Driving their suppliers to guarantee new levels of service quality in west Sichuan
Our second SME Spotlight features a very different kind of business from the first. Extravagant Yak Travel Company (EY) are Tibet travel specialists offering “personalised tours on The Roof of the World”. They are a wholly foreign-owned enterprise (WFOE) in Chengdu, Sichuan, whose holding company is in Hong Kong and whose founders come from Canada and the USA. Earlier in April I had pleasure of interviewing co-founder and Director of Business Development, Jim Hamp.
It's been nearly a year since I last saw Jim, so I began by asking for some up-to-date news. "We officially signed a supplier agreement contract with Viator two weeks ago" he tells me excitedly. Since Viator was bought by TripAdvisor recently, the implications for EY are massive (Viator's website gets 10 million visits per month, and TripAdvisor gets an eye-watering 280 million). "We're in full swing right now, trying to get our product information into a format that allows them to access it". And that's not all - they are in negotiation with another big online travel company and with one of Chengdu's new 5-star hotels, to be their sole in-house tour provider. I congratulate him - it could be a big year! Not bad for a 5-person company that only got its business registration 2 years ago this month.
I say two years ago – that needs bit of explanation. Prior to that it took three more years of research, business planning, setting up their holding company and making applications before their business license actually came through. For a small WFOE that kind of timeline is not unusual – at least if you want to stand a good chance of getting it right. Especially true if, like Jim and his co-founder Garrett , you're entering a WFOE-free zone (theirs was only the 2nd WFOE travel agency to be granted a license in the whole of western China).
So what does Jim say are the challenges running a business like theirs in China, apart from getting a business license in the first place? Local bureaucracy aside, he answers, their main challenge is finding suppliers who are committed to providing a quality service, and who want to satisfy the needs of the customer. "Though there is a strong work ethic in China, it's consistently difficult to find suppliers who put a high value on quality" he replies. "Volume of work, and the ambition to bite off as much as they can – they are impressive. But it's rare for us to find suppliers who take pride in the quality of service they provide". That's a crucial issue, because Extravagant Yak aims at the high-end of the adventure travel market. He gives examples of some of the services they need: rental vehicles that are clean and well maintained, drivers who drive in a suitable manner and don't smoke, restaurants who are sometimes willing to adapt to the needs of the customer, and (away from the big cities) clean accommodation. "We're willing to pay more than others for these things, but it's still difficult to communicate our expectation of quality to our suppliers". How to put the "want to" into suppliers' minds? "I can't say we've found the answer to that yet", he laughs. "Successful businesses in the West are determined to meet the customers wishes, but here as soon as you request something tailored, something special, it's like – what's wrong with you? It's a clash of cultures."
What makes for success with your suppliers? I ask. "It all comes down to relationship. Business contracts in the West can be more important than the relationship, but here it’s the other way round. The contract means almost nothing, because they want to give you the answer they think you want. You can't overstress the importance of relationship. You need mutually beneficial ways of working together." For Jim, the most important relationships are with their own partners within the business; even their employment contracts are of secondary importance to trusting relationships built up over years. In the case of Abu, their first local employee/partner, this relationship began back in 2008 when they worked together to provide relief supplies to victims of the massive Wenchuan earthquake. Later Abu agreed to leave a job with a large international electronics company to become part of EY. Interestingly to me, each person in the business earns ownership shares as part of their compensation package.
Is there anything Jim wishes he'd known in advance, before getting into this business? He and his family had already lived in China for many years, and so knew the culture pretty well already. "Transportation" he says. "To do commercial transport you must have commercial licence. We'd assumed we could purchase our own vehicle, to ensure quality. But we can't do it, because the official business scope in our registration document does not include commercial transportation. And you need 100 seats to qualify for a commercial license anyway". It's not the first time I've heard of minimum requirements like this – a certain minimum number of children before you can open a private kindergarten, say. "We wrote transport in the business license application, but the license we got back only said other services. Now we're stuck because it doesn't say transport explicitly. Anyway..".
You can find out more about Extravagent Yak Travel Company at www.extravagantyak.com
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