Why Do Professional Services Face Extra Hurdle Profiting from China?


Foreign professional service firms such as legal services, tax, consulting, accounting, public relations and human resource training have often found China is a peculiar market place.  Confident with the quality services and superior expertise they possess, many companies have gone to China expecting to gain a nice profit from the high growth economy.  They had foreseen not just servicing the multinationals in China, but also the huge number of Chinese companies who seemed clearly in need of their expertise. 

To many companies' surprise, their China operation had mostly been limited to providing services to the multinational companies.  Sealing deals with Chinese companies had proven to be much more difficult.  Similarly, while more and more Chinese companies are expanding into overseas market, they do not automatically turn to the help of local professional service firms.  Convincing Chinese companies to use these firms is harder than it seems.  Why do professional services companies face the extra hurdle profiting from China and Chinese companies?

Cost

Professional service is a relatively new industry in China.   It is not difficult for the Chinese to see there is value in the information, experience and expertise these companies offer.  The challenge is it is not customary for them to pay for them especially when the prices are often very high.  To understand this, one has to understand an important cultural value that influences the Chinese attitude towards a similar issue such as intellectual property.   China, as a culture that is predominantly group - orientated, views ideas and knowledge as belonging to the public domain and should be shared.  Contrary to the west, they see little wrong in "borrowing ideas" or "taking information for free".   

Even for those who do see the need to pay, they tend to turn to lower-priced local Chinese firms who offer similar services.  For most companies, it takes time to get used to the "sticker shock" from foreign professional service companies.  And it will take yet a bit longer to justify the potential return on making an investment on something that seems so "intangible".

Trust

It has been well studied that on the spectrum of trust, China falls on the side of low trust culture.  Traditionally, when the Chinese look for advice, they turn to their close families, friends and business associates - they believe only these people have their best interest at heart and will provide the most honest and objective advice.  And if you don't already belong to this group, you are more or less like a stranger that is not to be trusted.  Professional service companies mostly falls in this category in people's minds.

Poor ethical standards have also contributed to the tarnished reputation of the professional service industry in China.  It is very common to find Chinese professional service firms perform sub-bar quality service or charge fees for unperformed tasks to their clients.  For example, when a research firm is hired to conduct a primary research on consumer behavior data, they may claim to their client they've interviewed 500 people while in fact they've only interviewed 100.  Because of examples like this, Chinese are hesitant to trust any professional service companies before being convinced otherwise. 

Brand

The barrier to a trusting relationship can be alleviated with the possession of a strong brand.  Chinese has a higher level of trust in companies that carry well-known brands.  From the Chinese perspective, a good brand conveys quality, and in professional services quality could mean less risk of getting the wrong advice.  So when Chinese companies do seek out the help of foreign professional services, they tend to look for established brands to help minimize the risk of getting it wrong.

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