A helping hand

He dislikes being labelled an expatriate, saying he’s a Kiwi who lives in China. In fact, he’s lived half his life there, but his wife is European and his children are New Zealand passport holders.

His company represents the China investments of a variety of international firms. Mahon has direct responsibility for the management of 19 Chinese companies and he also advises companies – including several New Zealand ones – on their China operations, from strategy development to negotiating with Chinese partners.

What are the key opportunities for New Zealand companies in China?
For exporters the opportunities relate to how well they are doing in other markets already, how exposed they are to Asia and what human resources they have to develop China. Look at the food and beverage industry, for example. Already there are some extremely good companies successful in niche markets around the world. In considering China they need to think not just is there a market for their products, but do they have the means to expand to take advantage of that opportunity. New Zealand companies are generally small to medium-sized and China requires a lot of management time to understand, to assess and to take advantage of.

Are most Kiwi companies too small for China?
No, I don’t think so, though they need to think about China in an original way. If you look at examples of companies that have grown well in New Zealand and have become quite substantial, one would be Icebreaker. Jeremy Moon created a brand. He wanted to make a brand in New Zealand, but he used China as his platform.

What are some mistakes Kiwi companies make in China?
They see a vast market and think different rules apply, so they suspend the business acumen they would normally bring to bear in any western market. Or they think China is a developing market like any other – they think it is like Vietnam or India which it is not. [They need] to come in and just look, and try to sort what this place is, and not project their assumptions and visions for their company, which will blind them from what is actually there.

And also not to let the scale overwhelm them. China is 1.6 billion people over 31 provinces, but also it is, therefore, at least 31 separate markets. New Zealand companies should look at portions of that market that are bite-sized, rather than barrelling into Guangchou, or Shanghai, or Beijing and seeing that as the marketplace. There are towns that are second-, third- or even fourth-tier cities that have the population of New Zealand alone. It is a sort of guerilla approach to business here that New Zealand companies can do and are quite good at doing around the world anyway.

Is there a tendency only to look at coastal cities?
In the last 30 years over 85% of foreign investment has gone into a handful of coastal cities and the hinterland remains under-exploited or explored by western or New Zealand companies. There is a lot of room for a company prepared to go inland, even a province or two, or to look a little further west or to the northeast of China. There they may be the only player in their product.

How important is learning the language?
It is crucial to know the culture and to understand people in the country. Eventually language is a vital aspect of that. Not having Chinese to begin with, you must be advised properly and that is where the Beachhead programme can help New Zealand companies. Then you find foreigners that speak Chinese to help work with you and local Chinese people that are bilingual that you employ or retain in some way.
Eventually, though, it is incumbent on any New Zealand company, no matter how small, to have at least one or two key people undertake to learn Mandarin and to spend time in China to make sure they learn it in a way that is relevant to everyday. They might not be able to negotiate in the language but they begin to understand the way people think and the society they are working in.

McKinsey’s Andrew Grant recently told Unlimited that China takes a lot of persistence to reap rewards.
Andrew is dead right. I am in my 25th year as a Beijing resident and we’re still building our company. You must be patient here. Even the fast pace of China and its rapid development is a barrier in itself. So much is changing all the time that you have to be in the market, involved in transactions and right on the edge of things, to know which way to move. It is a difficult market and takes a long time, but there have been successful New Zealand companies here. But many New Zealand companies, by the nature of our economy, have been trading companies by mentality – produce a product, market it, get it out, export it – a lot of fast-moving factors and often China requires a different approach.

What has changed during your time there?
The engines of this economy are now the private sector, whereas for the first decade I was here that was not the case. If you look at the drivers of GDP growth every year, the private sector is the larger portion – it accounts for 60% of the real economic growth here. And since I’ve been here the GDP of China has multiplied five times. The scale of this economy is an on-going shock to anyone who was here back in the 1980s.
On the other hand, the change it has brought about for our business has made us more flexible. Nearly 80% of our employees (all of whom are partners in the business) are mainland Chinese, so we see ourselves as being a New Zealand company, but also very much a Chinese business. You go back even 10 years, foreigners generally would dominate the management and key roles in foreign-owned companies. That has changed for us and in the market.

It’s a more accountable market and there is more justice in China. I know that is not what people assume about China, but there is more transparency, politically and socially; the government system is driven by meritocracy rather than by ideology, as it was in the old days.

Is the Beachhead programme open for business in China?
The core board has been appointed and essential systems are in place. The dialogue with Beachheads in New Zealand and regionally, too, is now almost on a daily basis so we are very much ready. We’re also looking at a more proactive role. We will look at what New Zealand companies we think would benefit from the Beachhead programme and, working with our colleagues in New Zealand, make approaches to them.

Why?
We know enough about the Chinese economy to make suggestions for good medium-sized New Zealand companies about where opportunities might lie. This is a programme funded through New Zealand Trade and Enterprise (NZTE) and these managers and companies are all taxpayers. For them to get the benefit of us turning up and saying, ‘Let’s talk to you about China’, even if they don’t take up the suggestion and involve themselves, they will learn something about their businesses. I think that is something we are obliged to give.

Do you intend staying in China?
I don’t feel a separation from New Zealand. For me it is not a matter of choosing dramatically to be one place or the other. This Beachhead programme in itself is a great way for me to even further reintegrate with New Zealand. But I never left in a way.

If you had one message for Kiwi companies what would it be?
One way or another China is going to have a profound influence on your commercial lives. You need to look at China and understand how it relates to your business. You may decide not to come, but that will be a knowing choice rather than something you just didn’t get around to thinking about. It is going to affect you, so understand it and make a decision, because your future will be increasingly defined by what China does.