The Chinese Approach to Business and their Financial Freedom.
I lived in China for a number of years back in the days so I know this pattern so well.
The Chinese are the smartest race I know on this planet. Below are their business tactics and it’s working like a charm.
Did you know that there are more millionaires in China than anywhere on this planet and they are mostly self-made?
It’s not out of place to meet teenage millionaires in china - including in the rural areas.
Only in China can you have 100 companies registered to the same house/shop with no physical office.
The major market for Chinese business owners is foreign markets.
Their mode of business is strictly online! Yes that same Internet you are using to chat on every social media!
A father could be making memory cards, Mother in charge of postage, daughter handling the online sales - their cousins making phone cases, screen protectors. In all these, the money remains in the family and they would merge profits to invest in properties.
The above family within a decade would merge experience to establish contact with a company in the west to manufacture e.g phone batteries for a global brand. There you go millions rolling in!
Another approach that’s working till tomorrow. Most western brands would design say a jacket or shoe then off they go to the East - mostly China, Vietnam or Bangladesh with this design to mass-produce. The reason for this are just two, one to maximise profit and two - to exploit cheap labour and these countries are handy for both.
For argument sake, let’s pick say Ralph Lauren as a brand - their western designer already sketched what they wanted and their team arrived in China with a prototype/sample. They found a businessman willing to partner with them - after negotiation, they agreed to 10,000units of the jacket for their phase one. In most business agreements, there is always a clause or condition on the part of both parties to be protected - in most cases an existing company’s warehouse or operating factory would be used as capability tour for the visiting company (This is not unusual).
Ralph Lauren conditioned the Chinese company not to produce more than the agreed units and the Chinese company in turn reciprocated with a condition that the product MUST not be sold in China and the Asian market under no circumstances.
Both parties had a handshake. Chinese company opened a foreign bank account in the customer’s home country- let’s say Italy. The customer paid a percentage of the contract invoice with a time frame to deliver products as agreed.
The Chinese are off to work - they called their entire village for an emergency, we have a contract but we don’t have money yet. We will house you, feed you and give you a gift at the end of this contract - words spread to villages for casual workers.
Work is on - emergency tailors and designers are ready, cousins making fabrics in a nearby village is willing to supply and be paid later, other distant cousins are willing to produce buttons, threads etc.
Those who have been to China would confirm the work ethics of these unique people, they will work day and night and in shifts until their goal is reached. They usually sleep at the factory.
This company is now ready to showcase their outcome to the client, a purchasing agent is sent for inspection - after one or two amendment required in terms of colours, sizes etc. The agent is happy for production to continue. As a result of this, client is happy for the first shipment to commence and a second batch payment made.
Boom - business is on. But wait for it, that’s not the Chinese plan.
By the 3rd month, the 10,000units are complete and both parties happy.
Now here is when the actual business starts - the Chinese concluded their business with the client, the client invested into the R&D, the client paid for adverts across the globe etc.
The Chinese are aware of the corporate greed culture in the west. Per item, they made the jacket for about $30.00 but the client has labelled the jacket $550.00! Outrageous right, welcome to the world of business!
But there is a loophole in the contract which was intentional. The China population is over a billion, with a population yearning for western culture and fashion, the online market is is equally open to buy replica of original designers, from clothes to just about anything - the Chinese knew this!
The factory is still active, the workers are still available and the design is still with them! The Chinese are back in production! They will produce the same item in the same colours and design, this is not a replica but the same thing produced for the western company! ONLY this time with a different funny brand like say “BUJIAN”! Welcome to China!
They will now flood the China market! From Yiwu to Guangzhou, Wenzhou, Beijing etc! Some will find their way to Hong Kong via smuggling!
Remember the workers were not paid right? Now they are getting paid with about 100pcs of this jacket per worker! These workers probably came from various villages across China! Everyone is now going back home with their “Package”!
Small time business men and women from Africa and the rest of the world are now in the know of “BUJIAN”! They are rushing to Guangzhou to make their orders!
Let’s not forget about the Internet market for the rest of the world! Small time businesses are now on eBay, Alibaba and other sites advertising their “Ralph Lauren in BUJIAN label jacket” - internet shoppers are bargain hunters!
The Indian and the Philippine market is not left out - Indian population is just over a billion! Full of young population embracing the western culture!
While Ralph got the order of 10,000units! Over 500,000units have been produced by proxy! Money is being made by everyone! The company won’t stop production for “BUJIAN” as a brand and they are still on standby to accept orders from Ralph Lauren for phase 2!!! Are you still wondering why there are more Bentleys and Rolls Royce in China than anywhere else?
Remember the initial money paid by the client to an account abroad? Well it had a purpose! It’s a legal money right! Their children would be sent to this country to study business management! Visas and resident permit are a piece of cake with such available account balance! They will invest in highbrow properties in that countries with the money! And that’s it, they are building an empire! From nothing to something.
Another approach that’s working is to have multiple brands producing or marketing the same item! With one mother company and multiple brands! The customers would be comparing and competing with these brands but all cash is heading to the same company indirectly - see the attached picture for example and better understanding.
Welcome to China - a determined country with resilient and hardworking people.
Tunde Oluomo
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