Think you’ve got a strategy to enter the Chinese market? Think twice

By Yu Yongfu, TheNextWeb

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Yu Yongfu is the chairman and CEO of UCWeb, whose mission is to provide a better mobile Internet experience to billions of users around the world. Earlier in his career, he was a VP at Legend Capital. Yu graduated from Nankai University in 1999 with a bachelor’s degree in economics.

Whenever I visit the US, one question mobile entrepreneurs always ask me is ‘How can my startup break into China?’
The short answer is simple: Partnership. But finding the right local partner isn’t easy, and even if you do find one, gaining a foothold in the massive Chinese mobile market takes patience, insight, and strategy.

Seeing double

The biggest mistake most US entrepreneurs make right off the bat is in thinking of China as one market. In fact, in the mobile market, China is made up of two distinct markets.

Cities such as Beijing, Shanghai and Guangzhou are similar to the US; consumers in these urban centers are tech savvy, and there is a high percentage of iPhone and tablet ownership.

But outside of these cities, China’s mobile market is made up of millions of less affluent consumers who use low-cost Android phones and often don’t have access to high-bandwidth mobile connectivity. Market demand for this sector is best seen in the rapid growth of Xiaomi, a Chinese cell phone manufacturer who reported online sales of 100,000 mobile phones in 90 seconds for its sub-1000 yuan phone (about $130 US).

Such extreme differences between the two markets have made it difficult for US mobile startups to successfully enter China, even if they manage to partner with top local players.

But in order to succeed, US companies must have a winning strategy for both markets or risk losing out on huge opportunities.

The good news is US mobile startups often have an advantage over larger players in breaking into the Chinese mobile market. Startups are willing to explore a variety of partnership and strategy options to enter the market, and are more nimble and flexible to react to ‘hurdles’ when they appear.

Here are three steps can US mobile startups take to successfully grow their businesses across China.

The right partners

The first step is finding the right partner – one that understands your startup’s unique offer, has proven success in both Tier 1 and 2 markets, and is committed to growing your business alongside its own.

When partnering in China, don’t be afraid to get creative. GGV Capital matched a leading US player in the SaaS space with an emerging leader in China. The US company not only struck up a partnership but also ended up investing along side the venture firm in the Chinese company.

Technology collaborations along the lines of the Qualcomm-Tudou partnership are another example of creative US-China partnerships.

Last year, my company, UCWeb, teamed up with Evernote in a ‘marketing partnership’ to help the US company gain a deeper understanding of the Chinese mobile web consumer in advance of its formal China launch later that year. These strategic relationships may not be traditional, but they have delivered positive results for all involved parties.

US startups can also gain a foothold with the Chinese government through strategic partnerships. For example, Microsoft is the first major US provider to launch a public cloud in China through a three-way strategic partnership with 21Vianet, China’s largest carrier-neutral internet data services provider, and the Shanghai Municipal Government

Cultural immersion

In order to understand the vast and complex Chinese business landscape, you must see and experience China for yourself.

Once you have tapped into all your US connections, the next step is to build your own relationships on the ground in China. There is no substitute for spending a regular and significant amount of time there.

When visiting China, it is essential that you forge your own path, both literally and figuratively; if you follow someone else’s agenda, you may miss the chance to discover an untapped opportunity.

Take the time to explore both Tier 1 and Tier 2 cities. Not only will firsthand knowledge of Chinese business strengthen your position as a partner, but it will trigger your creativity so you can develop fresh, unique approaches for different segments of the Chinese market.

Strategy shift

Finally, US startups must adapt their business strategies to the Chinese market. For US entrepreneurs, this requires parting with assumptions and accepting input from local partners when it comes to marketing, competitive analysis and cultural trends.

This could mean making a significant departure from your company’s US strategy, or a radical pivot from your current China strategy. Either way, without an open-minded attitude, US companies will fail in China.

One example of a US mobile company that is successfully adapting its product strategy to the Chinese market is Appcelerator. Thanks to its partnership with the China Software Developer Network (CSDN), the largest developer community in China, Appcelerator is building the next generation mobile platform for China’s mobile market.

With more than a billion mobile subscribers, China represents an irresistible opportunity for mobile-first companies to grow exponentially. In order to successfully incorporate China into a global mobile strategy, US entrepreneurs must drill down to the local level to reach both Tier 1 and Tier 2 markets.

This two-tier strategy may involve greater effort, creativity and flexibility, but it will surely result in richer rewards.

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A FRANCHISE TO WATCH! London’s first pay-per-minute cafe: will the idea catch on?

Ziferblat is London’s first pay-per-minute cafe, based on a Russian chain where ‘everything is free, except the time you spend there’

Vicky Baker theguardian.com,

Ziferblat, London – where drinks are free, but you pay 3p-per-minute to be there

Ever felt you’ve overstayed your welcome in a cafe, by reading, working or surfing the web while hugging the latte you bought two hours ago? Pay-per-minute cafes could be the answer. Ziferblat, the first UK branch of a Russian chain, has just opened in London (388 Old Street), where “everything is free inside except the time you spend there”. The fee: 3p a minute.

Ziferblat means clock face in Russian and German (Zifferblatt). The idea is guests take an alarm clock from the cupboard on arrival and note the time, then keep it with them, before, quite literally, clocking out at the end. There’s no minimum time. Guests can also get stuck into the complimentary snacks (biscuits, fruit, vegetables), or prepare their own food in the kitchen; they can help themselves to coffee from the professional machine, or have it made for them. There’s even a piano – an idea that could seem brilliant or terrible, depending on who takes the seat.  READ MORE

U.S. Growth Picture Brightens as Exports Hit Record

Energy Boom Helps Narrow Trade Gap

By JEFFREY SPARSHOTT . WSJ.com

WASHINGTON—A booming U.S. energy sector and rising overseas demand brightened the nation’s trade picture in November, sharply boosting estimates for economic growth in late 2013 and raising hopes for a stronger expansion this year.

U.S. exports rose to their highest level on record in November, a seasonally adjusted $194.86 billion, the Commerce Department said Tuesday. A drop in imports narrowed the trade gap to $34.25 billion, the smallest since late 2009.

The export gain “is an encouraging sign that the global economy is recovering along with the U.S.,” said Michael Soni, economist at BBVA Compass.

Domestically, the economy has been showing improvement beyond the trade situation. Companies have been hiring at a steady pace across a wide range of industries amid stronger consumer spending, builders trying to satisfy demand for new homes and rising manufacturing output.

Oakworks Inc., a maker of medical, massage and spa tables in New Freedom, Pa., added a second shift in the fall to meet rising demand, said Joe D’Antonio, vice president for international sales.

“That’s related to the fact that demand is increasing, and a good deal of that is from international markets,” he said, citing sales to India, China, Brazil, South Korea and elsewhere.

Oakworks, which has about 125 employees, saw its exports increase about 10% last year and is targeting a 20% to 25% gain for 2014. The company’s tables—a spa table can cost around $5,000 and a high-end medical table as much as $27,000—face competition from less-expensive products made overseas. But many buyers now appear willing to shell out more for higher-quality, higher-priced goods.

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“Clearly that is a function of the economy getting better,” Mr. D’Antonio said. “And as a result people have a little more money to spend, to invest in quality. In the past if they didn’t have that money, quality might not be at the top of their list.”

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The trade figures led many economists to sharply raise their forecasts for economic growth in the final quarter. Morgan StanleyMS -0.32% economists raised their estimate to an annualized 3.3% from an earlier forecast of a 2.4% pace. Macroeconomic Advisers boosted its fourth-quarter projection to a 3.5% rate from 2.6%.

Fourth-quarter growth at that pace, following a 4.1% annualized increase in the third quarter, would mark the fastest half-year growth stretch since the fourth quarter of 2011 and the first quarter of 2012.

The falling U.S. trade deficit in large part reflects rising domestic energy production. U.S. crude output has increased about 64% from five years ago, according to the U.S. Energy Information Administration. Drillers have unlocked vast amounts of oil from dense layers of rock, notably shale in Texas and North Dakota, giving refiners a closer, cheaper supply of crude.

At the same time, the U.S.’s thirst for petroleum fuels has stalled as vehicles become more efficient. As a result, refiners are shipping increasing quantities of diesel, gasoline and jet fuel to Europe and Latin America.

“Not only is the American energy boom underpinning export growth, it is reducing American demand for foreign oil,” said Jay Bryson, global economist at Wells Fargo.WFC -0.04%

Petroleum exports, not adjusted for inflation, rose to the highest level on record in November while imports fell to the lowest level since November 2010.

If recent trade trends continue, Mr. Bryson said net exports could add one percentage point to the pace of GDP growth in the fourth quarter. That would be the biggest contribution since the final quarter of 2010.

Rising domestic energy production also helps in other ways, by creating jobs, keeping a lid on gasoline costs and lowering production costs for energy-intensive firms. As a result, consumers have more to spend elsewhere and businesses are more competitive internationally.

But it isn’t yet clear that the momentum is sustainable. Economic growth has been choppy since the recession ended in June 2009, with consumers and businesses often jittery.

Some economists already are warning about runaway expectations. “I think 2014 will be better than 2013,” said Michael Moran, chief economist at Daiwa Capital Markets America. “But my view is we are not ready to break out into vigorous growth.”

One impediment has been weakness in Europe, Japan and some emerging markets, which had held back U.S. exporters during different parts of the recovery. Net exports made big contributions to the economy in 2008 and 2009, but more recently have made only modest additions or been a small drag on growth.

Still, the global economy has shown signs of stabilizing in recent months, leading to more orders for American petroleum and other industrial supplies, capital goods and autos.

U.S. exports are up 5.2% from a year earlier, led by rising sales to China, Mexico and Canada. U.S. exports to China from January through November rose 8.7% compared with the same period a year earlier. Exports to Canada, the nation’s largest trading partner, were up 2.5% in the same period.

Some companies have used overseas sales to offset a weak U.S. market for their products. “For the last two years, international sales have been good,” said Anthony Sexton, director of international sales at Kanawha Scales & Systems. “Not so much domestic.”

The Charleston, W.Va., manufacturer makes machinery to weigh and load commodities like coal, iron ore and potash onto railcars and trucks. Each system typically costs between $2 million and $8 million.

Last year was a tough one for U.S. coal production. But Kanawha’s international sales rose about 8% to 10%, with Colombia, Canada and India all big markets. “Kanawha has been exporting since the mid-1980s…to diversify, so we don’t live and die on the U.S. coal market,” Mr. Sexton said.

—Daniel Gilbert and Ben Lefebvre contributed to this article.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com

U.S.’s software strength to lead modest growth in global tech market

Felix, or no Felix? That is the Question.

I hope all of you had a terrific holiday season and once again would like to wish everyone health, happiness and prosperity in 2014.  We have a very exciting and event-filled year planned, so over the next couple weeks you will be seeing a number of announcements on the pages of this publication.  Today, I would like to kick off the year by announcing an upcoming release of the completely updated and revised Fluent In Foreign Business™ book.

The new edition sub-titled “A Candid and Practical Guide on how to Grow Your Company by Expanding into Foreign Markets”, will include the 2015 Emerging Markets: KeysToAmerica™ Challenge, as well as additional chapters on Financing Exports and Projects, Franchising Abroad, Picking Most Promising Markets, Risk Mitigation, and new stories about author’s own international business adventures. The new edition of the book is scheduled for worldwide release on March 18th of this year. Those wishing to reserve a signed limited edition hard cover version, please register below. You can also see reviews and sample the original at http://wp.me/P1iIhX-I

Meanwhile we at Fluent In Foreign have a very serious question to all of you:). Should our beloved Global Felix™ be included in the second edition? Some folks who read the book said that having Felix illustrations included detracts from the serious nature of the book, others love the jovial character who makes difficult issues and complex subjects easier to deal with.  Here are some Felix illustrations from the book, each illustrates the main issue of a corresponding chapter. Let us know your opinion, on whether we should include Global Felix in the new edition of the Fluent In Foreign Business?Thank you and all the best in 2014!

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YES -Keep Felix in the New Edition

NO - Do Not Keep Felix in the New Book

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