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How Indian companies can partner better with Chinese firms

December 14, 2010

As a follow up to our article highlighting opportunities between India and China 2011-2016, and as we expect increased collaboration between Chinese and Indian firms spurred on by the recent euphoria amongst our diplomatic circles, Inchin Closer points out three key points Indian companies should keep in mind while partnering with Chinese firms.

  1. Choosing better partners:  As China provides better and increased incentives to domestic firms to prosper, do not necessarily align yourself with large Chinese firms because of their access to and influence with the local or national governments.  Experience over the past decade shows that this rarely has helped the foreign entity since, multinationals, have emphasized profitability, even when growth is slow, while their Chinese partners have emphasized growth, even without profitability. The result has been different priorities for investments and a lack of cooperation, both between the parent companies and within the mixed management team resulting in tension at the workplace. Instead, multinationals should pair with local companies that explicitly share their strategic goals. This doesn’t eliminate large, well-established Chinese companies. But it does open the door to faster-growing, privately owned, and smaller companies that bring a strong commercial mind-set and tangible business assets to joint ventures.The global pharmaceutical corporations GlaxoSmithKline and Novartis, for example, chose such partners in 2009 for their joint ventures in the vaccine market. Thanks to partnerships with smaller local companies—Shenzhen Neptunus Interlong Bio-Technique Company and Zhejiang Tianyuan Bio-Pharmaceutical, respectively—both joint ventures had the access they needed to government vaccine-procurement programs, as well as a talent pool, R&D know-how, and an entrepreneurial management mind-set for further rapid growth.
  2. Be Bold, Build trust, Take charge: Many Indian firms enter into a partnership with Chinese firms as a minority shareholder, unconfident of how the new entity will shape up and whether it will churn profit, many Indian companies prefer to keep their shareholding to minimum in a wait and watch perspective. Such companies have often found themselves relegated to providing know-how and capital, with little influence other than board voting rights, resulting in the new venture not moving in the desired direction. Instead, Indian firms need to enter the partnership confidently, build trust not only within the partnership but also with the government or other industry players and take the lead to steer the firm in a profitable direction. This approach requires developing interaction protocols, designating definate tasks and roles within the organisation, and rewarding employees by achievement of targets.
  3. Manging your workforce: Manging a partnership in China is not as easy as placing a few Indian managers looking for new challenges in China. Instead cultivate an international understanding within the firm, analyse which senior level manager is the most trust worthy candidate to be sent to China, and educate him /her with the requiste lanaguage, culture and social decorums so there are no false starts. While in China, also cultivate a strong association with local chinese universities that regularly churn out your required talented workforce. Lastly, since attrition in China is still a problem, with employees hopping to the next highest paying job often, build a strong relationship and warm company culture between employees of different nationalities. Celebrate the differences, offer rewards for excellent work and perks and corporate training and trips abroad.
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