DCC 101: Part 1

Last week when I attended a class at Ludwigshafen University of Business and Society, International Business Management (East Asia) (https://www.hwg-lu.de/en/academics/bachelors-degree-programs/international-business-management-east-asia) as an M&A and China business expert some of the probing focused on the methodology of projects and transactions in China. Here is a summary of some of the discussed know-how which typically is not covered by others: 1. Hire before you set up company: oftentimes the first efforts focus on coming up with a strategy, an investment structure and the allocation and planning of funds. However, if you have distribution or other issues where a loss of time can’t be made up with later “good management” it is better to first hire someone that takes care of the initial time-sensitive tasks, issues and opportunities. A full team is not needed, but someone that deals with the immediate issues.

2. Specialists come in later: often head offices involve finance or legal centric managers or outsiders at an early stage. Things “should be done right”. For planning or for strategy purposes financial and legal insights are indeed important, but in some industries or set ups there can be an overfocus on legal and finance topics. Early stage or micro business don’t need cost saving or tax analysis, but quick and early cashflows to recoup investments. Business development and sales will be important.

3. Generalists with various capabilities versus specialists: sometimes home offices replicate their format of outside lawyers, outside accountants, head hunter and outside IT consultants to China. This is often a very costly and highly ineffective way to solve early stage business challenges in China. It is better to hire 1 or 2 good generalists or a firm that can handle 70% of all the needs that are outsourced in the home country.