The Chinese consumer market shows great potential for growth in all industries. As China’s appeal to outsourced manufacturing grows, their economic status attracts companies looking to expand their market share and diversify their current product lines. But many of these companies reach their full potential in the Chinese market. Why do so many fall flat? There are three predominant factors that influence China’s business world, which either build up companies to their full potential, or quickly detract them from foreign expansion.
The Three Factors: Market Size, Culture, and Regulation.
China’s size makes it seem appealing to companies trying to expand internationally. But, most don’t realize that the landmass of China creates a population that is highly diversified, in economic status, consumer preferences, and outlets for selling. A marketing strategy in one geographic region may be obsolete in another. Foreign businesses do not understand the cultural practices and demographic makeup of the country’s regions; therefore most fail in one area with tactics that would have succeeded elsewhere.
While the United States is close to China in size, its population is accustomed to similar marketing and sales platforms. Domestic companies can appeal to the same demographic audience on both East and West coast because the wealth of the nation is dispersed, and economic activity is relatively uniform. In China, because culture and lifestyle differs so much from region to region, consumer preferences are not as uniform.
Cultural practice in China differs dramatically from western understanding. Business etiquette, communications, and social values are not the same. Therefore you can easily turn off potential Chinese customers and partners with an ethnocentric approach to marketing. For example, Western societies tend to praise individual accomplishment, promoting competition but building relationships on positive affirmation. In China, focus is placed on the organizational unit, at any level, and praise is given for the sake of winning the competition, but for moving the group forward. Chinese appreciate openness rather than what westerners consider “courtesy.” The Chinese build relationships on high levels of trust rather than in tokens of reciprocity.
Business owners tend to focus their global expansion strategy by getting around the regulation and bureaucracy of another country. But in China, the laws and procedures are far too complex to adopt in a western style. Trademark and intellectual property rights are too easily disregarded, and companies must protect themselves from Chinese “first to file” laws. In a recent survey of over 330 business with presence in China, 31% said bureaucracy was the primary point of struggle with entering the market. You can learn more about Chinese customs and logistics processes in this article.
If you are ready to expand internationally, conduct a SWOT analysis specifically tailored to your foreign marketing strategy and growth model. If you are in a growing industry that meet the needs of China’s ever-present consumer market, consider hiring a consultant to help you navigate the country’s unique market.
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Baysource Global has the connections and knowledge you need to navigate the Chinese business world, and can advise you how to best expand your business overseas. Read this article on China Market Entry for more information on this topic.