Many Multi-National Companies in China are making news for the wrong reasons recently.
First, it was global pharmaceutical giant, GSK, which was under investigation for widespead bribery, and even had a number of key management staff being arrested, or barred from leaving the country. Sanofi Aventis and Eli Lilly were under investigation next. Across the ocean, JP Morgan was being investigated for hiring the offspring of high-ranking officials in their China operations.
Given such high-profile investigations (and arrests), it seems like it won't be "business as usual" in China any longer. In fact, it had been a common assumption that one needs to "grease the wheels" and develop guanxi in China, if you really want to make it big in China. But can you actually sell a lot of products and make lots of money in China WITHOUT bribing?
Hence, this month's topics:
This issue's main article is on "Selling without Bribing in China", and how some sales people (even from foreign companies) bribe their way to meet their sales targets, while other sales people win over their customers without any bribing.
Selling without Bribing in China
by c.j. Ng
Charlie thought he had his client in his hands.
He had fully grasped his client's situation. His client, the Purchasing Manager, was in his late-20's, just had a house and a baby, AND his salary is awfully low. Charlie thought that a person in such a situation would need or at least like to have some cash to upkeep family expenses. No, in fact Charlie knew his client will need money.
Since Charlie worked for a foreign company in China, he would not be able to bribe his client. However, Charlie had it all planned out. His company provides products to distributors at a much lower discounted price, than compared to the prices that end customers get if they were to buy directly.
Hence, there's enough margins from the distributor to fork out from the price differential and bribe the customer. In fact, Charlie worked with a couple of "distributors" whose roles were NOT to grow the market for Charlie's employer, BUT whose sole purpose was to "help foreign companies do the things that these companies weren't allowed to".
Charlie knew that if he were to give his client enough money, that will be the key differentiator in a highly competitive industry. He knew this customer "is in the bag". He had the "guanxi" so to speak.
Unfortunately for Charlie, when the client eventually bought from someone else and not from Charlie. Thinking that the competitor might have given more money than he did, Charlie tried to ask his client if what he "offered" was too low.
The client politely told Charlie that the competitor did not offer any bribes at all. The reason they won the bid was because they paid more attention to the client's company's needs, and not his personal financial situation. The client thanked Charlie for his "thoughtfulness", and told Charlie to keep in touch.
A few months later, a whistleblower exposed Charlie's "under the table" practices, and both Charlie and his distributor were arrested. Charlie's boss was not spared either. He was fines, and promptly fired from his job for not safeguarding the reputation and integrity of the company.
Can You Sell without Bribing in China?
If you were to ask a corrupt sales person why he bribes his customers, chances are the answers could be:
However, there are some companies who are very strict with their policies and corporate governance, and ensure their staff do not have any opportunity to bribe their customers.
For these companies, it was found that:
Some explanations could be:
In other words, you CAN sell without bribing in China. While you may not sell and make as much money if you don't bribe as compared to if you were to bribe, there will always be risks of getting caught and severely punished.
It is also interesting to observe that:
Making Sure Your Sales Force Does NOT Bribe
There are various aspects that companies will have to address to make sure that their sales people come clean with their sales strategies. These are:
When setting the right systems and policies, companies will have to:
Sales people will need to be briefed, trained or even indoctrinated on the do's and don'ts of the business, not just what to and what not to do, but also why they need to adhere to strict regulations.
Finally, it's not simply enough to enforce company policies. Sales people will need to be equipped with the skills to handle some customers' kick-back requests, hopefully with the possibility of closing the sale remaining intact.
Sales people will also need to evaluate:
And The Biggest Obstacle IS... ...
As you can see from the above ways to stamp out bribery in selling aren't that difficult to implement. Yet, many companies are still struggling to ensure that their sales processes are clean.
So what's the challenge? In a word: Will. In other words, does the senior management of the company have the will to make sure things are done the right way.
Some issues bothering senior managers may include:
If we turn away those corrupted customers, can we
still meet our growth targets? Will we then
lose out market share to our competitors?; and
If we were to rein in our top sales people and
distributors, will they leave the company and thus
crippling the company's sales results?
However, one aspect that senior managers need to
consider is this: if you were to under-perform in your
sales targets and market share as a result of selling
without bribing, the worst case scenario is that you
will just lose your job.
On the other hand, if you were to achieve sales targets
by condoning corrupt practices, you may lose your
freedom, your entire career and your dignity. It's
something worth considering since there are now some
high-profile whistle blowing in recent months. It
may be high time to at least tighten the screws so your
sales force come clean with you.
Some issues bothering senior managers may include:
If we turn away those corrupted customers, can we still meet our growth targets? Will we then lose out market share to our competitors?; and
If we were to rein in our top sales people and distributors, will they leave the company and thus crippling the company's sales results?
However, one aspect that senior managers need to consider is this: if you were to under-perform in your sales targets and market share as a result of selling without bribing, the worst case scenario is that you will just lose your job.
On the other hand, if you were to achieve sales targets by condoning corrupt practices, you may lose your freedom, your entire career and your dignity. It's something worth considering since there are now some high-profile whistle blowing in recent months. It may be high time to at least tighten the screws so your sales force come clean with you.
Power Breakfast Hour: 12 Sep 2013
Selling without Bribing in China
Why bribing in selling in China is rampant, and how sales people can learn to say "no", and still win the sale;
How the bribing is being conducted, and how companies can take steps to stop such practices; and
How to overcome the challenges that senior managers face when ensuring a clean sales force in China.
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Tips for Managers:
Beware of Event Organisers that could Fleece You in China
China Print is predominantly comparable to drupa and, over the years, it has
warranted substantial market attention. However, those who have been watching
would notice a steady decline in numbers. The current market situation has
not made things better.
For those with business acumen, China Print was an extension of their profit margins. Renowned digital press manufacturer MGI Digital clocked a sale each day. This was the US firm's maiden exposure at China Print. Raymond Pena Jr. commented that for his company's first attempt at Asia, the response has been beyond expectations.
The show was also a big showcase for manroland after the last couple of turbulent years. Ever since Langley Holdings' takeover and overhaul of management, the team has enjoyed some relief. manroland sold at least four machines at China Print as at its second day.
By the fourth day of the event KBA had sold over 21 machines as had Founder Electronics, one of the Republic's most famous digital players. The Beijing-based company, which debuted its latest digital presses, was swarmed by local interest.
Goss International known for its newspaper web presses' dominant market presence targeted three markets: newspapers, books and semi-commercial publications with the Magnum Compact. According to Eric Bell, Goss International marketing director, this combination of automation technologies makes the Magnum Compact press ideal for producing run lengths from as low as 500 copies through to 250,000+.
"Today's cost pressures on printed media mean that printers of every size and variety need to streamline production, reduce overheads, and keep their presses running round-the-clock," commented Bell.
Heidelberg AG and Hewlett Packard booths seemed to be the spots where most visitors congregated.
The Bad, and...
One appalling feature was the usage of 'tents' on site! It was said many exhibitors were given the impression their booths would be erected within the concrete building of the exhibition centre. However, three big tents were erected to serve as floor space. Ventilation was powered by generators with inflatable plastic tubes hanging below the roof.
Some exhibitors successfully masked the presence of others with big walls creating a false impression as the end of the hall, effectively resulting in loss of visibility at the show. Those who got the short-end of the stick could only lament they were "placed at the wrong booth"
What made matters worse was the fact that many exhibitors housed in tents were told to dismantle on the fourth day of the exhibition for security reasons. Those in exhibition buildings were told electricity supply would be terminated at 11am on the last day of the exhibition.
Organisers should have exercised more consideration before deploying marshals to send visitors out approaching 5 pm. Being asked to leave in the middle of a customer negotiation was a common complaint.
This could lead to a potential uproar accompanied with losses if those asked to leave by marshals happened to be big customers on the verge of a million-dollar deal, although not much hope was pinned on getting compensation from the organiser. It is, however, assumed much damage has warranted a price reduction on space for the next exhibition in order to attract those already-bitten.
A big international player surprisingly had a much smaller booth! This company was known to invest in super large floor space to cater to a wide display of equipment. Staff was seen commencing the dismantling of the booth on the fourth day of the show.
One worrying sight nobody could miss was the blatant disregard to safety at a tradeshow where paper predominated throughout the site. Visitors were seen lighting up beside presses despite numerous signs prohibiting the act!
Peddlers stood outside halls selling the China Print catalogue, similar to the thick listing of exhibitors given out complementary with registration last drupa. Buying from these peddlers entitled you to a 50% discount at RMB100 a book, in comparison to buying from the show organiser.
Major exhibitors commented their booths were not ready on the first day and many had to wear masks while last minute work was executed. It would not be surprising to hear that China Print's credibility has been significantly tarnished as a result of the shortcomings experienced by exhibitors and visitors alike.
About Directions Management Consulting
Directions Management Consulting is the partner of LeadershipIQ in China and Asia. LeadershipIQ helps more than 125,000 leaders every year through the facts drawn from one of the largest ongoing leadership studies ever conducted is used to help companies apply resources where the best possible results be achieved.
In addition, Directions Management Consulting is a leading provider of sales performance, innovation and experiential learning solutions in China and many parts of Asia.
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Currently, Directions Management Consulting has served clients such as GSK, InterContinental Hotels Group, Unilever, Bristol-Myers Squibb, Roche, Philips Lighting, Carrier, Ingersoll Rand, Freudenberg etc.
Through collaboration with consultancies such as Forum Corporation, MTI, de Bono China, ProWay etc., the consultants in Directions Management Consulting have served clients such as PwC, Volks Wagon, Air Products, Evonik, Wacker, Epson amongst others.
Directions Management Consulting will increase its efforts to conduct leadership studies in China and other parts of Asia, so that more companies apply resources where the best possible results be achieved in this part of the world.
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