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China’s Service Sector Will Reign, Part XII — Use The Expatrepreneurs

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Andrew Hupert over at the DiligenceChina Blog [link no longer exists] has a great post extolling the virtues of what he calls “expatrepreneurs,” which he defines as follows:

Expatrapreneur — Westerner who starts a new business in China. Usually involves a number of business plan rewrites, false starts, mental breakdowns, racist rants, cries for help, fits of despair and alcohol dependency. Potentially your best bet when looking for local professional service providers. Look for foreign run ops that have been on the ground for at least 2 years. Many foreigners burn out early, so make sure that your choice of consultant or service firm is in it for the long haul.

The post focuses on Reign Design, a Shanghai “media design and new media” company “that recently did the excellent work on ChinaSolved.com.” It is a beautifully done site.

Hupert sees Reign Design as “typical” of the “expatrepreneurs” who start a business in China, in that they are “getting bigger, more specialized and more international.” These companies “are becoming focused on their core business, capitalizing on good will and repeat business from satisfied customers (I am one of them), developing more sophisticated, consistent operating systems and controlling their growth in terms of head-count and services offered.”

Hupert talks about how he started using Reign Design in 2005, after first conducting “a thorough survey of the market for web design in Shanghai,” and finding “a few VERY expensive international firms” specializing in large corporate accounts and “dozens of small local operators offering low levels of service for very little money.”  There were few options in the “middle & upper-middle bands of the industry.”  These middle band companies offer “solid value” at prices that are not “TOO expensive.”  These middle band companies make complete sense for large numbers of foreign companies doing business in China.

Hupert sees these middle band service companies in China’s sweet spot:

International firms in China need to realize that we are in the midst of a rare opportunity. Local competitors have, with a few notable exceptions, been slow to adjust to changes in the Chinese market. Chinese consumers and businesses have raised their expectations and become much more sophisticated in a very short time — and the majority of local service providers have still not significantly improved the quality of their product offerings. It may FEEL like the whole world is already selling their goods and services in Shanghai, Beijing and Shenzhen already — but the reality is that there is a wave of new entrants who are just now preparing to make their move into China. This is the time for international start-ups and small businesses to leverage their brands, ramp up their sales and get BIG while they still can.

2007 is the year that China goes hyper-competitive. Ride the wave or get wiped out by it.

I completely agree that demand for these middle band service companies will greatly increase, but I think it too strong to pitch 2007 as the last chance for these sorts of companies to make their China mark.

What I find so interesting about this post is that I see my boutique international law firm as the “Reign Design equivalent” for those seeking Western style China law advice from a firm with English and Mandarin speaking lawyers. There are the mega law firms with offices all over the world that charge double what our China attorneys charge. These firms cater to the massive companies that have little concern about price (some of these firms have attorneys who bill out at more than $1500 per hour) and their focus is on the huge company, the huge deal, and the huge case. Then there are the handful American and British mostly solo lawyers who essentially freelance in China (oftentimes illegally), with no out of country support or accountability. And yet, because of the extreme shortage of experienced China lawyers (particularly those who can read Mandarin well enough to read China’s laws), I do not see this already minuscule middle band in the China legal world expanding any time soon.

What do you think?


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