After many years of international consulting and trading activities with Hong Kong and China, Klaus Koehler established a services company, the Klako Group, in Hong Kong in 1979. The company provided consultancy for incorporation, Klako Group accountancy, and taxation. Since then, the company has expanded its services into other areas such as recruitment, quality control, and inspection for overseas companies who want to access and benefit from the Chinese market. Since its beginning, using the first mover advantage for growth, Klako Group opened offices in Beijing, Shanghai, and Shenzhen in China besides its Hong Kong headquarters.

By early 2007, Klako had nearly 100 employees in its four offices. The Hong Kong office is headed by son Sven, the Shanghai office by daughter Kristina, and founder Klaus oversees the family business as the managing director.

Global mix

‘When my father first started the firm, about 90 percent of our clients were from Germany, but now it is a global mix. Nowadays, about 30–40 percent of our customers are German, while the rest come from the United States, Canada, Australia and Europe including the United Kingdom, France, Italy,’ explained Sven, who joined the family firm six years ago.

Generally, Klako’s clients already do business in China, or are at the stage of entering the market. ‘Our customers either want to buy, sell or manufacture in China,’ added Sven. One thing remains constant: Klako always advises overseas companies to make use of Hong Kong’s advantages and set up a base in the city to access the mainland market. ‘For many international businesses, structuring investments into China via Hong Kong can make a lot of sense. Concerns over direct exposure to China liabilities, ease of a future sale of a China investment, and certain tax and profits distribution capabilities can make the insertion of a holding company as part of their China strategy an interesting option,’ advised Sven.

Cultural edge 

That is where a service provider like Klako comes in. It has client managers able to converse with the clients in their own languages. ‘In Hong Kong, we provide a complete outsourcing solution whereby our clients set up a holding company for their Chinese investments with our address and they avoid fixed costs like rent, staffing, and so on.

Our staff handle the accounting, as well as, for more active trading companies, their banking, letters of credit, shipping and if necessary, product inspections,’ explained Sven.

Since its inception in 1979, business has been steady.

‘Most people are of the opinion that in order to stay competitive in their own markets, they have to include China in their business strategy, often as soon as possible. But our advice to them is to start slowly and take a phased approach. People tend to go in too quickly in all sectors. In China, it is not so easy to have a profitable business. Many companies do not set up their structures properly from the beginning and will then have to restructure,’ advised Sven.

There is an important role for service providers like Klako in China and Hong Kong as more and more overseas firms enter the China market. ‘We offer them experience, expertise, and a hassle-free approach,’ said Sven.

Questions

1. Are service companies like the Klako Group most valuable in ‘unique’ situations like China or do they have a role in assisting companies wanting to enter markets elsewhere, as, for instance, the European Union or North America? Explain.

2. In what ways would you expect the Klako Group to be able to assist a company interested in finding and making arrangements with:

(a) a Chinese supplier;

(b) a Chinese marketing organization;

(c) a Chinese partner?