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Sourcing and Selling Product in China – It’s Different!

Sourcing and Selling Product in China – It’s Different!. Global Business Club of Mid-Michigan March 31, 2010 Chuck Bird Director, International Sales Food Safety Division Neogen Corporation. CHINA – Interesting Facts. 700 million cell phone users 350 million internet users

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Sourcing and Selling Product in China – It’s Different!

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  1. Sourcing and Selling Product in China – It’s Different! Global Business Club of Mid-Michigan March 31, 2010 Chuck Bird Director, International Sales Food Safety Division Neogen Corporation

  2. CHINA – Interesting Facts • 700 million cell phone users • 350 million internet users • 45 billion disposable chop sticks used per year • China invented paper (and toilet paper) • 9000 different magazines • 118 cities with population > 1 million • 800,000 executives – 35% are female

  3. A Mission that Matters The mission of Neogen is to be the dominant company in the development and marketing of solutions for food & animal safety.

  4. Sourced from China • LOW TECH COMMODITY PRODUCTS • High Volume • Low margin • Disposables • Raw materials/ingredients

  5. Sold to China • High Tech Diagnostic Products • Pathogens • Toxins • Allergens • Drug Residues • Spoilage Organisms • Sanitation • Genetically Modified Organisms • Plant Diseases • Cleaners • Disinfectants

  6. Three Key Ingredients for Success • TRUST • Open communication • Verification/Confirmation • Did I mention TRUST?

  7. Sourcing in China • Finding the right supplier • Networking • Referrals • US Chamber of Commerce • MDEC/Export.gov/Shanghai Office • Internet searches • In-country interviews • On-site Audits • References • Qualify a second vendor (time permitting)

  8. Sourcing from China • Getting the right product • Technical Details – make sure all quality related details are defined and confirmed • Preserve Trade-Secrets as much as possible (Confidentiality Agreements) • Invest in equipment needed (molds, etc.) • Outline and agree to quality specifications • Cross-train QA/QC staff • Obtain pre-lot samples for validation testing • Use same equipment for validation testing

  9. Sourcing from China • Getting the right product • Perform QA/QC on all samples and lots • Agree to delivery schedules and quantities. • Don’t forget shipping (cost, lead times) • Schedule frequent on-site visits yearly • Consider renting an apartment if multiple products or complex products are involved • Build a strong relationship – TRUST!

  10. Selling to China • Potential Pathway • Distributor • Joint Venture • Company owned store - WOFE

  11. Selling to China • Finding the right distributor • Networking • Referrals • US Chamber of Commerce – Gold Key • Internet searches • In-country interviews • References

  12. Selling to China • Distributor set-up • Signed Distributor Agreement (one-year) • Purchase price and retail pricing established • Payment terms agreed to • Focus on target market(s) • May need sub-distributors • Hong Kong is separate

  13. Selling to China • Expectations • Set sales goals at the beginning of the year. • Participate in trainings and meetings. • Communicate success and hurdles. • Communicate competitors activities. • Carry Inventory. • Solid Financials. • Distributor has to grow with you.

  14. Selling to China • Hurdles • Language barrier • Cultural differences • 18% VAT & Shipping costs • “Price is everything” mentality • Travel time and costs

  15. Selling to China • Keys to success • Brand recognition • Minimum two visits per year • Participate in key trade shows • Government references (approvals) • Transnational customers • Chinese literature/website

  16. Selling to China • Next Steps • Joint Venture (Trust) • WOFE • Ex-pat managed • Realistic expectations on growth • Appropriate staffing • Manufacturing in China

  17. SUMMARY • Trusting relationship • Realistic and agreed upon expectations • Investment of travel • Flexibility • Patience • Preparation • Bring your appetite – Food is important in China – most agreements are completed during dinner!

  18. THANK YOU! QUESTIONS?

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