After reading the Auntie Annes case, please answer the question that follows. The news was something to celebrate. It was 2007, and Wen-Szu Lin and his partner, Joseph Sze, had just learned that they had been approved to be the first franchisees to take Auntie Annes Pretzels into China. This promised to be the opportunity of a lifetime! With more than 1.3 billion potential customers and a fast-expanding economy, how could they miss? Lin was very well prepared for this foray into entrepreneurship. After all, he had been born in neighboring Taiwan and lived there until the age of seven, so he was fluent in Mandarin Chinese. He also had completed an MBA in entrepreneurial management from the prestigious Wharton School of Business. Sze, who also had a Wharton MBA and was similarly prepared, shared Lins assessment of the opportunity and his excitement for the chance to introduce Auntie Annes to the Chinese market. With franchise agreement in hand, and after a great deal of planning and preparation, they opened their first store around the time of the Beijing Olympics in 2008. But it didnt take long for the new small business owners to realize that they might have bitten off more than they could comfortably chew. Every Auntie Annes pretzel sold around the world is made from the same secret recipe, and the expansion into China would use it as well. Lins plan was very simple: Import the pretzel mix, along with other key ingredients, and start making pretzels fast enough to satisfy the fast-growing appetites of Chinese consumers. It seemed to be a foolproof strategythat is, until the Chinese government decided to get involved. A key delivery of pretzel mix passed through customs quickly and without a hitch, but this probably makes sense, since that office cares mostly about collecting required taxes. But serious problems surfaced just after that, when the China Entry- Exit Inspection and Quarantine Bureau (CIQ), which is the agency that is responsible for determining whether imported food products are safe to eat, announced that it had tested the shipment and had to declare it unfit for human consumption. When he got word of the decision, Lin immediately recognized that it had the power to ruin the new venture before it could get out of the starting block. How can you make Auntie Annes pretzels if you cant use the exact mix of ingredients in the companys formula? But the CIQ office in China was warning Lin and his partner that they might have to dump about 5,000 bags (equal to an entire 40-foot shipping container) of the franchisors proprietary mix down the drain. The agent assigned to their case, Mr. Zeng, delivered the ultimatum, contingent on his departments test of a second sample of the mix. The loss would be devastating, effectively shutting down their operationsbut even the challenge of disposal would take some work. They would have to open each bag of mix and pour it into a drain large enough to handle the load, being certain to wash it down slowly and with enough care to void clogs. Lin and his partner knew the drill all too well. The CIQ had already forced them to dispose of more than 1,300 pounds of caramel for having dangerously high levels of the preservative sorbic acid (five times the allowable limit), contrary to U.S. test results showing that the shipment was very safe. So here they were . . . again! The situation would have been humorous if it had not been so tragic for the business. The official report claimed that the pretzel mix contained dangerous levels of a kind of bacteria that is found only in dairy products. What made these findings so interesting is that the mix contained no dairy products, only common ingredients such as flour, salt, and sugar. Challenging the report led nowhere; in fact, Mr. Zeng made it very clear that he would condemn the shipment outright if Lin continued his protests. The companys entire future was staked on its ability to get a second sample to pass tests performed by a CIQ lab that provided results that apparently were less than accurate or honest. At one point, Lin was called to the CIQ headquarters to figure out what to do with a condemned shipment. What he found there was revealing, to say the least, and it gave him an up-close sense of how government offices can work in other countries. When he showed up to meet with the companys assigned inspector, he noticed that Mr. Zeng was focused intently on the computer screen in front of him, squinting as if he were trying to read fine print. Lin reports being thoroughly impressed by his concentration, unexpected for a government employee. Mr. Zeng realized that he was waiting by the door and responded, Please wait a few minutes as I finish up my work. Wanting to start this crucial relationship off on the right foot, Lin cheerfully indicated that he would. While he waited, Lin looked around the office and sized up the operation. What he noticed there was very eye-opening. The shelves and table were filled with packaged food items, from wine bottles to canned foods to candies. They must receive many samples, I thought. . . . Empty cookie and chocolate candy wrappers littered each inspectors desk, all from the same company called Crai, an Italian firm that wanted to launch a group of restaurants and grocery stores in China at that time. A good friend of mine who headed up Crais importing had been complaining to me about the lengthy process at CIQ for months. Specifically, she mentioned several items that had been rejected and destroyed by CIQ: cookies and chocolate candies. What a coincidence, I thought, as I looked at the crumb-covered desks. I sure hope that these customs agents did not hurt their stomachs during the destruction process. When he turned his attention back to Mr. Zeng, he found him still hard at work with his razor-sharp focus on the computer monitor unbroken. But by then it was clear that he was using one hand to type and the other to move the mouse wildly. The action he used was so frenzied that Lin couldnt help but wonder what in the world the inspector was doing. He concluded that Mr. Zeng must have been working with some kind of advanced Excel spreadsheet model or perhaps proprietary customs software. But it was neither, and that became obvious from what he heard next. Faint sounds crackled and exploded from his computer. I leaned in and listened carefully. Shhuuuu . . . boom! Boom. Boom. Crack, pop, pop, pop. Boom!!! That was not music. It was the sounds of guns and bombs going off! I realized. Mr. Zeng continued wriggling the mouse, clicking on its buttons while his left hand tapped the space bar and several letter keys with lightning speed. I envied his focus. I could see his screen reflected in the window behind him. His computer monitor was full of monsters trying to kill each other. Warcraft! Well, a Chinese version of it. Mr. Zeng was not working tirelessly to clear as many customs forms as possible before the Olympicshe was playing computer games. And Mr. Zeng was really getting into it, with beads of sweat forming on his forehead after about five minutes of intense action. About ten minutes after that, the beads had gathered into streams that were starting to roll down the side of his face. This was serious commitment, but Mr. Zeng was not alone in his extracurricular engagement. Based on the reflections in the window, Lin could see the computer monitors of other inspectors, too, and realized that very little work was actually being done in that office. Lin described the scene as follows: One inspector preferred red blouses to green ones, and seemed like an adept shopper from the many windows she had opened to compare similar products across several websites. The next inspector had true, raw talent as well as commendable organization skills. He had ten small Instant Messenger windows placed evenly and symmetrically from the top left of his screen to bottom right. Conversations flowed smoothly and quickly across all ten. I could type nearly 100 words per minute, but I was no match for this inspector. I silently applauded his talent in keeping up with so many screens, and making it seem effortless. From these observations and the interactions Lin had during his visit with Mr. Zeng later that day, it seemed clear that the agencys work and the reports its employees were handing down were not very trustworthy. As time went on and the hassles from CIQ mounted, Lins frustrations continued to build. The inspection process was hardly serious or accurate, and yet it was destroying his new company, one rejected shipment at a time. And to add insult to injury, the Chinese government routinely gives wide berth to domestic producers, allowing them to get away with all manner of unsafe practices. At one point, Lin purchased a product from a local vendor that caused half of his employees to lose their sight, and no one seemed to careit was simply par for the course in China. (These workers later recovered their eyesight, thanks to changes in health care practices that were just being made.) But when it came to his imported supplies, suddenly health concerns were paramount. It seemed to be a rigged system. Lin eventually managed to save the pretzel mix from destruction, but only after he called in favors from friends and friends of friendsanyone who might have pull with the Chinese government. He finally received word that a second sample of the mix passed all testsbut this was nothing short of miraculous, since Lin had never provided one to the CIQ or to Mr. Zeng! This made the whole affair even more bizarre. Perhaps Lin and his partners situation could only be explained by something they learned from a conversation with the wife of the U.S. Ambassador. She revealed that their hassles with customs probably had nothing to do with the safety of the shipments. In the wake of a scandal that exposed melamine-tainted milk products in China, many countriesthe United States includedput a hold on food and agricultural products from China. So Mr. Zengs regulatory decisions may have been political tit for tat and nothing more, but this is scant comfort for the entrepreneur whose business fails as a result of political gamesmanship. Lin has concluded that he and his business partner were always at a disadvantage when it came to doing business in China. You really need to have that prior experience and those prior relationships, he says. When we showed up, we didnt really have any prior relationships. This, among other shortcomings, led ultimately to the closing of the partners Auntie Annes Pretzel stores in 2012, and they have each moved on to greener pastures of opportunity. But their experiences abroad illustrate the stark differences that can exist between doing business in the United States and operating in other countries. These naturally ramp up the potential complications for small business owners who willingly accept the adventure of global expansion, with its inherent hazards and potential rewards

What challenges to doing business in China did Lin and Sze experience? List any issues that may present distinct problems for other U.S. small companies that may want to do business there.