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Doing business in China, India requires a lot of give and take

It's clear to most international business people that the future of global trade greatly depends on what happens with the two Asian powerhouses, China and India.

When U.S. companies look at China and India, they see millions of potential customers, international offshoring possibilities and formidable competitors.

The numbers are compelling.

India ranks as the 20th-largest purchaser of Colorado goods, while China ranks fourth. China's GDP will rival that of all of Western Europe by 2015.

The middle class of each country is expected to hit 500 million people by 2012. This suggests a potential consumer market of 1 billion people. Blinded by the possibility of increased dollars, yen or euros, marketers eagerly look for any possible way to gain entry into these countries.

While China and India represent large markets, they also are essential proving grounds for other overseas expansion. If you can do business in China and India, you can do business anywhere.

When companies start to add the low cost of labor in these countries to the proximity to emerging consumer markets, it's easy to see why they want to do business there.

However, many marketers are getting bloodied on the front line. We can't just take a plane ride, open up our briefcases and sell to these countries. It takes time and an enormous amount of effort.

A great way to test a U.S. firm's intentions is to gauge its investments -- financial and otherwise. What language is it speaking -- English or the local language? Did the company buy an apartment or do executives stay in a hotel? Has it localized marketing materials, products and pitches? Do executives stay for three days or three weeks?

Beyond the basic investments needed for any overseas market, China and India simply aren't easy countries in which to do business. We know that in all business situations, there must be mutual, and usually multiple, benefits.

However, many American and European companies are concerned that the concessions extracted by China and India are highly unusual and burdensome, and leave those businesses vulnerable.

For example, when Boeing wanted to sell aircraft to China's government, it was necessary to have some of the aircraft designed and built in China by Chinese workers. Throughout China, firms often encounter rules that require local labor to be used.

In order for mobile telephone carriers to gain access to India, they had to reveal their secret technologies, management styles and methodology to the Indian government. Whenever possible, India insists on using locally made components, having a hand in the R&D process and serving in board seats of foreign companies operating there.

Offsets frequently are utilized to keep the trade balance in line. An offset is when a U.S. company sells product into India but then is required to purchase a certain amount of Indian product in return. Sometimes offsets can refer to the labor, machines, hardware, software or intelligence required for the project.

Recently, a European food-processing firm entering China was required to hire 50 percent Chinese management (thus necessitating training them), 100 percent Chinese engineers, 100 percent Chinese labor, build the factory with Chinese construction materials and submit blueprints to the Chinese patent offices for the proprietary technology that was being imported into China.

The European company eagerly agreed to all the concessions. Though the average pay is still under $80 per month in China, the European company still thought the market potential was huge enough to justify its concessions.

If you wish to have access to these markets, you need something to give. It can be money, technology, jobs, intelligence or new skills.

The ultimate challenge then would be how can we give to gain access while still protecting ourselves? If we hand over too much IP, won't our customers come back as competitors?

There's good news, however. The most sought-after commodity we can give is intelligence.

China and India covet our business intelligence, sales competence, marketing savvy, modern management techniques, data in worker productivity, environmental clean-up techniques and entrepreneurial creativity.

And the better news is that we're already selling it, as well as giving it away. Anyone who registers with one of our universities, reads our management texts, subscribes to our business papers or surfs our Web sites can gain this know-how. So, in fact, we're being asked for what we are already prepared to part with.

The smart negotiator will try to sell it, not just give it away.