Foreign investors often stumble when they enter China. Thunderbird School of Global Management Professor Mary Teagarden, Ph.D., has seen many mistakes since 1978, when she started working as a business consultant and researcher in the market. She also has seen many successful investments. She offers three broad lessons in a conversation Aug. 5, 2011, in Glendale, Arizona.
1. Gravity still works. Teagarden says many foreign investors are naive when they enter China. “The first rule of thumb is that gravity works in China,” she says. “If it’s not a good business deal, it’s not going to be made better because it’s in China.” Foreign investors must do their due diligence in China the same as anywhere else. “Without good due diligence, you’re going to make dumb mistakes,” she says.
2. Beware of shiny objects. Teagarden says the second rule for foreign investors is to look beyond the glamor of China’s ultramodern first-tier cities. “Don’t be distracted by the shiny objects,” she says. “You go to Shanghai and find a Jetsons atmosphere. It’s a futuristic city like you would not believe. But the business opportunities are out in the second-tier cities and the third-tier cities.”
3. Create real value. Teagarden says the third rule is to know your market and fill a need. “Know how you are going to create value for the Chinese customer,” she says. “If you can create value for the Chinese customer, and if you are willing to locate in the markets where the real growth is happening today, you can do very well in China.”
Learn more Oct. 4, 2011, when Teagarden speaks at the Houston Professional Speaker Series at the University of Houston in Texas.