A few months back I met an entrepreneur working for an SME that was planning to start exporting into China. Their products are used in the building industry and they need their machinery to be tested and approved by a Chinese lab. It all looked good; their products are in good demand and they followed the right steps: registered brand, registered a product lay-out (they did not own a patent), identified a good distributor (financial reports included), negotiated a good contract (with exit clauses in case of low sales) and got the required certificates and approvals to start exporting…
So, today I met them again to clarify a few things for the post I was planning to write about their success story and surprise…., but not really surprise, things have not gone as expected.
- in the last two years, local manufacturers doing similar products have “mushroomed”
- there are multinationals producing similar products locally
- the same labs that certify products in this category, also offer in the market “their own technology” which happens to look a lot like a mix of several products available in the market (guess how they acquire their know-how, … some people say that stripping down machines during certification tests provides a lot of know-how)
- with all the above, the premium price that clients seemed to be willing to pay (justified by the higher quality that a foreign brand provides) is no longer a reality…
So, I looked at them and asked: what lesson did you learn from all this?
And their answer was: start with a good market research, understand competitive situation, market potential and consider producing locally if the numbers work out ok… And whatever you decide, move fast.
Does this story sound like something you’ve heard? Does it make sense to you?