Outsourcing to China

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>> In 1981, China was much, much different than it is now. All the means of production in China at that time were state-owned so some how or other you were always dealing with the government. These days that's not the case anymore.

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>> China is as entrepreneurial and as free-wheeling a capitalist society as you'll see anywhere.

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>> The road to business in China is loaded with potholes and there are probably books that are written about things that you could...mistakes that have been made and potentially could be made. The main thing, I think, is to realize that China is not a monolith; that China is a series of small businesses, some good, some bad.

>> The local business community in China is not just suppliers and contractors. It also includes the local officials, customs officers, the logistics people, the shipping.

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>> The legal structure in China, there is definitely a code of laws but if the book that has those codes in it ever comes out, you're finished. It should never come out. Everything is negotiable really in China including taxes and every other thing; so if that book comes out you know that your goose is cooked.

>> I think first of all we have to understand China invented bureaucracy okay and they've had thousands of years of experience with bureaucracy, so red tape is a second nature thing and so you need to be prepared to deal with red tape. Red tape is a process; there's forms to fill out; it's one approval you have to get 10 or 20 chops on the same thing and it's time consuming; it's frustrating and you either learn to deal with it or you find somebody who knows how to deal with it and hire that person.

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>> The only contracts I think that I've ever signed in China have been contracts for the establishment of a business or a business office, and then the simple contracts that are involved with the purchase of merchandise; usually that's a sales contract. The basic contract in China, the relationship between a supplier and a distributor like us is a handshake.

>> On the one hand a contract is very important because it stipulates the principals that the two parties are going to be operating under. So all the major thoughts should be in there. On the other hand the worst thing you can do is to have a lawyer make the first draft because lawyers tend to throw words in to a contract, and since these words tend to go in in English, it becomes very voluminous--okay a lot of the words the Chinese are not going to understand and have no legal meaning frankly. So it's much better to start with the Statement of Principals and have all the requirements specifically stated in there and make sure everybody agrees on that. Now if you have a contract based on principals, there will be room for more negotiations and discussions and whatnot afterwards.

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>> I can go in to a factory and I can make a judgment quite quickly as to whether that's a good factory for us or not. We have an office in Shanghai, in China and another one in Ching Tao assumed spelling, and those people are monitoring the factories all the time and keeping track of production. That's been really I think another element that has been a key to our success of the business.

>> Certainly in Memphis you can't get good products out of China. The answer is you can get good quality products, but you can't do it without paying attention. You can't just give somebody an order and walk away and expect perfect products to come through. It's in the Chinese character to take short cuts. We laugh about it all the time when we're talking to them. And the Chinese saying is, foreign language which really means is that for every policy up there there's a way around it. So there is that healthy disrespect for rules that is inviewed assumed spelling in the culture. So if you don't want any shortcuts, it's important that you convey to your supplier what is important, what is key, why you cannot do without this lining in the tire or why a little bit of lead is not good for this product in the paint. Just make sure you convey this to them so that they understand that if they take that shortcut they're going to lose a business.

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>> In business in China and in Asia generally, relationship is really, really an important factor. Usually you'll talk for 15 or 20 minutes about family things or things that are totally unrelated to the business; racing sailboats maybe you'll talk about. Then finally it gets into business; it just kind of slides in.

>> You can't develop foreign language overnight. You can't go in there and say, "I want to build a plant, I shook hands, I ate, I drank the White Lightening and we have foreign language, that's fine, I'm leaving." It doesn't work that way; it takes a commitment, it takes a personal commitment and probably it takes time.

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>> The areas where imported products from China have really done well have been at the student level for violins and for the lower and middle range for guitars and mandolins and banjos and other string instruments. And so I think that China has brought many, many, many new musicians into the market; and in fact the musical instrument industry in this country, manufacturing, is much, much stronger now than it was when I started business 25 years ago. Those instruments are being sold to musicians that probably started out with an instrument from China.

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