Changing face of advisers in China

Consultants as much in demand by local companies as international ones

The growth of the Chinese economy has moved at an unprecedented pace, particularly during the past two decades. Chinese businesses and the increasingly sophisticated way in which they operate have contributed substantially to that phenomenon.

Culturally endowed with indigenous talent, they have nevertheless been quick to recognize and harness the expertise and capabilities of the world's top international consulting companies to anticipate and better exploit the remarkable domestic and global opportunities to their fullest advantage.

International consulting firms have been in China for a long time, some dating their presence back to the 1940s. However, it was in the 1980s that large international consulting firms started to actively develop business in the country.

At the beginning, most international firms simply followed their existing global clients, mainly the multinationals who were entering China. They helped these companies develop an entry strategy, negotiate joint ventures with Chinese partners and establish local capabilities.

Local clients later recognized the value that international consulting firms could bring and started to engage them. Even the Chinese government, especially at the regional level, started to leverage international consulting firms to help attract investment and develop industry strategy.

Over the years, consulting firms have continuously adapted to meet the changing needs of the Chinese market and their clients. This process evolved in several distinct phases.

First, China built a strong export-oriented economy. The key players included multinationals and local companies that developed China as a production base. International consulting firms helped the multinationals with making investment decisions, site selection and assisted them during their negotiations with local partners and the government. They also advised the Chinese government on developing its industry policies to encourage investments and bring about the creation of strong industry clusters.

In the second phase, the Chinese market established itself as one of the largest in the world. With demand-driven growth, increasing productivity and rising incomes, a new focus emerged - the need to build a strong domestic business platform. Consulting firms supported multinationals and local companies in both developing and implementing their growth strategies in China. They brought the best international practices in branding, product development and sales and marketing to assist clients in adapting to business life in China.

The country is now integrating fully into the global economy and many Chinese companies are expanding their businesses and going abroad, marking the third phase of the evolution. Large consulting firms help these Chinese companies in developing a globalization strategy and realizing a successful international expansion, whether it is organically or through mergers and acquisitions.

Some companies like Roland Berger have taken a different route in developing the China market by building a strong local clientele base. Chinese companies make up an integral number of its clients. About 75 percent are local, which includes State-owned enterprises, private companies and the Chinese government.

This is one of the biggest differentiating factors of Roland Berger's strategy in China. We strongly believe that local companies make an important and growing contribution in both a national and international context to the country's economic prosperity.

Despite the size of its economy, China constitutes a comparatively small market segment for the services of the top consulting companies in relation to the overall consulting market. But as China's economy globalizes and becomes more sophisticated, the demand for global consulting services will increase.

Global consulting firms bring in many areas of expertise: the best practices from global leaders in various industries, in managing a business, from strategic planning down to operational management, and in training local talent.

It is because of these top practices that many consultants end up working full time for Chinese companies who leverage their consulting skills.

Consulting companies have also witnessed a change in what companies seek from them. At the beginning, Chinese companies focused on developing a three or five-year overall strategy. The focus shifted to more specific topics such as branding, product development and channel management. The nature of the projects also changed from solely providing recommendations to more implementation support and building capabilities.

At present, there is a higher demand from local companies needing services such as assistance with international expansion, which in turn involves understanding the global market, identifying partners or acquisition targets, and setting up international organizations.

As local companies become bigger and more successful, it is inevitable that their need for consulting services will also increase if they hope to capture growth opportunities, compete with multinationals and improve internal management. As the second-largest economy in the world, China is committed to continued growth.

The advice, experience and expertise of renowned consulting companies have played a significant role in the development of the country to date and have helped Chinese companies to become even more competitive, both at home and abroad.

It seems a valued partnership between local companies and top consulting firms will be required to make the difference in an increasingly competitive global marketplace.

The author is a senior partner and vice-president of Roland Berger Strategy Consultants, Greater China.

(China Daily 07/13/2012 page7)