Comments on: Going For Growth–In China

By: Paul Barsch

Paul Barsch — Sat, 21 Nov 2009 22:27:49 +0000

CCF, thanks for commenting. You said, “Examples of foreign companies here in China entrusting the core of their operations to local partners or employees, to see them later conduct a parallel business or create a competing firm, abound.”
Let’s dig deeper, why do you think this is the case?

By: China Company Formation

China Company Formation — Sat, 21 Nov 2009 11:45:38 +0000

Great article indeed. The point of not adopting a hands-off approach should be stressed. Examples of foreign companies here in China entrusting the core of their operations to local partners or employees, to see them later conduct a parallel business or create a competing firm, abund. Bringing local talent, yes, but maintaining operational control, absolutely.
Patrick

By: Paul Barsch

Paul Barsch — Tue, 17 Nov 2009 01:32:13 +0000

Jim, thanks for adding your real world experience to this post. Reminds me of a great HBR article on Chinese Negotiation Strategies. A circular route isn’t uncommon!

By: Dr. jim Sellner PhD., DipC.

Dr. jim Sellner PhD., DipC. — Tue, 17 Nov 2009 01:25:26 +0000

Patience yes. i have been negotiating with a Chinese company for the last 22 months to develop & deliver a 2-year Entrepreneurial Training Program. We are now moving ahead after partnering with someone who has been working there for about 20 years – quanxi is key.
dr jim sellner, PhD.,DipC.

By: Paul Barsch

Paul Barsch — Sun, 15 Nov 2009 21:28:20 +0000

Anthony and China Lawyer, thank your for adding your comments to this column. I did a quick lookup on Amazon, and Chocolate Fortunes looks like it has some good insights into breaking into Chinese markets. Anthony, appreciate the kind words!

By: Anthony

Anthony — Sun, 15 Nov 2009 20:45:15 +0000

China Lawyer,
I passed a display of ‘Chocolate Fortunes’ in Barnes & Noble last night. I shall have to go back today and give it a read.
Paul,
A wonderful post that is informative, and hopeful, in the sense that it is not impossible to enter the Chines market. Due diligence and patience are required to ensure success.
Anthony

By: China Lawyer

China Lawyer — Sat, 14 Nov 2009 20:51:55 +0000

Are you familiar with the book, Chocolate Fortunes? It makes for a great read on the big chocolate companies trying to market their products in China and since it JUST came out, it is actually still current.

By: Fang Fang

Fang Fang — Thu, 12 Nov 2009 23:38:27 +0000

Well-said. It is a big challenge to sell in Chinese market. However, there are yet so many successful brands. The marketers must understand what they are selling and why Chinese people should buy them instead their domestic alternatives.
Every time I go back to China, I am struggling for gift ideas. Here, it seems almost everything are made in China. Why do my friends want that? Eventually, I narrow my list down the following things:
1) Cosmetics and skin care. The prices here is so much cheaper than those sold in China. — but I heard that it is changing.
2) Nutrition pills, such as vitamins, centrum, fish oil, etc. Chinese people, especially the middle class, middle-aged and above people are demanding those products. There are domestic alternatives but people believe that products sold in the States has a better quality. Apparently, chinese consumers do not have the faith in the domestic quality control process.
3) fancy, advanced electronic gadgets, which has yet to be released in other market. — Those are also changing since there are now more and more cheaper domestic fake products coming out even before the official launch in the state.
Anything else? nope! I couldn’t think of any.
So I like the word “careful”. By that, I mean the marketers must understand what is that “so unique” about their product that Chinese people will appreciate. In general, chinese people do believe that the quality of certain foreign product is better. But should you pay more? It depends. I wouldn’t imagine Chinese people will buy Kleenex tissues just because it is better. But I can imagine people buy Cannon Cameras. So I think the marketers must be careful in evaluating whether their product fits their needs. — I don’t see many foreign brands will have good luck passing this first round of screening, especially those foreign brands still labeled as “Made in China”
The word “patient” is also very very important. Chinese market itself is evolving. As my mom has told me that there are more and more retailers in China now offer generous return policies, which is a huge advancement in my opinion. Imagine when the U.S. has established those return policies. Chinese consumers are gradually adopting western marketing philosophy. The Chinese are not quite there yet. But I believe sooner or later. Just give it patience.

By: Paul Barsch

Paul Barsch — Thu, 12 Nov 2009 18:24:25 +0000

Claire, reading your comments brought some key words to mind for considerations in bringing Western products to Chinese markets: Careful, measured, thoughtful, pragmatic, flexible. And probably the most important: “patient”.
Thank you for taking the time to add to the discussion!

By: Claire Ratushny

Claire Ratushny — Thu, 12 Nov 2009 17:09:43 +0000

How right you are, Paul. Marketing Western products into the Chinese market, no matter how lucrative it is, represents a major challenge. It’s not for the faint of heart. Especially for brands that have absolutely no recognition in China. Even those that do and might see the beginnings of demand, can encounter problems. Apple’s iPhone comes to mind. You might like to take a look at this:
http://www.macnewsworld.com/story/68534.html
Rushing to market in China is ill-advised. Not getting it right the first time can be very costly. Having said that, problems can be rectified but it makes me wonder whether Chinese consumers might not be reluctant if the first entry signals potential problems. It just goes to show how important it is to really understand national customs, laws and concerns; even on a region by region basis before jumping in the first time.

By: Paul Barsch

Paul Barsch — Thu, 12 Nov 2009 15:44:04 +0000

Camille, sage and solid advice you’ve shared with marketers regarding implications of going for growth in China.
First, you shared that when it comes to doing business in Asia, one size does not fit all. What works in Western markets may not work in Asian markets. There are complexities, nuance and sometimes unseen implications of the positions and tactics of Western executives. Hence, the benefit of bringing local expertise to assist.
While I’ve advocated working with local resources to effectively penetrate Chinese markets, I would throw out a word of caution here in over-reliance on local “on the ground” teams. I’ve seen too many reports/articles of Western companies taking a hands-off approach to Asian markets and letting local teams run the show. While local teams arguably have the understanding and expertise in their home markets, accountability and checks/balances must be architected to help ensure that activities are going as planned and that side businesses/bets are not in the works. This is a long winded way of saying that responsibility for the successful penetration of Asian markets should not be abdicated to local teams.

By: Camille Schuster

Camille Schuster — Thu, 12 Nov 2009 15:24:53 +0000

China is definitely a market that requires long term thinking AND preparation. In the first place, the fundamental assumptions of how society works are different. In the west, our assumptions are based on the philosophy of Artistotle and Plato. In the East, assumptions are based on the philosophies underpinning Confucianism, Hinduism, Buddhism, and Jainism. These are generalizations, of course, but do highlight that the basic assumptions, values, and attitudes toward people, business, and the world are different.
One implication is the emphasis on relationships and reputation when doing business. Companies need to tread carefully. In the West there is a philosophy of try something first and apologize later. In China there is a philosophy of try something and if you mess up you must earn your place back before trying again.
Take time to learn the fundamental differences, to prepare the speed and risk taking in business, and to be ready for the obligations of being a partner. If you are not set in all three areas, take a step back, do your homework, and then make your move. If you have not begun preparation for entering this market, do so now.