why are your sales in china underperforming?. table of contents commercial, operational & risk...

Why Are Your Sales in China Underperforming?

Table of Contents

Commercial, Operational & Risk Management Advisory Firm in China

1. Introductions

2. Economic Review of China

3. Introduction of Case Study

4. Discussion of Commercial Assessment, Competitor

Assessment, and Voice of Customer Assessment

5. Outcomes

1. Conclusions of 3 Assessments

2. Corrective Actions

3. Client Status

Introductions

Introductions

Alex Bryant | Founder & President

Former Director of International Business Developmentfor Barnhardt Manufacturing Company


Alex Bryant has been an active leader in the international business

arena for more than 21 years, primarily in the areas of strategic

planning, sales and marketing, global logistics, product development,

joint ventures/partnerships/wholly-owned foreign enterprises and

general management.

Prior to founding East West Associates in 2005, Alex spent eight

years as the Director of International Sales and Business

Development for Barnhardt Manufacturing Company.

Moderator

Introductions

Jon AndersonSenior Executive Advisor

Former Director for Kyosay Global and Vice President-

Director of Strategic Services for Boldt

Metronics

Nader ZyaeiChina Vice President &

Managing Director

Former Vice President and General Manager – Asia for Lennox International

(NYSE: LII)

Jay HoenigDirector

Former Chief Operating Officer Asia Pacific for Hill and Associates Group and

Chairman of Hill & Associates (PRC)

Mark PlumDirector

Former President of Briggs & Stratton Asia(NYSE: BGG)


Economic Review of China

China’s New Normal

• 2008 & 2009 were decisive years in the Chinese economy

• Shifting from an export driven economy to an economy focused on domestic market

• Increasing competition from domestic entities

• Increasing labor and social benefits costs

• GDP growth has slowed from double digit growth, but annual GDP growth is now

stabilizing around 7%



Results of the Shift

• Price is an increasingly important factor

• Products need to be designed for the Chinese market/customer

• After sales support, parts, and services dedicated to Chinese market

• Reliance on cheap labor not a winning strategy

• Well trained work force and a best in class supply chain improve speed to

market

• Market intelligence and strategy crucial to success



Despite the Challenges…

• The Chinese economy consists of over 1.3 billion people

• Annual GDP growth of 7%

• Fastest growing middle class in the world





2015 “Am-Cham” business survey

Why are you in China?

Review of China


PerformanceThe Majority of US companies in China are profitable, enjoying high annual revenues, positive cash flow, and good market share.

Review of China


Most US companies remain optimistic

and continue investing in the China

market

• 29% reported China as their number

one global investment priority

• 96% are maintaining or increasing

their investment in China

• 95% forecast similar investment in

2015


Review of China


Familiar Challenges

The top five operational challenges in 2014 were

• Rising cost

• Human Resources

• Domestic competition

• Corruption & Fraud

• Foreign Competition


Review of China


Economic Trend in China

Challenges in China are a mixture of

• Mature Markets - Higher costs, increased competition, and complex

human resource issues

• Emerging Markets – Lack of regulatory transparency, fraud, corruption,

and unreliable market data

Case Study

Case Studies


US Corporation who held market leading position as a specialty manufacturer in the flow control industry was requested by their USA largest customers to open a manufacturing facility in China to support their China domestic market growth plans. EWA client company established China plant in 2006.

From 2006 to 2015 China operation produced identical products to which they produced in the USA and delivered them to their USA clients in China.

EWA client company began experience slowing sales in 2013 -- Their sales to China operations of their USA customers were flat as the US customers in China were beginning to feel the impact of a slowing Chinese economy in their market space (oil/gas ) and they began trying to source from local Chinese producers.

Preliminary information indicated that their USA client’s total market share in China was less than 3% yet the overall China market for flow controls was growing by 7%. EWA client company was only participating in a fraction of the available market in China.

Case Studies


In 2013, EWA was requested by this US specialty manufacturer to assess their China Sales & Marketing efforts and develop an action plan to profitably grow in China

Manufacturer was experiencing:

• Slowing sales

• Eroding margins

• High employee turnover

• Lack of confidence in the China-based executives to develop the right Corrective

Actions to resolve their Sales & Marketing challenges and lacked critical data on

their customers, products and market

Assessment Offerings


EWA recommended 3 assessments

1. Commercial Assessment

2. Competitor Assessment

3. Voice of Customer Assessment

These assessments were essential to gather reliable and actionable information,

make EWA recommendations and subsequent Corrective Actions

Three AssessmentsCommercial Assessment | Competitor Assessment | Voice of Customer Assessment

Assessments


Commercial Assessment

Objectives: Fact-based evaluation of Sales & Marketing Management and Organizational structure, Selling Capabilities in China domestic market

Analysis: - Quality of the Sales & Marketing Management and Team- How well does the sales organization structure fit the

demand market- How well does the Sales team execute “Value Selling”- Does the Sales team understand their “Value Proposition”

and incorporate it into their selling methods- How well sales force skills match the demand market- How well does the compensation system align with

company objectives- How well does the product portfolio meet the market needs- Quantify the size of the vertical markets they serve- Identify regional differences- Test aided and unaided brand awareness- Identify under-served markets and new opportunities

Method: Primary and secondary research – interviews, field work and corporate

procedures

Assessments



Vertical Markets External Barriers Internal Barriers

• Size• Regional differences• Demographics• Underserved markets• New market opportunities• Market maturity

• Legal• Regulatory• Cultural

• Internal support• Product development• Centralization• Compensation• HR policies

Branding Product portfolio Goals

• Unaided brand awareness• Aided brand awareness

• Fit to market needs• Value Selling

opportunities• Product adaptation

• Goal setting process• Metrics and measurement• Accountability

Assessments



Value Proposition Sales Force Sales Management

• Features & benefits to the customer

• Value selling capabilities vs. first cost

• Distribution strategy choices• Sales strategy• Marketing strategy• Go to market strategy –

Direct sales, agents, distributors

• Organization fit to market

• Capabilities• Management• Goal alignment

• Capabilities• Alignment• Channel conflict

management• Dealer/agent management• Sales force management

and development

Assessments


Competitor Assessment

Objectives: Benchmark the top 5 competitors and determine how well the client company “matches up” to their major competitor attributes

Analysis: - Understand their product portfolio- Where are these competitors generating sales in China- What is their specific Go to Market strategy (Supply Chain

base, Manufacturing, Distribution and Sales)- Estimate their cost structure, where possible- Evaluate their market space: durability, reliability, and cost

leadership - Determine market niches where they focus and where they

do not focus- How do the product portfolios compare

- What differences exist between the organizations and their sales/marketing processes and which differences may yield a competitive advantage

- What overall opportunities for improvement may surface as a result of the comparison

Method: Primary and secondary research – interviews, field work and talks with all levels of the supply chain (suppliers, distributors, manufacturers and

subcontractors, end customers) , industry suppliers, industry experts

Assessments


Competitive Assessment

Vertical Markets Market Space Demographic

• Where are they selling • What are they selling• Price points• Length of time in market• Niche markets

• Durability• Price points• Reliability• Supply chain strategy • Go to market strategy• Access to end

customers

• Local or international competitor

• Product origin – local vs. imported or hybrid

• Differences in design or materials

Branding Product portfolio Market share

• Selling proposition• Test brand awareness• Market reputation• Promotion strategies

• What are they selling• Have they adapted

the product• Features and benefits• Differentiation

• What is the estimated size of each total market

• What is each competitors local market share

Assessments


Voice of Chinese Customer Assessment

Objectives: Fact-based data gathering and evaluation from the customer’s viewpoint

Analysis: - What is the Perceived Value Proposition for the customer- Perceived Product requirements:

- Features & Benefits - Price points - Delivery Requirements & Installation - After-Sales service requirements

- How well do the company and the Chinese customers agree on the Value Proposition

- How different is the value proposition in the China market from the US market

- What is the relative importance of Market Position & Branding, Marketplace Reputation

Method: Primary and secondary research – interviews, field work and meetings with customers and prospects, agents and distributors, channel partners, OEM’s and industry experts

Assessments


Voice of Customer Assessment

Value Proposition Features & Benefits Demographic

• From customer viewpoint• China customer’s views

match China Sales team views

• China vs. Global customers: difference

• Perceived product benefits

• Pricing• After market• Product Quality• Customer

responsiveness

• Value Proposition differ between domestic and international customers

Branding Market Space Value Selling

• Selling proposition• Reputation in marketplace• Value to Chinese customer

• Value Proposition differ per market sector

• Sales team properly selling to Value Proposition

OutcomesAssessment Conclusions | Corrective Actions Implemented | Client Current Status

Conclusions


OverviewAssessment Conclusions

1. Product portfolio was not well suited either for Features & Benefits or Cost to successfully compete in the domestic China market

2. Top 10 suppliers had not been resourced in 6 years and on average had increased pricing 10% annually contributing to uncompetitive cost structure

3. Sales compensation was not designed to effectively measure sale personnel contribution or results

4. Sales manager was felt to have lost interest and loyalty

5. Product Features & Benefits did not support Value Proposition

Conclusions


Assessment Conclusions (1)

Vertical Markets External Barriers Internal Barriers

Focused on traditional home country market – slow to adapt to new markets

• Over-reliance on powerful distributors

• Limited sales focus on end users

• No field quoting ability• Limited sales automation

Branding Product portfolio Goals

• New to market, brand unknown

• Over-engineered• Pricy• Negative impact on

sales, profit and retention

• Somewhat contradictory to growing actual sales

Conclusions



Value Proposition Sales Force Sales Management

• Static supplier base – high cost/poor quality

• Selling “first cost”, not value

• Commission not aligned with product line selling goals

• Poor leadership – hired for relationships, unable to transfer knowledge to others

• Unable to manage channel conflicts

• Sales management compensation not aligned with management of others

Conclusions



Client Customers Competition

Value Proposition The company did not have a quick turnaround time, slow to respond, stock-out’s frequent

The customer valued quick response time to problems in order to keep their pumps running, not just price

Sales force did not perceive the difference

Customer clear on what he wants

Features and Benefits Good client acceptance Competitors offering cheaper less engineered products

“Go to Market” Focus largely on traditional markets

Some competition successfully focused on niche markets

Corrective Actions


Corrective Actions

1 Product Portfolio EWA facilitated product reviews with the client to understand what was required to adapt existing products to meet China customer requirements

2 Product Portfolio A product portfolio was developed that met the Chinese requirements while still supporting the parent companies brand position and reputation

3 Supply Chain An evaluation of top 10 suppliers and alternative suppliers identified

4 Sales Organization China sales organization was re-structured to allow for defined locations for each regional leader, regional leaders became compensated on the sales of their team and did not have their own customer quotas

5 Sales Management Sales leader was dismissed and an outside search was started for a new leader

6 Marketing Corrective action was taken on the value proposition and features and benefits

Client Status


Client Status

1. Client company introduced several new products that were targeted at the high end of their target market, which allowed sales growth with acceptable margins and established a footprint in several new markets.

2. Position descriptions, career ladders, training programs were formally written and introduced, which reduced Sales employee turnover to 12%

3. 30 % of component suppliers we resourced4. Costs were reduced by 12% on several new products though new product

designs and resourcing of several key components 5. Critical outcome:

EWA client was in China for China with China and this enabled them to begin to penetrate the China domestic market which had grown into the world’s largest market for their product segment.

CONTACT

Alex BryantFounder & President

East West Associates Inc.

Phone: (+1) 704-807-9531

Fax: (+1) 704-362-2686

China & United States

[email protected]

www.eastwestassoc.com

Nader ZyaeiChina Vice President &Managing Director

East West Associates Inc.

China Mobile: (+86) 1582 1332 660

USA Mobile: (+1) 630 386 3254

Shanghai

[email protected]

www.eastwestassoc.com


why are your sales in china underperforming?. table of contents commercial, operational & risk...

Documents

china economic review

review of china commercial

china performance

china underperforming

china alex bryant

moderator slide

general management

vice president director