According to new Deakin research completed in partnership with the Open University of Hong Kong, many small to medium enterprises are struggling to undertake the type of intense networking needed to build relationships in an East Asian culture where business lives or dies based on its network.
With China the second largest economy in the world and Australia's number one trading partner, business is strong between the two countries, though the researchers found that many SMEs didn’t have the capacity to entertain the close relationships demanded by Chinese customers.
To compile the study, the team analysed the experiences of 40 different Australian SMEs over a five-month period from August to December last year across a number of industries.
"Our research was motivated by the increasing significance of China to Australia's economy, and the fact that SMEs represent a significant proportion of the Australian economy," said Deakin’s Dr Jane Menzies.
"The Chinese market is already Australia's number one trading partner and the amount of trade between the two countries is growing, offering Australian businesses many opportunities."
The report identified a number of priority areas when planning for operations in China, including innovation, network development, online strategies and investment in resources to target the Chinese market.
Innovation and entrepreneurship
The researchers found a focus on innovation and entrepreneurship would help Australian companies develop future competitiveness.
"Getting involved in Australian chambers of commerce in China, visiting trade fairs, attending conferences, and tapping into social networking and online selling sites such as Weibo, Weishing and Taobao are some of the neighbourly ways Australian businesses are finding favour with their Chinese counterparts,” continued Menzies.
"But while many Australian businesses are developing new products for the Chinese market, many reported their ability to sell on the basis of innovation was impeded by local environmental and cultural conditions.
"Some respondents suggested there were parallels between building and developing professional relationships in China and in Australia, such as the common practice of discussing business opportunities over lunch, while others had benefited from employing staff with Chinese connections, including 'sea turtles’—or students who had spent years studying in Australia before returning to China.
"However, the most important issue that the participants faced in the Chinese market was generally found to be due to internal resource shortfalls including funding, staffing and time. These negatively impacted on their ability to keep up relationships and develop business in China.
"With good connections, careful planning, an innovative approach to the local market and good products and services, Australian businesses can reap significant rewards from operating in the Chinese market.”
Some of Australia’s senior politicians continue to champion the “Asian Century” white paper, which was released in 2011 by Julia Gillard’s former administration, most notably Barnaby Joyce, the agriculture minister.
However, in comments made last week in The Weekly Times last week, Joyce suggested that Australia should sharpen its focus on supplying premium products, rather than attempting to serve as Asia’s food bowl.
With an estimated market of 3bn Asian middle-class consumers by 2030, Joyce said it was “ridiculous” to believe that Australia could come close to providing the food they would require. Even if the country doubles its output by that year, it will still only provide sufficient produce to feed around 120m Asians.
Moreover, the country’s agriculture could be seen as a threat by neighbouring countries, like Indonesia.
“Indonesian farmers don’t want to hear that the only cattle that will be available for market will be Australian cattle,” said Joyce.
Instead, he said a targeted approach, much like competing New Zealand’s 100% Pure brand, would be a better strategy.
“If we all go off as rats and mice, here, there and everywhere, then we won’t have a consistent approach,” he said.
A new white paper to announce Australia’s approach to macroeconomic business in Asia will be released towards the end of this year.