Features | Economy | East Asia

Engineering Survey: China

Australian companies are often drilled in the “three tenders, cheapest wins” philosophy, where relationships are irrelevant.

By Sholto Macpherson for

Australian companies are often drilled in the “three tenders, cheapest wins” philosophy, where relationships are irrelevant. In Asia, particularly China, this philosophy is worthless. Instead, long term success is built on strong relationships and trust.

“It’s not about putting a price in and waiting. You’ve got to wine and dine them, you have to explain who you are, you have to develop the trust by supporting them, you have to show your commitment,” says Dr Alan Broadfoot of Ampcontrol.

The size of the population often means much larger bureaucratic and corporate structures, which move more slowly and have more people vested in every decision.

Once a tendering company has given a price, representatives may have to wait several days for a meeting. After a deal is signed, Australian companies shouldn’t just pack up and go home until the following year.

“With China we learnt a lesson; if you’re going to approach the market there has to be a continuous push because you can lose ground in those relationships. You just can’t win an order and wait till they tender again. You have to be constantly there, talking to them, seeing how your equipment’s going, giving them assistance,” says Broadfoot.

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Chinese companies expect maintenance and supervision to be part of a deal, and may not pay for it. “The trick is to make sure you have enough money in there to cater for that support,” says Broadfoot. Using Chinese nationals to provide support means the costs aren’t as high as they would be in Australia, although expat assistance is still required.

GHD signals its long-term commitment by establishing regional offices, says CEO Des Whybird. Where others have one office in China, GHD has three – in Beijing, Changsha and Wuhan as well as Hong Kong. Similarly in Malaysia there are offices in Kuala Lumpur, Ipoh and Kuantan.

The same strategy applies in Australia, where there are 30 regional offices.

The benefit of being close to clients outweighs the cost of running multiple offices in one country, says Whybird.

Working locally is essential to a strong, ongoing relationship with the customer, which is often the difference between getting paid in full and on time. This is true regardless of the country – Whybird notes that payment problems also arise in Australia and are hardly unexpected.

There are other advantages to a local office. Foreign currency is highly regulated in China and Chinese companies require a licence to trade in US dollars, so foreign companies are limited to a very select group of customers. “So if you can go on-shore in-country and you can trade in RMB, enormous barriers come crashing down,” says Broadfoot.

“I don’t think we should view the rest of the world as being that different from our own country. We take the complexities of Australia for granted because we are used to them. New Zealand is a great place to do business in, but there are things done their way. There are variations to the way we do things, that’s half the fun,” laughs Whybird.

Another way to build client relationships is to employ local people, and not just at junior levels but in management too.

“In China, we’re not there as Australians, we’re there as Chinese,” says Broadfoot.

“All our employees there are Chinese nationals, we support them with assistance.”

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If making it in China seems like a lot of effort, well maybe it is. But Australian companies need to ask themselves whether they can afford to ignore the world’s biggest emerging market.

 “If you can persevere, the quantum of the market is 20 or 40-fold,” says Broadfoot. One customer, a Chinese coal company, has taken its 50 million tonne production to 100 million tonnes and has plans to take it to 200 million. “Now, 200 million tonnes is getting up to what the size of the Australian seaborne [coal] trade is – from one group.”

A foothold in China can open the door to South East Asia through the Chinese diaspora that has infiltrated the region’s business and political circles. “China is so intrinsic to a lot of the cultures in South East Asia,” says Broadfoot.
Soon it will be intrinsic to Australia’s business culture too.