11 Jun 2011

Partnerships with Chinese firms 'not always advisable'

7:01 am on 11 June 2011

A New Zealand business operating in China says the accepted wisdom of entering partnerships with local firms with experience of the market does not always work.

Auckland-based manufacturer Teknatool started off following that advice when it opened a manufacturing plant in Qingdao in 2006.

Chief executive Peter Baker says it ditched the partnership because it had compromised the company's standards as a high-quality niche player.

Inferior raw materials were used in order to get a better price margin, he says, and maintenance at its engineering workshop was not rigorous enough.

Taking full control wasn't the end of Teknatool's problems, however. Mr Baker says unacceptable practices crept in under local management, including higher costs and poor quality output.

Teknatool brought on board people with experience of emerging markets, such as Mr Baker himself.

He says its Chinese operations still need to employ locals rather than load the firm up with expensive New Zealand staff. The firm also looked at how New Zealand-based Chinese-born personnel could be brought into mid- or senior management roles.

The success of the China operation has led Teknatool to open a stand-alone research and development facility in Qingdao.