If you or your company has a presence in the Bay Area and is looking to do, or is already doing, business in China, this series of events is the best of the bunch. There are 100′s of events a year on this topic in just the San Francisco Bay Area alone, and our company attends many of these, and our experience so far is that the people and organizations focused on business in China are at these luncheons. So in addition to getting exposed to the latest thought leaders and their stories, the networking value is very high.

This month’s event featured Rebecca Fannin, the author of Startup Asia: Top Strategies for Cashing in on Asia’s Innovation Boom (2011) and Silicon Dragon: How China Is Winning the Tech Race (2008). She is also a frequent contributor to Forbes. Her talk was moderated by Henry Wong of Garage Technology Ventures and Diamond TechVentures.

Given that we had just hosted a client on a visit to Shanghai and Beijing in March to meet the “movers and shakers” in China’s entrepreneurial ecosystem, Rebecca’s talk and book couldn’t haven been more apropos. When she was signing our books, we did our best to drop many of the names we had met and she knew pretty much everyone we mentioned (The CEBEX Group, Richard Robinson, and more).

During her talk yesterday, she referred to a fascinating story from her book Startup Asia in which Renren, the “Facebook of China”and its Founder/CEO Joe Chen, had a dust-up with Kaixin001 and its Founder/CEO Cheng Binghao. Joe Chen, a Stanford graduate and successful serial entrepreneur in the US, had started what would eventually become Renren back in 2003, way before Facebook was known to anybody.

When Kaixin001 had a surge in popularity in 2008, Renren registered the Kaixin URL for a few thousand dollars and essentially cloned the Kaixin site with a matching look-and-feel, even calling the cloned site “Kaixin.” Cheng sued and eventually won, with Renren being fined $60,000. But by then it was too late. Users were confused between the two sites and Renren eventually integrated the Kaixin clone site into Renren, capturing those users and taking Renren public to a US$743 million IPO valuation.

Rebecca’s overall point was not to showcase another example of Chinese piracy and flagrant copying/cloning, but how the experienced Chen out-gamed his rival Cheng, and whether this will play out as other experienced entrepreneurs return to their homeland to do battle with competitors that had never left mainland China.

Interestingly enough, a few of the NetBridge Global team had just seen Joe Chen speak at a small event in San Francisco a few weeks earlier (not surprisingly, he didn’t mention this particular story).

If you are interested in meeting Rebecca Fannin or learning more about technology entrepreneurship in China, her group holds multiple events in the US and Asia throughout 2012, including:

• Silicon Dragon Beijing, May 31, Beijing
• Silicon Dragon Shanghai, September 13, Shanghai
• Silicon Dragon Valley, October 3, Menlo Park, CA
• Silicon Dragon Pearl River Delta, November, Hong Kong

You can find out more about Rebecca and these events at Silicon Dragon Ventures.

But getting back to these luncheon events, we have to give credit where credit is due. The person that is able to bring high-caliber speakers like Rebecca Fannin to these events is Bing Wei, the Bay Area Council’s Vice President of Global/China Initiatives.

Bing Wei’s day job is building bridges between the Bay Area Council and China. She leads efforts that include, but are not limited to, a partnership between the Bay Area Council and Shanghai’s Yangpu Science and Technology Innovation Group while coordinating multiple delegations a year to and from China.

Last month’s Council luncheon featured Handel Jones, author of Chinamerica: Why the Future of America is China, Founder/CEO of International Business Strategies, Inc.; contributor to Forbes. It was our first time attending and it put these luncheons on our “must attend” list.

If you are looking to start up in China, the groups and people mentioned above are a good place to start.

I cannot think of any foreign, consumer-focused online/web portal, service or social network that is a market leader in China. Even the local China leaders in this space (Renren, Youkou, etc.) have their own issues monetizing their business. Renren (RENN) makes a bit over US$30M per quarter!

Apple makes money in China because they sell aspirational, tangible “devices.” And even though online web services, video/music streaming and mobile app downloading are all hugely popular, nearly all of it is free. Rein talks about a Chinese worker that makes US$250/month that bought a $1000 iPad (Apple products cost significantly more in China than in the US). I recently recommended a cool iPad app to a Beijing friend who is very wealthy, and his response was “not interested, its a paid app.”

Given Mark Zuckerburg’s aggressiveness and zeal, and apparent passion for being in China, my guess is that Facebook will eventually be made available in China. But will it ever find success like it has in India (where it has >80% market share)? My answer is emphatically no.

Does that mean internet service and/or social networking sites have no opportunity to succeed? Absolutely not. But it requires a unique business model with local partners that is very different than how the company succeeds in other country markets.

As the author begins the article:

About 14 years ago, I met an entrepreneur who wanted to open up coffee shops around China. I never thought the coffee business would work there. The Chinese would not easily give up their tea-drinking culture for a bitter, overpriced drink, I told him. Starbucks has proven me wrong.

China will soon become the biggest market outside the United States for Starbucks. It has 500 stores and these stores are more profitable per outlet than Starbucks outlets in the U.S.

The keys to Starbucks were to:

• Create products tailored to China’s unique cultural tastes (e.g. green tea drinks and Frappacino’s).
• Differentiate itself from its competitors (spacious, comfortable air-conditioned or heated stores attracting professionals for business meetings).
• Position its brand as “aspirational” to allow higher product pricing.
• Ensure high quality customer service with a big focus on recruiting and training.

This is not rocket science. Understanding your customer and differentiating yourself from the competition and/or existing alternatives is really no different in China than it is in any market. The challenge with China is to find those that have a combination of the “go-to-market” smarts and on-the-ground experience.

The top 10 companies are (market share in parentheses):

1. KFC (40%) - If you’ve travelled domestically in China, KFC topping this list wouldn’t be a surprise. There are KFC’s everywhere which are always packed, and they’ve adapted to the Chinese cultural taste better than any other fast-food brand.
2. General Motors (12.8%) -GM’s sales in China has topped the U.S. in recent years.
3. Microsoft (99.3) – This statistic is very misleading. Most Microsoft software is pirated with an estimate of only 20% of legitimate Windows licenses.
4. Boeing (52%) - Air travel has increased 16% in 2011 from 2010.
5. Nike (N/A) – Followed closely by local brand Li Ning which has more than a 30% share.
6. Coca Cola/Sprite (61.5%/26.95) – Did you know that Sprite is the NUMBER one soda in China?
7. Procter & Gamble (55%) – Leader in hair care products with room to grow.
8. Intel (14.9%) -This is the share of ALL semicoundoctor revenue (chips that go into computers, mobile phones, set-top boxes, etc.).  Intel has between 70-80% market share in PC’s (desktop, notebook and server computers).
9. Starbucks (70%) – The global leader in coffee store sales is also the leader in China.
10. Apple (51%) – With over half the tablet market and the fourth position in smart phones, Apple has become the luxury brand of gadgets.

“No country generates such disparate and heated views as China. Optimists see a rapidly emerging economic power that will soon over take the US and pessimists see a house of cards that will soon implode. But everyone seems to agree that its growth process is unbalanced with excessively high investment and repressed consumption. It is now more crucial than ever to understand why these imbalances exist and how the Chinese government hopes to tackle them in order to secure desirable outcomes for all players in the global marketplace.”

This conundrum exists at both a macro (policy) and micro (business) level as businesses puzzle on how to navigate the tricky waters of China’s economy.

This is a followup to the  article: “10 things you must do to win in emerging markets.” China is still considered an emerging market, given that the majority of the people still live and work in areas outside the reach of technology (mobile phones being, or at least becoming, the exception). Therefore, we believe these 10 principles hold true in China as well.

But even though China is seen as THE market to target, given its population and spectacular growth, many companies that are successful in emerging markets find themselves either failing in China or “afraid” to approach it. A wildly successful, multibillion-dollar US-based The company avoided China initially, focusing first on India as they begin their expansion into emerging markets. They thought it would be easier to “crack” India first then bust their chops in China.

This trepidation is well founded. While China arguably has the most “untapped” market potential, the nuances and vagaries of doing business in China, due to its history, culture, and existing government structure, make the approach to being successful in China a unique and more challenging one.

Many claim to be “experts” on China, but even the experts admit they continue to learn the longer they do business there.  But it is possible to follow some guiding principles that will improve a company’s chance for success.

1. Develop a comprehensive government relations program, for both the Chinese & US governments.
2. Become an expert on how the Chinese business person thinks and works. (Read “One Billion Customers” or the China CEO.)
3. Have a communication plan between the local subsidiary/office and headquarters. 
4. Think/invest for the long-term … nothing happens fast in China, even if everything moves fast.
5. Develop a strategy for corruption. It’s pervasive, especially the more local your engagements are.
6. Hire wisely … your local team will make or break your business.
7. Develop a rock-solid product/technology strategy that includes a multi-faceted IP protection plan.
8. Do not go it alone, but partner carefully and wisely.
9. Position everything you do in China around “how you are helping China.”
10. Relationships (guanxi) is how business is done, but never assume relationships are static.

Because each of these 10 guiding principles could make a separate chapter in a book, we will continue to dive deeper into these topics.

But here’s the rub … China is considered an emerging market.  But you wouldn’t call Shanghai or Beijing an emerging market because income levels, as well as PC, internet and mobile phone penetration are approaching levels found in developed countries.  But a significant area of the country, specifically the 800 million or so people in rural towns and villages, would truly be considered an “emerging market.”

A company therefore needs a multi-tiered approach when targeting their product, market and business development strategies within an emerging market country, especially larger markets like the BRIC countries (Brazil, Russia, India and China).  For example, Intel created five city tiers segmented by various demographics for China.

So with that caveat aside, any approach to growing a business in an emerging market country needs to consider these 10 guiding principles when introducing new products or competing against established players.

1. Engage the government early.  Hire ex-politicians, lobbyists or government consultants who already have contacts in key ministries.
2. Develop your channel and distribution strategy, picking a few partners initially and scaling out over time.
3. Find critical, complementary partners to co-brand/co-market to increase scale.
4. Localize marketing campaigns and where possible tap into national pride.
5. Start brand-building early and focus on creating “aspirational” brands.
6. Offer affordable pricing … customers are more price-conscious, but will pay more for aspirational brands (e.g. #5).
7. Invest in local labs and/or R&D centers … this can be key for increased government support.
8. Evaluate alternative business models for packaging, selling, distributing, financing and servicing your products and services.  What works in developed markets (e.g. Dell’s direct-model) does not necessarily work in emerging markets (e.g. retail PC stores prevail).
9. Products sold in mature markets need to be evaluated and modified as needed.  Setup a feedback/research mechanism for field and local-on-the-ground personnel to communicate with product divisions.
10. Start and think small initially.  Do a pilot. Incubate. Experiment in defined regions and/or segments.  Begin strategizing ways to scale initial offerings.

In general, these principles are common amongst all emerging market countries.  But each country has different aspects that must be considered.  For example, China is a very unique and complicated market of which a  separate top 10 list can be found here.