1. Sociedade Portuguesa de Inovação Insert project logos in this area (use the slide master) 3,5/3,5 CM Chinese Market: Opportunities for Portuguese Companies Wu Bin SPI Chief Representative in China Porto – 16 Novembro 2004 –Sheraton Porto Hotel, Porto Lisboa – 17 Novembro 2004 – Pequeno Auditório do Nucleo Central do Taguspark, Oeiras

2. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Opportunities for Portuguese Companies Summary 1.Exporting to China Main Sectors with Export Potential, SWOT Analysis, Successful and Unsuccessful Examples, Practical Advices 2. Buying from China Why Purchasing in China? What to Purchase from China? Difficulties and Barriers 3. SPI Services Your partner in China

3. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China

4. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Main Sectors with Export Potential to China 1.Wine & Drinks 2.Foodstuffs 3.Top class fabrics & garments 4.Top class leather shoes 5.Furniture & Houseware (kitchenware, ceramic ware, textiles, decorative items) 6.Building Materials (cork products, stones, ceramic tiles, sanitary ware) 7.Machine Tools 8.Moulds (plastic injection)

5. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Wine 1. Strenghts a.Long-tradition of winemaking; b.Good wine quality; c.Renowned Port Wine Image; d.New comers for Chinese consumers. 2. Weaknesses a.Lack of image in China; b.Invisible presence/few promotions; c.Local importers/distributors unwilling to buy; d.Little support from wineries.

6. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Wine 3. Opportunities a.Huge potential for imported high-quality wine; b.Few Portuguese wines, little competition; c.Consumers taste/preference. 4. Threats a.Strong competition/dominance by French, Italian and Spanish wines; b.Competitive offer from Australia and California; c. Low price from Chile, South African and Argentina.

7. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Textile / Fabrics 1. Strenghts a. New material/high-tech fabrics is the new attraction in China; b. Competitive combination of quality and price, European offer. 2. Weaknesses a. No image/presence; b. Companies are not committed to marketing and promotion.

8. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Textile / Fabrics 3. Opportunities a. Large consumption of garments in China requesting high- quality/top class fabrics; b. Market is seeking new materials, with competitive offer. 4. Threats a. Italy is very strong in this sector, due to its quality/class; b. Most importantly, Italian companies are very aggressive in promoting their products (Portugal has to learn from them).

9. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Leather Shoes 1. Strenghts a.Quality shoes from Portugal; b.Previous presence in China. 2. Weaknesses a. Few promotions; b. Companies not committed to overseas market.

10. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Leather Shoes 3. Opportunities a.Brand/quality shoes with comfort/good price is the new fashion among consumers; b.Special design shoes enjoy market niche for imported shoes. 4. Threats a.High-quality locally-made shoes from both joint venture and domestic manufacturers dominate the market; b. Local distributors prefer suppliers with commitment and support, like Italian suppliers.

11. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Furniture & Houseware 1. Strenghts a.European design is currently quite attractive in Chinese market; b.Portuguese design would be a new hot spot for demand. 2. Weaknesses a.Lack of image, in terms of the industrial sector; b.Almost no promotion/participation in trade fairs (namely National Pavilion in Chinese fairs).

12. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Furniture & Houseware 3. Opportunities a.House purchase increase in China; b.New fashion raises new decorative items and furniture demand (young generations are seeking new furnishings from abroad with competitive offer). 4. Threats a.European countries like Italy and Spain are taking advantages of their strong image in China, receiving more buyers; b. Supplies from Japan, South Korea, Taiwan and Hong Kong become largest wholesalers in China for imported furnishings.

13. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Cork 1. Strenghts a.Nr.1 Supplier with a strong image in China; b.Market dominance. 2. Weaknesses a.High cost, compared with competitive suppliers; b.Chinese consumers not familiar with cork products, due to lack of promotions.

14. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Cork 3. Opportunities a.Increasing consumption of wine boosting demand for more cork stoppers; b. Cork tiles application & promotion stimulates further import of cork to China. 4. Threats a. Spanish suppliers are very good in attracting Chinese buyers (even stealing Portuguese customers); b. Strong competition among Portuguese suppliers; c. Chinese local processing factories supplying a competitive combination of medium quality/low price stoppers.

15. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Machine Tools 1. Strenghts a. Strong increase of exports to China in the last 3 years; b. A higher level of R&D and Innovation. 2. Weaknesses a. Lack of image in China (low participation in trade fairs); b. No local presence to provide technical and after-sales support to Chinese buyers and end users.

16. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Machine Tools 3. Opportunities a.The huge market potential needs to be further tapped; b.Strong demand of CNC machine tools; c.Local presence will be more competitive for overseas manufacturers in terms of brand, function, quality, price, service, duration of delivery; d.Turn-key project will be the new mode of business. 4. Threats a.Competition is always very fierce and, without firm commitment and investment in this market, it is difficult to compete in this sector; b.Lack of image of Portugal and Portuguese machine tools in Chinese market.

17. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Moulds 1. Strengths a.High production capacity and ratio of moulds of large- scale, high-precision, complexity and long life duration b.High application level of CAD/CAM/CAE technology including 3D design and 3D analysis during its forming process with the high-speed measuring technology and counter engineering as the back-up; c.High application level of hot runner technology, air-aided injection forming technology, and high-pressure injection forming technology; d.High standardization level of plastic mould and utilization rate for standard pieces; e.Good quality moulds material and advanced surface dealing technology.

18. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Moulds 2. Weaknesses a.Almost invisible and unknown name of Portuguese moulds in Chinese market due to lack of long-term commitment and direct participation in the market; b.Limited presence of Portuguese mould industry both in the professional fairs in China and in the market, providing local support;

19. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China SWOT Analysis: Moulds 3. Opportunities a.Great potential, as illustrated before, for the next decades; b.Potential demanding for mould and plastic mould; 4. Threats a.Fierce competition from: Chinese manufacturers in the low and medium class dies; Japanese/Taiwan in the medium and high range; Germany/Italy in the high range moulds.

20. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Successful Example Joint Venture One Top Cork Supplier from Portugal and the Nr.1 Winery in China Reasons for Success (Portuguese Company) Winning a long-term big client; Selling more cork to other clients in China; Creating good image in China, taking advantage of the strong brand name of the Chinese partner; Taking control of core technology; Natural industry / business / investment shift; Successful investment.

21. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Successful Example Reasons for Success (Chinese Company) Saving costs, compared with imported cork stoppers; High quality stoppers, compared with local stoppers processing factory; Supplying stoppers to other wineries; Part of the multi-sector investment strategy. Reasons for Success (Joint Venture) Strong demand of high quality stoppers from Chinese wineries; Providing local-made good stoppers at competitive price; Strong demand from Nr.1 winery in China.

22. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Unsuccessful Example Export to China Portuguese Olive Oil Company Portuguese manufacturer: Top brand olive oil producer; Global exporter; Excellent European brand. Chinese buyer: Nr.1 shopping center in Beijing (maybe in China); Top brand image sense among Chinese consumers; Good distribution network.

23. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Unsuccessful Example Reasons for “Divorce” No market support to Chinese buyer; Never visited China (requested by the buyer several times); Waiting at home for the orders (1st order is done at the initial visit of buyer to Portuguese supplier); Slow response for the daily email/fax communication; No reply to the proposal from buyer for further business development.

24. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Unsuccessful Example Current Situation Chinese buyer, decided not to work with Portuguese supplier; Chinese buyer is now working with Spanish olive oils and they are having extreme success; Portuguese olive oil company has not yet realized it lost one of the most important markets and huge profits.

25. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Business Culture: Barriers and Reality Most Chinese companies/people do not know Portugal; Portuguese products are not yet known in China; Many Chinese companies do not speak English or Portuguese; Strong market support is highly expected from Chinese buyers when negotiating; Some P.R. activities are necessary as there are too many suppliers, both domestic and abroad; Chinese distributors & consumers attach great importance to the brand name.

26. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Practical Advice for Portuguese Companies Short-Term Considering Chinese market as priority export market; No sow, no reap; Chinese market needs your “investment” by all means, a gradual step; Selling Portuguese edging products, unique and competitive (unique means both attractive and meet local taste; competitive means both price and quality compared with Chinese and other foreign competitors); Frequent promotions and gradually build your own image; Work closely with your Chinese partners; Finding a good local partner and obtaining their best cooperation by supplying the best offer.

27. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Practical Advice for Portuguese Companies Mid-Term Market segmentation and development based on the principle of appropriate market research; Fostering your own brand name in China by frequent participating in local and nationwide affairs thus creating a sound image; Working closely with your Chinese partner and supporting promotions; have your own presence increasing gradually (local representative office, e.g.).

28. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Practical Advice for Portuguese Companies Long-Term China is a place for the long-term commitment, devotion, gradual evolution and eventual success, not for short-term speculation. Study it carefully all the time and practice, adapt to it (localization) and make innovation (internationalization). Money, Time, Patience and Relation. Flexible small & medium enterprises with specialties.

29. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Exporting to China Buying from China

30. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Buying from China Why purchasing from China 1. China becomes a world leading manufacturing base 2. Supplying quality products with competitive price 3. Wide application of OEM mode

31. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Buying from China What to purchase 1. 1.Various commodities; 2. 2.Agriculture & garden tools and appliances: sprayer, pump, motor and other electric farm and garden appliances. 3. 3.Gifts, toys, handcrafts, shoes, bags, etc. 4. 4.Textile products; 5. 5.Tools and small hardware; There are many more…

32. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Buying from China Difficulties & Barriers 1.Risk always exists for int´l business, either quality, credit, payment problem; 2.Communication is difficult: a different language; emails do not work effectively; contacts are mostly done through phone and meetings; 3.More time consuming; 4.Travelling to China without local support (local staff speaking Chinese) would be extremely difficult, for both meetings and logistics; 5.Cultural difference plays an important influence on the success of the business meetings.

33. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 SPI Services SPI China Services and Business Scope

34. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 SPI Services SPI China Market Assessments Building Partnerships Local Representation Promotional activities Organization and support of missions to China Creation of representative offices/subsidiary

35. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 SPI Services MUITO OBRIGADO!

36. 1,6/1,6 cm Chinese Market: Opportunities for Portuguese Companies November 04 Porto - Portugal Edificio “Les Palaces” Rua Júlio Dinis, no. 242, 208 – 4050- 318 Porto, PORTUGAL Tel: 22 607 64 00 Fax: 22 609 91 64 spiporto@spi.pt TagusPark Núcleo Central, 232 2780 - 920 Oeiras, PORTUGAL Tel: 21 421 22 49 Fax: 21 421 12 01 spilisboa@spi.pt Pequim - R.P.China XueYan Building A108, Tsinghua Science Park Tsinghua University, Beijing 100084 P.R. CHINA spichina@spi.pt Irvine (California) - EUA 2102 Business Center Drive, Suite 220E Irvine, CA 92612 USA Tel: +1 949 253 5702 Fax: +1 949 253 5703 spiusa-irvine@usaspi.com Columbia (Maryland) - EUA 10025 Governor Warfield Parkway, Suite 214 Columbia, MD 21044 USA Tel: +1 410 997 5600 Fax: +1 410 997 3554 spiusa@usaspi.com SPI Services Lisboa - Portugal www.spi.pt