Frequently Asked Questions About China Strategies

Question: U.S. firms are competing worldwide in an increasingly global economy. How does China sourcing fit into a company’s business strategy?

William Sinn: “China is a strategic partner for these reasons:
   • Helps companies remain competitive in a world market
   • Improves production capacity
   • Foreign workers' skill complements Americans
   • Cost savings from cheaper labor
   • Cost savings from cheaper components and parts

It’s a big world. In a global market companies must locate production where it is most cost-effective. With its enormous labor pool, it’s an almost limitless resource. Outsourcing is here to stay. As a newly awakening consumer society, China is a major marketing destination. For those who choose to find the advantages, Sinn & Company can lessen the risks and help companies successfully take advantage of China as a purchasing resource, manufacturing base and marketing destination.”

Question: Many American companies market or source in China. Is there a right way and a wrong way?

William Sinn: “A successful China strategy has to
   • Provide access to opportunities in China
   • Make sense for your particular business
   • Do the right things the right way
   • Connect with quality people and firms

Analysis, communication and contacts are everything in international trade. We back that up with a trip to China – possibly the most important strategy for setting up successful operations. Those are the right ways. The “wrong ways,” are unfortunately common. Look around and you’ll see companies struggling with poor quality products and productivity, distribution and inventory problems. I make sure those things don’t happen for my clients. I’m an engineer and marketing professional, so I understand my clients’ industries and markets. I go to great lengths to develop the right strategies for their individual products. There is no one plan for every business.”

Question: There are those who claim that off-shoring jobs is taking jobs away from American workers, particularly in manufacturing. How do you respond to that?

William Sinn: “Effective globalization creates efficient use of resources which in turn creates growth and profitability which creates jobs. The companies I have worked with all grew in their employment due to successful globalization. China is an unbelievable asset as a business strategy. It’s a low cost production machine. Some companies may lose a relatively low number of employees to overseas labor, but look at what they gain: a healthier company and in many cases, the creation of new, higher paying jobs. My primary objective is to help U.S. companies stay in business. International sourcing is wise stewardship of company resources. High-value jobs—particularly in purchasing and distribution—are opening up in the U.S. from sourcing, and most companies grow market share and help grow market as a result. Sourcing grows revenue, profits, employment and shareholder confidence. The reason for going to China is simple: to grow the company.”

Question: We’ve heard a great deal about the massive industrialization and technical skills in China today. How can U.S. companies take advantage of that?

William Sinn: “When China joined the World Trade Organization in December 2001, they agreed to open their market to U.S. goods and services. They are following through in passing new anti-piracy laws to deter counterfeiting of brand products. China is learning international trade in ways they never could in the past. They are graduating IT-skilled workers in record numbers. Part of their benefit to the U.S. is their well-trained labor force.”

Question: What are the most common blunders that occur in China sourcing attempts?

William Sinn: “There is a danger to not knowing your contacts. Credibility is so important in the course of protecting institutional knowledge. I have worked in both U.S. and China business climates, and have extensive knowledge of international trade laws, data security, intellectual property rights, and political risks.”

Question: Would you say then, that understanding American business is as critical to successful China trade as understanding Chinese business issues and climate? If so, why?

William Sinn: “Clients need clear communications with their partners to fulfill their goals. As a China native educated in the U.S., I am fluent in Cantonese, Mandarin and English. I’ve successfully operated Chinese/US joint ventures across the Asian rim. My understanding of technical, industrial and marketing issues from both Chinese and American business structures has been critically important, especially in communicating the needs of my U.S. clients. In a global marketplace, it’s often the basic business functions companies cannot execute that cause frustration, loss of time and money. I’m the equalizer. I put companies in touch with opportunities faster and better than they could ever do themselves.”

Question: U.S. IT executives tend to think of India when they consider offshore development. But you think China will become the next outsourcing hub. Why?

William Sinn: “China will start to boom very soon. Before the 1980s, it was a communist country and very industrial-based. But the universities are starting to graduate information technology students now, and there's an influx of students who studied in the U.S. and then returned to China. They're bringing back the wealth of education they gained and also the contacts they made in Silicon Valley. China will catch up because it doesn't have a choice.”

Question: Will there be an advantage for U.S. businesses to move their IT outsourcing to China? Will it be a question of lower costs than India?

William Sinn: “China has a vast pool of skilled IT workers. As demand for offshore IT outsourcing services grows, China can fill the need. China is booming as a country. Anybody who has a foothold in China will have an edge on tapping into the Chinese market over the long haul. For example, if hardware is being developed and produced in China, there might be an advantage to having the software developed in the same country. Most electronics are made by the Chinese, so it's natural to have hardware and software come back together. What's more, fluency in English in China is growing by leaps and bounds. China will be a formidable competitor to India, resulting in new options for U.S. companies.”

Question: What are some of the pitfalls that companies should be aware of when working with Chinese companies? The country is known for software piracy.

William Sinn: “The skill sets for working with China are the same as for any foreign company. Be patient and do your homework. Americans need to understand their own company and what the offshore operation can do. Certainly, trade secrets and intellectual property are big concerns right now. There may be parts of the operation that you don't outsource; you may be able to contain your IP in a module of your software that you don't offer for outsourcing. You should protect your U.S. markets. You should file patents and trademarks in China even though its protection is weak now. China supports the "first to file" rule. And things are changing quickly in China, as in any emerging market, especially in areas of IP rights.”