Why Are Your Sales in China
Underperforming?
Table of Contents
1. Introductions
2. Economic Review of China
3. Introduction of Case Study
4. Discussion of Commercial Assessment, Competitor
Assessment, and Voice of Customer Assessment
5. Outcomes
1. Conclusions of 3 Assessments
2. Corrective Actions
3. Client Status
Commercial, Operational & Risk Management Advisory Firm in China
Introductions
Introductions
Moderator
Alex Bryant | Founder & President
Former Director of International Business Development
for Barnhardt Manufacturing Company
Alex Bryant has been an active leader in the international business
arena for more than 21 years, primarily in the areas of strategic
planning, sales and marketing, global logistics, product development,
joint ventures/partnerships/wholly-owned foreign enterprises and
general management.
Prior to founding East West Associates in 2005, Alex spent eight years
as the Director of International Sales and Business Development for
Barnhardt Manufacturing Company.
Commercial, Operational & Risk Management Advisory Firm in China
Introductions
Nader Zyaei
Jon Anderson
Jay Hoenig
Mark Plum
China Vice President &
Managing Director
Senior Executive Advisor
Director
Director
Former Director for Kyosay
Global and Vice PresidentDirector of Strategic
Services for Boldt
Metronics
Former Chief Operating
Officer Asia Pacific for Hill
and Associates Group and
Chairman of Hill &
Associates (PRC)
Former President of Briggs
& Stratton Asia
(NYSE: BGG)
Former Vice President and
General Manager – Asia
for Lennox International
(NYSE: LII)
Commercial, Operational & Risk Management Advisory Firm in China
Economic Review of China
Economic Review of China
China’s New Normal
•
2008 & 2009 were decisive years in the Chinese economy
•
Shifting from an export driven economy to an economy focused on domestic market
•
Increasing competition from domestic entities
•
Increasing labor and social benefits costs
•
GDP growth has slowed from double digit growth, but annual GDP growth is now
stabilizing around 7%
Commercial, Operational & Risk Management Advisory Firm in China
Economic Review of China
Results of the Shift
• Price is an increasingly important factor
• Products need to be designed for the Chinese market/customer
• After sales support, parts, and services dedicated to Chinese market
• Reliance on cheap labor not a winning strategy
• Well trained work force and a best in class supply chain improve speed to
market
• Market intelligence and strategy crucial to success
Commercial, Operational & Risk Management Advisory Firm in China
Economic Review of China
Despite the Challenges…
• The Chinese economy consists of over 1.3 billion people
• Annual GDP growth of 7%
• Fastest growing middle class in the world
Commercial, Operational & Risk Management Advisory Firm in China
Economic Review of China
Why are you in China?
2015 “Am-Cham” business survey
Commercial, Operational & Risk Management Advisory Firm in China
Review of China
Performance
The Majority of US companies in China
are profitable, enjoying high annual
revenues, positive cash flow, and good
market share.
Commercial, Operational & Risk Management Advisory Firm in China
Review of China
Most US companies remain optimistic
and continue investing in the China
market
•
29% reported China as their number
one global investment priority
•
96% are maintaining or increasing
their investment in China
•
95% forecast similar investment in
2015
2015 “Am-Cham” business survey
Commercial, Operational & Risk Management Advisory Firm in China
Review of China
Familiar Challenges
The top five operational challenges in 2014 were
•
Rising cost
•
Human Resources
•
Domestic competition
•
Corruption & Fraud
•
Foreign Competition
2015 “Am-Cham” business survey
Commercial, Operational & Risk Management Advisory Firm in China
Review of China
Economic Trend in China
Challenges in China are a mixture of
•
Mature Markets - Higher costs, increased competition, and complex
human resource issues
•
Emerging Markets – Lack of regulatory transparency, fraud, corruption,
and unreliable market data
Commercial, Operational & Risk Management Advisory Firm in China
Case Study
Case Studies
US Corporation who held market leading position as a specialty manufacturer in the
flow control industry was requested by their USA largest customers to open a
manufacturing facility in China to support their China domestic market growth plans.
EWA client company established China plant in 2006.
From 2006 to 2015 China operation produced identical products to which they
produced in the USA and delivered them to their USA clients in China.
EWA client company began experience slowing sales in 2013 -- Their sales to
China operations of their USA customers were flat as the US customers in China
were beginning to feel the impact of a slowing Chinese economy in their market
space (oil/gas ) and they began trying to source from local Chinese producers.
Preliminary information indicated that their USA client’s total market share in China
was less than 3% yet the overall China market for flow controls was growing by 7%.
EWA client company was only participating in a fraction of the available market in
China.
Commercial, Operational & Risk Management Advisory Firm in China
Case Studies
In 2013, EWA was requested by this US specialty manufacturer to
assess their China Sales & Marketing efforts and develop an action
plan to profitably grow in China
Manufacturer was experiencing:
•
Slowing sales
•
Eroding margins
•
High employee turnover
•
Lack of confidence in the China-based executives to develop the right Corrective
Actions to resolve their Sales & Marketing challenges and lacked critical data on
their customers, products and market
Commercial, Operational & Risk Management Advisory Firm in China
Assessment Offerings
EWA recommended 3 assessments
1. Commercial Assessment
2. Competitor Assessment
3. Voice of Customer Assessment
These assessments were essential to gather reliable and actionable information,
make EWA recommendations and subsequent Corrective Actions
Commercial, Operational & Risk Management Advisory Firm in China
Three Assessments
Commercial Assessment | Competitor Assessment | Voice of Customer Assessment
Assessments
Commercial Assessment
Objectives:
Fact-based evaluation of Sales & Marketing Management and
Organizational structure, Selling Capabilities in China domestic
market
Analysis:
- Quality of the Sales & Marketing Management and Team
- How well does the sales organization structure fit the demand market
- How well does the Sales team execute “Value Selling”
- Does the Sales team understand their “Value Proposition” and incorporate it into
their selling methods
- How well sales force skills match the demand market
- How well does the compensation system align with company objectives
- How well does the product portfolio meet the market needs
- Quantify the size of the vertical markets they serve
- Identify regional differences
- Test aided and unaided brand awareness
- Identify under-served markets and new opportunities
Method:
Primary and secondary research – interviews, field work and corporate procedures
Commercial, Operational & Risk Management Advisory Firm in China
Assessments
Commercial Assessment
Vertical Markets
•
•
•
•
•
•
Size
Regional differences
Demographics
Underserved markets
New market opportunities
Market maturity
Branding
• Unaided brand awareness
• Aided brand awareness
External Barriers
• Legal
• Regulatory
• Cultural
Product portfolio
• Fit to market needs
• Value Selling
opportunities
• Product adaptation
Internal Barriers
•
•
•
•
•
Internal support
Product development
Centralization
Compensation
HR policies
Goals
• Goal setting process
• Metrics and measurement
• Accountability
Commercial, Operational & Risk Management Advisory Firm in China
Assessments
Commercial Assessment
Value Proposition
• Features & benefits to the
customer
• Value selling capabilities vs.
first cost
• Distribution strategy choices
• Sales strategy
• Marketing strategy
• Go to market strategy –
Direct sales, agents,
distributors
Sales Force
• Organization fit to
market
• Capabilities
• Management
• Goal alignment
Sales Management
• Capabilities
• Alignment
• Channel conflict
management
• Dealer/agent management
• Sales force management
and development
Commercial, Operational & Risk Management Advisory Firm in China
Assessments
Competitor Assessment
Objectives: Benchmark the top 5 competitors and determine how well the client company
“matches up” to their major competitor attributes
Analysis:
- Understand their product portfolio
- Where are these competitors generating sales in China
- What is their specific Go to Market strategy (Supply Chain base,
Manufacturing,
Distribution and Sales)
- Estimate their cost structure, where possible
- Evaluate their market space: durability, reliability, and cost leadership
- Determine market niches where they focus and where they do not focus
- How do the product portfolios compare
- What differences exist between the organizations and their sales/marketing
processes and which differences may yield a competitive advantage
- What overall opportunities for improvement may surface as a result of the
comparison
Method:
Primary and secondary research – interviews, field work and talks with all levels of
the supply chain (suppliers, distributors, manufacturers and subcontractors, end
customers) , industry suppliers, industry experts
Commercial, Operational & Risk Management Advisory Firm in China
Assessments
Competitive Assessment
Vertical Markets
•
•
•
•
•
Where are they selling
What are they selling
Price points
Length of time in market
Niche markets
Branding
•
•
•
•
Selling proposition
Test brand awareness
Market reputation
Promotion strategies
Market Space
•
•
•
•
•
•
Durability
Price points
Reliability
Supply chain strategy
Go to market strategy
Access to end
customers
Demographic
• Local or international
competitor
• Product origin – local vs.
imported or hybrid
• Differences in design or
materials
Product portfolio
Market share
• What are they selling
• Have they adapted
the product
• Features and benefits
• Differentiation
• What is the estimated size
of each total market
• What is each competitors
local market share
Commercial, Operational & Risk Management Advisory Firm in China
Assessments
Voice of Chinese Customer Assessment
Objectives:
Fact-based data gathering and evaluation from the customer’s viewpoint
Analysis:
- What is the Perceived Value Proposition for the customer
- Perceived Product requirements:
- Features & Benefits
- Price points
- Delivery Requirements & Installation
- After-Sales service requirements
- How well do the company and the Chinese customers agree on the Value
Proposition
- How different is the value proposition in the China market from the US market
- What is the relative importance of Market Position & Branding, Marketplace
Reputation
Method:
Primary and secondary research – interviews, field work and meetings with
customers and prospects, agents and distributors, channel partners, OEM’s
and industry experts
Commercial, Operational & Risk Management Advisory Firm in China
Assessments
Voice of Customer Assessment
Value Proposition
• From customer viewpoint
• China customer’s views
match China Sales team
views
• China vs. Global customers:
difference
Branding
• Selling proposition
• Reputation in marketplace
• Value to Chinese customer
Features & Benefits
• Perceived product
benefits
• Pricing
• After market
• Product Quality
• Customer
responsiveness
Market Space
• Value Proposition
differ per market
sector
Demographic
• Value Proposition differ
between domestic and
international customers
Value Selling
• Sales team properly selling
to Value Proposition
Commercial, Operational & Risk Management Advisory Firm in China
Outcomes
Assessment Conclusions | Corrective Actions Implemented | Client Current Status
Conclusions
Overview
Assessment Conclusions
1. Product portfolio was not well suited either for Features & Benefits or
Cost to successfully compete in the domestic China market
2. Top 10 suppliers had not been resourced in 6 years and on average
had increased pricing 10% annually contributing to uncompetitive cost
structure
3. Sales compensation was not designed to effectively measure sale
personnel contribution or results
4. Sales manager was felt to have lost interest and loyalty
5. Product Features & Benefits did not support Value Proposition
Commercial, Operational & Risk Management Advisory Firm in China
Conclusions
Assessment Conclusions (1)
Vertical Markets
Focused on traditional home
country market – slow to
adapt to new markets
Branding
• New to market, brand
unknown
External Barriers
• Over-reliance on
powerful distributors
• Limited sales focus on
end users
Product portfolio
• Over-engineered
• Pricy
• Negative impact on
sales, profit and
retention
Internal Barriers
• No field quoting ability
• Limited sales automation
Goals
• Somewhat contradictory to
growing actual sales
Commercial, Operational & Risk Management Advisory Firm in China
Conclusions
Assessment Conclusions (2)
Value Proposition
• Static supplier base – high
cost/poor quality
Sales Force
Sales Management
• Selling “first cost”, not
value
• Commission not
aligned with product
line selling goals
• Poor leadership – hired for
relationships, unable to
transfer knowledge to
others
• Unable to manage channel
conflicts
• Sales management
compensation not aligned
with management of
others
Commercial, Operational & Risk Management Advisory Firm in China
Conclusions
Assessment Conclusions (3)
Value Proposition
Client
Customers
The company did
not have a quick
turnaround time,
slow to respond,
stock-out’s frequent
The customer valued
quick response time to
problems in order to
keep their pumps
running, not just price
Sales force did not
perceive the
difference
Customer clear on what
he wants
Features and Benefits
“Go to Market”
Good client acceptance
Focus largely on
traditional markets
Competition
Competitors offering
cheaper less
engineered products
Some competition
successfully focused
on niche markets
Commercial, Operational & Risk Management Advisory Firm in China
Corrective Actions
Corrective Actions
1
Product Portfolio
EWA facilitated product reviews with the client to understand what was required to
adapt existing products to meet China customer requirements
2
Product Portfolio
A product portfolio was developed that met the Chinese requirements while still
supporting the parent companies brand position and reputation
3
Supply Chain
An evaluation of top 10 suppliers and alternative suppliers identified
4
Sales Organization
China sales organization was re-structured to allow for defined locations for each
regional leader, regional leaders became compensated on the sales of their team and
did not have their own customer quotas
5
Sales Management
Sales leader was dismissed and an outside search was started for a new leader
6
Marketing
Corrective action was taken on the value proposition and features and benefits
Commercial, Operational & Risk Management Advisory Firm in China
Client Status
Client Status
1. Client company introduced several new products that were targeted at the
high end of their target market, which allowed sales growth with acceptable
margins and established a footprint in several new markets.
2. Position descriptions, career ladders, training programs were formally written
and introduced, which reduced Sales employee turnover to 12%
3. 30 % of component suppliers we resourced
4. Costs were reduced by 12% on several new products though new product
designs and resourcing of several key components
5. Critical outcome:
EWA client was in China for China with China and this enabled them to begin to
penetrate the China domestic market which had grown into the world’s
largest market for their product segment.
Commercial, Operational & Risk Management Advisory Firm in China
CONTACT
Alex Bryant
Nader Zyaei
Founder & President
China Vice President &
Managing Director
East West Associates Inc.
Phone: (+1) 704-807-9531
Fax: (+1) 704-362-2686
China & United States
abryant@eastwestassoc.com
www.eastwestassoc.com
East West Associates Inc.
China Mobile: (+86) 1582 1332 660
USA Mobile: (+1) 630 386 3254
Shanghai
nzyaei@eastwestassoc.com
www.eastwestassoc.com
Commercial, Operational & Risk Management Advisory Firm in China