John Jones, managing director of Caernarfon-based PPM Technology Ltd, has been doing business in Asia for over a decade. Here he shares his insights and experiences of managing distributors in China.

We are a small business of just nine full-time employees, based in North Wales. We develop and manufacture Toxic Gas and Indoor Air Quality (IAQ) Monitors. We’re in a niche market, which is mainly governed by legislation, and as such we’re exporting over 80% of our products. Over the last decade we have succeeded in finding markets throughout Asia, with many of our key markets now in the region.

We are doing business in Japan, South Korea, Taiwan, Malaysia, Singapore, Hong Kong and China, which collectively accounts for between 50-60% of our overall business. Establishing ourselves in Asia required a great deal of commitment, energy and patience, particularly in finding and managing distributors.

Traditionally, our instruments were used for industrial applications in the UK, Europe and the USA. But new legislation in a number of Far Eastern countries opened the market there for us in the last ten years.

Our breakthrough in Asia came in 2000 when Japan became the first Asian country to legislate for the monitoring of formaldehyde as an IAQ parameter. We soon found that we were getting enquiries from Japanese companies via our website and realised that we needed to find partners in this market to help us develop compliant products to meet local demand.

As other Asian countries followed Japan’s lead, we began to work closely with distributors across Asia to improve our existing products and develop new instruments to obtain relevant government approvals and secure tenders. So it was essential we worked with distributors who had a good rapport with government departments responsible for legislation.

During our time working in Asia, our experience has taught us some salutary lessons, particularly around the appointment and management of distributors. You certainly have to select your distributors carefully and build trust and long-term relationships with them. It is also important to find the right strategy to manage them effectively. This can only come from regular face-to-face meetings in the market, as well as observing and monitoring their operational methods.

Despite China being one of our most important markets, it has taken years to get established there and involved a steep learning curve for us. We’ve had to overcome many obstacles and frustrations along the way. However, our ability to learn from mistakes and our determination has paid off. Over time we’ve found ways to manage our distributors in China effectively and we are now winning more business there than ever.

When we first moved into the market, upon initial advice, we appointed a large network of distributors to ensure we had this vast market covered. This was fine in the short-term when we were selling smaller quantities, mainly to local universities and private companies. However, we soon discovered that this approach was to our detriment when we tried to secure provincial government tenders.

We found out that our numerous distributors were competing against each other to win business. Before we realised it a price war had broken out. To secure orders, our distributors were lowering their prices so much that our profit margins were disappearing fast. We also lost out on a number of tenders as the same instrument was being offered by different distributors, and in some provinces this reflected badly on us. As a result, this opened the door for our competitors, especially those that had exclusive arrangements. In addition some of our distributors were also representing our competitors and this caused tensions all around.

PPM Technology Ltd: Fast facts

• PPM Technology is based in Caernarfon, Wales, UK and has nine employees

• The name PPM has been associated for many years with toxic gas detection technology ever since PPM Ltd was established by Dr Tom Parry Jones OBE in 1993. Previously, Dr. Jones was the founding owner of Lion Laboratories, a world leader in breath alcohol detection technology.

• PPM’s products are exported to nearly 60 countries across five continents

• For further information visit: www.ppm-technology.com

We needed to act fast to resolve these issues in order to restore our credibility and revive our margins. To tackle this, we streamlined our distribution network in China, focusing on just two exclusive distributors. We decided that one distributor should hold the exclusive rights for our Formaldemeter 400-st model, while the Formaldemeter htv model was to be distributed through trusted sub-distributors, managed by our main distributor.

By so doing, we have effectively taken back control of the tendering process. We now have a policy that the first company to advise us of a tender is the only one which can pitch for it. This has worked out well, as over the last six months we have won all tenders, including the most recent one in December 2012, when Science International, one of our distributors in China won a tender to supply 119 Formaldemeter htv instruments to the Government Procurement Office of Shan Xi Province.

Having fewer distributors also means that we can focus on building long-term and trusted relationships with them, a crucial element for growth in Asia. Another advantage of this model is the savings in freight and insurance cost, realised simply by sending products in bulk to our main distributor, who in turn can pass this to the customer.

My advice would be take time to find distributors that already import and have good and prior knowledge of your intended market, as well as good English.

You must also allocate time and money to visit the market and your distributors as often as you can. They expect regular visits from senior management. Over the last 10 years I have travelled extensively to most Far Eastern markets including China, Taiwan, Hong Kong, Japan, South Korea, Malaysia and Singapore. We still regularly visit our distributors to discuss product development and provide technical advice.

We found out that a great way to meet existing and potential distributors and new customers is through government-sponsored trade missions, as well as at trade shows, such as Eco Expo Asia.

Taking part in missions organised by International Business Wales and UK Trade & Investment over the years gave us access to expert advice, in-depth market insights and invaluable contacts through mission briefings and consulate networking events. If you’re looking to explore Asia I definitely recommend going on an organised mission, as visiting an unfamiliar market on your own in Asia can be daunting and costly.

Despite the many pitfalls and challenges we’ve faced on our journey in Asia, particularly in China, I still thoroughly enjoy visiting Asia, especially Hong Kong and China. There’s always a warm welcome there from our distributors, as well as the British embassy. As other markets in the region open up and continue developing, we will go on looking for opportunities to grow our business there, no doubt learning from our experiences along the way.

John’s top tips to success in Asia:

• It’s important to trust your distributor – spend as much time as you can in the market meeting them and getting to know them

• Be careful of distributors who are just out for a quick gain and not interested in building long-term relationships. This becomes apparent when you detect signs of little or no after- sale service and customer support.

• Also, stand up to distributors who push too soon for exclusivity. Only work with them on this basis once they have proved themselves and it feels right to you.

• Give prices in sterling – it helps with actual sales figures and bank charges but also due to currency fluctuations it is important to have a clause in your agreement to cover this issue.

• Find distributors that have good command of English. In addition, it is always a bonus if they have previous business links to the UK.