Going For Growth…In China

November 12, 2009
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shanghaiCharged with finding new markets for growth, many Western marketers are eyeing China’s rising middle class and terrific GDP numbers. And while getting Western products and services into the Chinese market is hard enough, the ability to compete and thrive in China takes mastery of specific skills and processes. Success also involves a drastic change in mindset.

 

As one of the few countries in the world showing positive economic growth, the future of China sure looks promising. And to take advantage of a very large marketplace, Western companies like Pfizer, Astra Zeneca, Goodyear and others have established beachheads in Chinese markets. However, an Economist article titled “Impenetrable” reminds readers how truly difficult it is to sell foreign goods in China.

To be sure, some companies are thriving in China. The Economist article cites luxury good makers, airplane manufacturers, and commodity producers as successfully penetrating China. Yet, for every success story, there are a dozen works in progress especially in fields such as pharmaceuticals, banking and insurance and telecommunications. In fact, Ronald Schramm, a professor at the Chinese European International Business


shanghaiCharged with finding new markets for growth, many Western marketers are eyeing China’s rising middle class and terrific GDP numbers. And while getting Western products and services into the Chinese market is hard enough, the ability to compete and thrive in China takes mastery of specific skills and processes. Success also involves a drastic change in mindset.

 

As one of the few countries in the world showing positive economic growth, the future of China sure looks promising. And to take advantage of a very large marketplace, Western companies like Pfizer, Astra Zeneca, Goodyear and others have established beachheads in Chinese markets. However, an Economist article titled “Impenetrable” reminds readers how truly difficult it is to sell foreign goods in China.

To be sure, some companies are thriving in China. The Economist article cites luxury good makers, airplane manufacturers, and commodity producers as successfully penetrating China. Yet, for every success story, there are a dozen works in progress especially in fields such as pharmaceuticals, banking and insurance and telecommunications. In fact, Ronald Schramm, a professor at the Chinese European International Business School says that the impact of Western firms’ total sales in China are little more than a rounding error.

Why all the difficulty? Western firms must deal with the fact that for all the excitement of capitalistic economic zones in China, most of the enterprises in China are state owned. That means Western companies must deal with plenty of costly and unending red tape from protective Chinese authorities. And while China joined the World Trade Organization in 2001, there is much work to be done to level the playing field for Western companies to effectively compete.

Yet, all hope is not lost. Digging a bit deeper for strategies to penetrate and prosper in Chinese markets, I interviewed Globe Trade founder, Laurel Delaney. Ms. Delaney argues that companies doing business in China need to change their mindset and think of China as an investment that will pay off over the long run. She says, “It takes tremendous time, incredible patience and phenomenal preparation to do business in China. Many companies just don’t have the stamina, perseverance or dollars to last — yet, if they hang on and keep working on it, they will eventually find success.”

The path to successfully navigating Chinese markets also involves avoiding the biggest blunders. To that point, Ms. Delaney mentions the number one mistake a Western marketer can make when looking to China for growth is attempting to go it alone. “You need a strong and effective team and good “Guangxi” (relationship) when doing business in China,” she says. “The stronger the team you assemble breaking out of the gate — the greater your likelihood of success in developing business in China.”

Ms. Delaney also mentions the types of local talent, needed “on the ground” to propel success. First, she says, Western companies should set up a peer-to-peer advisory board consisting of legal talent, an individual with M&A knowledge, a transportation and logistics “superstar”, a banker and a governmental contact. It’s these people that can help a Western marketer iron out issues and challenges they’ll likely face.

In addition, outside of setting up a joint venture with a company, consider hiring local talent to help market to Chinese consumers. According to Ms. Delaney, someone on your marketing team, “(needs to know) native tongue languages of China, be smart and masterful at communicating which includes marketing/advertising, have experience with your product or service offering, and have a history of proven success.”

China is an economic giant and is poised—eventually—to be the number one economy in the world. For Western marketers, finding ways to get your products and services into China is definitely worth strong consideration. Success in Chinese markets won’t come easy, and it won’t be cheap. China’s markets hold great promise, but also peril for companies that lack determination and endurance for the long-run.

Questions:

  • A Business Week article notes that in many instances the Chinese government has of late, “strengthened its grip on the economy.” Is there any hope for Western companies to sell their wares against state owned companies?
  • Green industries are often cited by futurists as an area where the United States and other Western nations can create competitive advantage. And yet, currently, 35% of the world’s solar cells are made in China. Will the next Green revolution take place in China?
  • Beijing University professor Michael Pettis says, “There is little real innovation or branding ability in China.” Does this provocative sentence scream “opportunity” for Western marketers and their associated products/services?