China, officially known as the People’s Republic of China is world’s most populous Sovereign Nation. Its massive population presents a remarkable opportunity for businesses all over the world. Over the years, Chinese consumers have become quite liberal to form strong relationships with worldwide brands. That’s why selling the high-value equipment to Chinese companies has become a lucrative option to the foreign manufacturers.
But before selling high-value equipment to China, foreign enterprises need to have a clear-cut understanding of the fundamental viewpoint of the Chinese side, so that you can come up with an effective selling strategy.
In the early 90s, China used to import almost all the advanced machinery from the overseas countries. With the advancement of their in-house manufacturing sector, the trend of importing equipment from the foreign countries have considerably slowed down. But a renewed interest has been noticed among the Chinese enterprises to purchase sophisticated machinery and equipment from the foreign manufactures. China’s heavy dependence on Germany is pointing out to the fact that there is a huge scope for the overseas companies to make a decent profit by selling high-value equipment to China.
Why Chinese companies are buying advanced equipment from overseas?
(1)– Although China is one of the largest economies in the world, still their intellectual faculty is inferior. They are quite good at imitating things but not inventing them. They are heavily dependent on the foreign companies for the high-end equipment as they are incapable of manufacturing them on their own.
(2)- Much of the production equipment of the Chinese factories are old, outdated and low-quality. The technology used in them is nearing the end of its useful life. A strong technical upgrade is required to manufacture the equipment as good as the foreign companies. This makes it inevitable that they are making purchases of expensive machinery from foreign entities.
Tips on selling high-value equipment to China-
In spite of making rapid economic progress, the mindset of the Chinese companies towards the purchase of foreign equipment has not changed a great deal. Their thought process remains the same as it was twenty years ago. But if you have a sharp knowledge about how they behave while purchasing high-value foreign equipment, you could easily sell your product to them and take home huge profit. The success lies in understanding their purchasing mentality and dealing with them properly.
- High price tag- The most common question foreign companies face from the Chinese side is their price is too high. There are three things you can do to overcome this issue- First- Give them the option of paying in instalments, Second- Insist on a major discount, in the range of 30% to 40%, Third- After paying the discounted price for the first two units, insist on an additional discount for future purchases.
- Training is unnecessary- Make them believe that no training is required for using the equipment. And later when they realize they are not capable of operating the equipment, you can extract money from them by offering them training sessions. By doing this you can take back most of what you have given them as a discount. A tit for tat strategy.
- Pre-operations testing is not required- It is a waste of time for you if you indulge in elaborate site set up and pre-operations testing. Your only responsibility should be just turn on the equipment and leave the rest to them.
It is quite obvious that not all the Chinese companies have the same mentality, but a typical Chinese factory owner will negotiate and implement its purchases of advanced foreign equipment based on the above-mentioned beliefs. So, properly set up your selling strategy and be a winner.