Introduction
The new millennium has seen a resurgent economic power in China. The Chinese growth is reflected in various sectors that impact globally. China is the new emergent economic giant that is having growth figures ranging to over ten per cent annually. The high economic growth has led to a booming building industry that is currently the world’s leading. China building industry has gobbled up most of the resources in the building materials sector, including cement, steel, fuel etc. The construction industry has therefore opened up opportunities for various professionals in the sector. Key among them are engineers, quantity surveyors, masons, labourers, and, crucially, architectural designers. Inevitably China’s eastern province, Hong Kong, has led in providing the various professional services required. To market a Hong Kong architectural consultancy business in China would require a strategic business plan formulation.
A consultant has been various described as an expert in a certain profession working as an advisor either to a firm or to a specific individual. The consultant offers skills, knowledge and proficiency that businesses or other individuals can utilize. The consultant advises, solves problems, makes appropriate recommendations, and provides specific work. The consultants are mostly billed per hour, day or project, through commission, or can be based on their performance. Most consulting firms in Hong Kong are relocating to China as the market over there booms. However, a business entering the China market has to be aware of the unique features prevalent there. According to Edmund Ho, the CEO of DTZ Debenham Tie Leung, an international property consultant based in Hong Kong, the property market has its own unique features. The design of the housing is different from the Western or even Hong Kong’s, e.g. smaller sitting rooms and kitchen areas as opposed to larger bedrooms.
Business Structure
To set up the architectural design business in China, the most suitable corporate and management setup must be decided. This will variously depend on the Chinese government regulations. To decide what form is best, there is a need to consider liability issues associated with the business in China and which form will provide the best tax structure for this particular type of business. As a consultancy, there will be no need of incorporating the business. The best form of legal entity to start the consultancy business is the limited liability company (LLC). This will give them control of their venture, less personal liability and afford them the discretion of borrowing funds from other sources. By contracting local and international professional legal experts, the consultancy business venture can be set up successfully (Forming a business).
The Marketing Strategy
China, as a foreign designation, has a diverse set of cultural norms and a level of capriciousness that far exceeds the usual volatility of entrepreneurship. Large corporations can have the funds for a continual injection of either manpower or other inputs. However, for a consultancy, there must be a proper and complete market feasibility study as the firm must do things precisely and concisely to ensure success. As a consultancy has minimum capital outlay, a market strategy focussed on the potential client base will have better returns on the firm. The things to consider are:
- Rapidly changing regulations: Since China’s entry into the World Trade Organisation (WTO) and also through mounting global pressure to level the playing field with foreign companies, the government has gradually loosened up the stringent rules and regulations hampering non-Chinese firms. The long standing restrictions on foreign firms are, however, changing so rapidly that a new investor must ensure they keep abreast.
- Non-Conformity of Policy: Regulations and policy vary from province to province, city to city, and even district to district within the same metropolitan. If the firm is considering a national countrywide business, the differing rules will be a hindrance and costly to implement.
- Business Location: Cities in the eastern seaboard, for instance, Guangzhou, Shanghai and Beijing, are popular destinations. However, a new entrant will face stiff competition in these cities. A 2004 Vision Asia study found that Shanghai had nineteen thousand wholly foreign owned companies and eight thousand joint venture companies.
- Availability of government incentives in interior locations: the Chinese government, in efforts to diversify and develop China’s hinterland, has offered generous incentives to firms willing to locate or re-locate towards the western part of the country. The government is rapidly opening the areas through infrastructure development.
The consultancy, therefore, marketing strategy should focus on the interior, with a possible location in Xi’an city located in the western part of China. It has four million inhabitants and offers various investment inducements that will be an added advantage. The fact that there is massive infrastructure construction ongoing or planned will also be ideal for the architectural business. In Xi’an, the city has a high-tech zone that offers profoundly discounted office space, tax exemptions for new ventures for the first two years of business commencement. The consultancy firm can be able to offer its Hong Kong architectural designs consultation services to the rapidly growing city and the western China region.
Fee Structure
The firm’s fee structure can be competitive as the western region has less competition. The firm will also ensure it offers the Hong Kong architectural superior designs as compared to the prevalent local designs. Using professional Hong Kong experienced architectures, the firm can be offered faster, specialised expertise, which will give it a competitive edge over the existing firms. As a consultancy, the firm can offer a consolidated set of services in line with the construction building industry. This includes having in its rooster a panel of engineers, quantity surveyors, interior designers, etc.
In China, to ensure business viability for an architectural consultancy, government contracts are essential in view of the state structure. Most of the land and infrastructure are owned by the state, hence the major construction business is contracted by the government. This means the firm must court government officials who are part of a party political hierarchy. The management of the firm must therefore keep in touch with state regulations; ensure keeping strict deadlines on contracts, high-quality work, and involvement of local professionals to ensure there is no alienation with the community.
Profit Maximisation
To ensure profit maximisation, the firm can adopt various strategies. , local legislation is usually tightened, leading to limited returns as the local governments demand more open regimes and control of the foreign firms to protect their local indigenous firms. The firm must avoid substantial operating expenses by devising operating strategies that consist of combinations of different marketing initiatives, such as market selection or pricing strategy, and production initiatives, such as raw materials sourcing and production location (Roe, 2001).
Business Relationships
Personal relationships are also significant in China, and they are more valued than contracts, legal obligations as well as procedures. As a foreign market, language skills, sound professional knowledge, and the understanding of the Chinese people mindset are listed as critical to new foreign business ventures. The Chinese business start-up is a maze of bureaucracy that involves from twenty-five to thirty steps to commencement. The nation’s legal system is not very reliable, while the government regulations are said to be vague and often subject to the whims of the bureaucrats. As an international firm, the consultancy has an enduring advantage by not being purely confined to the domestic markets; this will allow the firm to utilise its international network representation to enhance exposure to the uncertainties of the local market has ensured a profit maximisation (John Haltiwanger).
Conclusion
China’s rapid economic growth reflected in its booming construction business, therefore, provides unique opportunities for a business marketing the Hong Kong architectural designs. As the infrastructure and property in China are state owned or controlled, it means the major contracts that can ensure the success of a firm have to be solicited from the heavily bureaucratic government officials. By locating in the largely undeveloped western region, a firm can have a competitive edge as compared to the saturated eastern coast region of the Yellow Sea. The incentives offered there counteract the rigid bureaucratic disadvantages expected for new ventures.
Reference
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Diagnosing Your Business Formation Requirements, General Business News Articles (2004).
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John Haltiwanger, Ron Jarmin and Javier Miranda1. “Business Formation and Dynamics by Business Age:.” (2008): 17.18.19.