Many inquiries and orders from big buyers in Europe and America are transferred through Hong Kong and Taiwan traders. Salespeople in the mainland of China are difficult to receive orders directly from them. In this way, most of the profits of the intermediate links have been intercepted by traders in HK and Taiwan.
Some of you may think, “If I contact the final customer directly, the customer will get a lower price. Then he will definitely place the order with me. And the profits of both sides will also be higher.”
This idea seems to be great. But the actual operation is often not satisfactory. If you do not understand customers’ thoughts and specific requirements but contact them directly, you may not only lose this opportunity. The situation will be worse because you offend existing customers from HK and Taiwan.
You will have many questions here. Why don’t final customers give orders directly to trading companies or factories in the mainland? Why can’t we skip the trading companies in HK and Taiwan, and work directly with final customers to share profits?
These problems seem simple, but they are challenging in actual operation. Here, I refer to the advantages of HK and Taiwan traders as “soft power”. And I will summarize them into several parts to explain.
Historical Factor of HK and Taiwan Enterprises
This historical factor can be traced back to the War of Resistance against Japan. Owing to the war, many mainland entrepreneurs began to move south to HK. They also took a lot of money and talents to HK. The well-known “Hong Kong Li & Fung” was also moved from Guangzhou to HK because of the war.
As we all know, after the Third Plenary session of the 11th Central Committee of CPC, China entered the period of reforming and opening up. The planned economy is transformed into the market economy. By the end of the 1990s, after a series of institutional liberalization and RMB exchange reforms, China entered the high-speed era of foreign trade development and gradually became a world factory.
Therefore, when we began to globalize our products and export overseas, HK and Taiwan have been ahead for many years. The accumulations of economic structure, industry, reputation, and the flexibility of economic and financial techniques are the advantages that traders in HK and Taiwan have maintained so far, although this advantage is becoming increasingly less obvious.
The Best Choice of Transnational Corporations
After the reform and opening-up, China’s low-cost labor force, highly competitive prices, and gradually improved supporting industrial systems are fatal attractions to multinational companies.
Multinational firms see potential business opportunities. They know that investment, production, procurement, and trade in mainland China are certain to pay off handsomely. So they began to prepare for entering the mainland market in the future. The best choice for this “preparation” was HK. HK is close to Shenzhen and can radiate to the most developed Pearl River Delta area in the Mainland. It also has Asia’s main foreign ports and a free financial system. Multinational companies can develop all trades in the Mainland of China through HK.
Therefore, a large number of European and American enterprises began to set up branches or representative offices in HK. They aim to recruit staff to prepare for entry into the mainland market in the future. This made the number of traders, agents and purchasing offices in HK multiply at that time.
Nowadays, most European and American companies are beginning to enter China directly. They set up offices and even the headquarter of China in Beijing, Shanghai, Guangzhou, Shenzhen, etc. But due to past accumulation and business considerations, they still use the headquarters in HK as the headquarter of Greater China, even of the Asian-Pacific region. Thus, the achievement of HK traders, besides their own hard work, more relies on the opportunities created by that era.
The Accumulation of Reputation and Public Praise of HK and Taiwan Enterprises
The manufacturing and trading industries in HK and Taiwan have started decades earlier than those of the Chinese Mainland. Those industries have gone through the initial era of “low-price competition”. They participate in a deep international division of labor in many areas and have their own place. So, they have passed the stage of “original sin of capital”. They have sufficient educated talents, many years of customer and product accumulation, long-term cooperation and credit guarantee.
Business reputation and public praise need long-term accumulation. They cannot be easily changed in just a few years or even decades. As if you are going to buy gold jewelry, you may prefer big brands such as Chow Tai Fook, Chow Sang Sang, Lao Feng Xiang, and LUKFOOK. You know they will be more expensive than other small brands, but you will still buy them. The reason lies in your trust of these brands. So you are willing to pay slightly higher prices than their peers.
The same is true for customers. They have not purchased products from mainland Chinese traders. So they have no idea of the situation of the mainland. Under similar circumstances, they may still give priority to traders in HK and Taiwan. After all, nobody wants to take risks.
Therefore, reputation and public praise themselves are intangible assets. Many Hong Kong and Taiwan enterprises can survive many economic crises, naturally because they have enough accumulation to cope with various crises. Reputation and public praise are often the cornerstones of the development of these companies. This kind of influence is intangible, imperceptible. But it can guide customers’ decisions.
Good Business Image and Professionalism
Every time we mention Hong Kong and Taiwan trading companies plus salesmen, the first impression in our mind is “professional.” Then why is there such a positive impression? It is because salesmen in these companies have professionalism, efficient working style, strong resistance to stress, and excellent service awareness.
HK and Taiwan are economically developed, and the competition in the trade industry is fierce. If an enterprise wants to survive, it must satisfy its customers. For the satisfaction of the customer, all work and services must be provided perfectly. This is a chain. As long as there is a lack of a section in the middle, problems will occur.
Therefore, in addition to their own experience, insight, more essential things are the grasp of details, attention to efficiency, etc. In the end, they can present a “professional” image in front of customers. This image makes it easier for them to get orders from customers with equal opportunities.
This kind of “goodwill” and “professional” requires the accumulation and efforts of several generations. When you compete with HK and Taiwan traders, you must be more serious about dealing with their high efficiency and professionalism, as well as customers’ instinctive preferences for them.
These four points above constitute the so-called “soft power”. It is not that they do not want to have “hard power”, but that they lack the necessary conditions. The local industry in HK has already declined. Most of them have already transformed into the service industry and retail industry. So they lack local manufacturers. They can only trade mainly and issue orders to mainland China and other Asian countries or regions. Moreover, Hong Kong’s artificial and office buildings are expensive, which make the costs are much higher than those of the mainland. Therefore, HK traders have neither price nor production advantages. Then they can only focus on “soft power”. On the one hand, it is due to their HK spirit of hard-working. On the other hand, it is also a helpless choice.
Then it comes to Taiwan. Compared with HK, there are some related industrial chains and manufacturing industries, such as the furniture industry, electronics, etc. But they are also limited by various high costs and expenses. Thus, Taiwanese companies are gradually moving the manufacturing industry to mainland China and countries such as Vietnam, Pakistan, and Cambodia. People who often deal with Taiwanese factories may find that their quotations are higher than those of mainland suppliers. But they highlight a higher quality, sophisticated documentary service, flexible payment methods, etc.
All in all, the profit and the added value lie in this “soft power”. You should strive for profit through other advantages and competitiveness rather than the price.
It is not to ask you to abandon the existing “hard power.” Instead, it means that you should improve your strengths and avoid weaknesses, and win with comprehensive strength.
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