The China Invasion : Israeli Hi-tech companies doing business in China

China’s a big target for Israeli hi-tech expansion and the latest Israeli Telecomm 2006 Expo showed just how seriously Israelis are about doing business in China.

Haaretz, Israel’s best newspaper, had a section made especially for summarizing Telecomm 2006 with a special piece titled “The China Invasion” by Hanan Bar-On. Here’s my very quick translation of some highlights from this article :

It’s not only the world’s largest country, but also serves as an enormous Telecomm growth potential, which is exactly what Israeli hi-tech companies are searching for in China. Here’s how to succeed in a highly challenging and superstitious market.

What do Comverse, Amdocs, ECI, Gilat, Radcomm, Radvision and Tadiran have in common? Those Israeli hi-tech giants, and many other are active in China. Very active. […]

Economical reforms and opening up to the west have turned China into an economical super-power. China joined WTO on 2001, which was a big step in transforming China into a global economy leader […]

How can an Israeli Telecomm company succeed in China? First of all, it should establish local connections with a local partner, which would allow a long term partnership with loyalty and mutual commitment. It will need an English speaking partner who knows the rules of the games and is able to deal with local bureaucracy, get the right approvals and maintain local regulations. Through the local partner, it might be able to get to the big Telecomm players, which is the number one goal  […]

But, sometimes teaming up with a local partner isn’t enough, and one of the best ways to succeed is just to buy a local firm. Obviously, only large companies are able to do so and a good example is Amdocs which paid over 30 million dollars to takeover Longshain – the main provider for billing platforms in China. […]

“You have to know how to talk with the Chinese” says Shafrir, who helped Radcomm and Radware enter China. Shafrir has good Chinese skills and, according to him, a long experience working with the Chinese market which allows him to bridge between the cultural gap that Israelis are facing in China. […] It’s not very surprising to learn from Shafrir that like everywhere else, the key factor for success in China is having connections. “In China, sales are based on personal connections and you have to know the right people. […] The right way to enter China is to get used to their way of doing business. You have to create personal connections that go beyond work and to understand the term GuanXi, which means – to bond with your Chinese partner. You do so by hanging out together in long dinners, singing Kareoke (KTV), drinking lots of Chinese wine (Bai Jiu), and bringing gifts, lots of gifts. The main points for success are : patience, patience, honor and ‘saving face’”.

Israeli companies representatives say that the Chinese market isn’t easy, especially due to the cultural gap. “Chinese rely a lot on honor”, says Shafrir, “honor them, and they will honor you” […] China is a wonderful country, with great people and an interesting culture, but they are very superstitious . When you want to do business, you have to go and spend the evening with them and be very careful not to offend them. They will be offended by anything” […] “Ceremony is also very important to the Chinese and you have to follow those strictly, like with the businesscard swap”.

 

Many companies from lots of different countries are going into the Chinese market. Do the Israeli firms have any advantage? Shafrir : “Almost none, but there is more openness to accept the Chinese”. Eli Doron : “There is competition, but we have one major advantage – Israel is considered to be a hi-tech super-power”.