started with a few days’ notice if the company has a candidate they’d like us to hire. Otherwise, it usually takes two to three months in
order for use to go through the recruiting process and hire staff,” Mr Mikkelsen said. “The other service we provide is Outsourced Administration, which is where we assume the management of a client’s subsidiary in China. That is to say everything to do with Finance, HR, tax and things of that nature.”
When it comes to the hiring of local staff, businesses will have the final decision and are free to lean on DI Asia Base to oversee the recruitment or use a head-hunting agency.
“Clients approve the candidates that are selected and they themselves come out for the final round of interviews with the final candidate field,” Mr Mikkelsen noted. “We cannot guarantee that companies make a good choice or that we find only amazing candidates. Recruitment is far from an exact science after all. But we do have a very good track record over the past 15 years and very high staff retention compared to the norm in China.”
Keys to a successful entrance
DI Asia Base began its China entry service in 2004 and approximately 110 companies have come through the program since then. Mr Mikkelsen reported that some participants end up forming standalone operations in China once they reach a certain level while others stay with the program as they don’t require more than what’s provided.
“The program could really work for companies in any industry. It is sector agnostic. Even big companies have used the service since it allows them to have that first presence where they can scale up accordingly. It is the mediumsized companies that benefit the most from the program, however,” Mr Myhre pointed out. “It could also be interesting to smaller enterprises, especially those involved in technology. Ultimately, companies need to have a certain level of commitment and maturity to enter the Chinese market so that is something to factor into the decision.”
Mr Myhre believes businesses must be prepared before entering China. This includes doing all the necessary homework and having a deep understanding of the situation in regards to business. From there, the key is to find trustworthy partners who understand both sides of the culture and can make life easier, both of which the DI Asia Base entry service can assist with.
“By joining the program, companies are able to focus on business development and strategy instead of dayto-day tasks. Building the business and focusing on why you want to be in China, as opposed to the how, has a great deal of value, both in terms of time and financial costs,” Mr Myhre noted.
According to Mr Mikkelsen, most of DI Asia Base’s 50 current clients focus mostly on the business development/ sales aspect of operations since they are taking care of virtually all other practicalities.
“The important thing for clients starting out in China is to have capable, dependable local staff who truly understands the local market and who feel at ease with having them represent the company,” Mr Mikkelsen said. “In order to have success here, you need to be represented in the market and genuinely know what is going on. We provide that security and environment in which such staff can thrive and you can feel at ease that there are dependable control mechanisms in place as well as some measure of oversight.”
Understanding the local market and being able to see the situation in real time is also something Mr Myhre found to be a key to success.
“Things can change very quickly here. And the only way to understand and identify this change is to be here. The digital transformation is quick and having the presence in China means it won’t pass you by. You can see first hand how and why the change happened and develop a solution that fits,” Mr Myhre stated. “Norwegian companies must understand the local situation and know the market since potential clients will value this. Having an understanding of the situation can also help build trust between a foreign business and the local market.”
The right time
While China is a notoriously difficult market to enter, now may be as good of a time as any for Norwegian companies to make their move. According to Mr Myhre, as long as they understand the dynamics of the market and can get boots on the ground, businesses from Norway are in a good position to succeed.
“There are great opportunities in China and there is a great interest around Norwegian businesses. This came after the two high level visits to China, one by the Royal Couple and one by the Prime Minister, where there was a recordhigh number of Norwegian companies involved,” Mr Myhre explained. “A free trade agreement between Norway and China would help create an even more positive environment for future collaboration. “
Additionally, several Norwegian sectors are strategically poised to assist China in its future development.
“Norwegian sectors are very compatible with the needs of China. There is lots of technology and knowledge we can deliver to China’s value chain,” Mr Myhre reported. “There are also products and services that Norwegian companies have which are a high-priority for Chinese development. This is a winwin scenario where both sides can really benefit.”