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  • China Law Firms in “Winner-Takes-All” Battle to Stand Out When Marketing Their Corporate Legal Services, New Study Shows

    Published on January 13, 2011

    China: Law firms often face a “winner-takes-all” contest to market their corporate legal services in China, a study released today shows, with the spoils going to those that can convince legal departments they offer the required expertise. Conducted by LexisNexis Martindale-Hubbell, which provides critical information and networking resources for the buyers and sellers of legal services around the world, the survey also showed that the market for corporate legal services is highly segmented.

    The survey of legal departments at Chinese and foreign companies operating in China showed that 76% of companies hire between one and four law firms only, compared with just 5% that hire more than 16 law firms. Moreover, of those that offered information about their budgets, the vast majority said that just one or two law firms get the bulk of the money available.

    “The data suggest that law firms need to build reputations for themselves, demonstrate an understanding of their clients’ needs and be able to deliver results on time,” said Aley Chang, Managing Director of LexisNexis Greater China. “However, it is a matter of getting on the radar of those people who make the decisions on hiring law firms.”

    When asked how they found and selected external legal counsel, 74% said they maintained formal or informal lists of preferred law firms. And while they may use a number of sources to locate law firms, the preferred list is the No. 1 factor in the final selection. The survey also found that in-house legal departments figured prominently in such selection decisions, meaning that law firms can concentrate their efforts on wooing this narrowly defined target and getting on their preferred lists. This contrasts with other parts of the world such as Central and Eastern Europe, where the procurement department is increasingly involved in such decisions and just 56% of legal departments maintain lists of preferred law firms.

    The market in China for corporate legal services shows a high degree of segmentation between local and foreign law firms, and boutique and full-service firms. More companies (26%) expected to increase their spending on external legal counsel in the forthcoming year than decrease it (9%). The main reasons for decreased spending are reining in costs and taking more work in-house, while the primary reason for higher costs is greater complexity in cases. The survey demonstrates that many companies need expertise that may be possessed only by foreign or boutique law firms, and for legal departments the challenge is locating the right law firm.

    “The survey shows how law firms in China that invest in marketing themselves to the right audiences are more likely to succeed in securing the bulk of corporations’ budgets for external legal counsel,” said Derek Benton, Director, International Operations at LexisNexis Martindale-Hubbell. “For local Chinese firms, promoting their local knowledge is key to winning new business and for foreign firms, highlighting how their expertise differs, as well as the capacity and resources that local firms might not have, that is crucial.”

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