China is distinct from other developing markets in a number of important ways, all of which have strong ramifications for marketers. To begin with, China's economy is far more diverse (and therefore offers a much broader range of opportunities) than Russia and Brazil, economies which are far more reliant on raw materials and commodity products.
Especially, China is now often seen as the most lucrative opportunity in the developing world. The country is no longer just viewed as a low-cost manufacturing base, but also increasingly as a lucrative market with a receptive audience of customers. As such, companies are now under growing pressure not only to better understand Chinese buyers, but also to successfully navigate the many barriers and potential risks when trying to find a route into the China market.
Here comes 8 key pieces of advice that all companies considering entering China should consider:
1. Multi-channel promotion- online and mobile telecoms sales channels are becoming an increasingly important promotional route when selling either to Chinese consumers or businesses. At the same time, the relationship-focused culture of the country means that face-to-face selling and events also remain a critical part of most companies' promotional mix. Similarly, direct mail, often dismissed as an ineffective route to market, is now becoming more important as a promotional activity. The fact that direct mail represents just 5% of Chinese companies' advertising spend (compared to 35% of American firms') indicates that it retains some value in grabbing the attention of potential buyers.
2. Establish a sophisticated and competent local sales force – Western companies frequently dedicate insufficient time and resource to establishing a local sales force that fuses buy-in to the company's objectives with local knowledge and understanding. It is surprisingly common for Western companies' Chinese sales teams to be under-resourced and under-trained whilst capital is poured into product development and manufacturing plants.
3. Allow three to seven years –Quality systems, distribution networks, product localization and staff training are all examples of activities that require long-term commitment and which are prerequisites to having a sustainable Chinese business. On average, service companies and those with relatively simple business models can expect to be sustainably established within around three years of entry; larger corporations with complex business models and distribution networks often regard five to seven years as the necessary period to become fully established.
4. Do your legal homework and evaluate legal risks – Chinese law is complex and often ambiguous, meaning that extensive legal advice is essential at every stage of the market entry process, including areas such as company set-up, labor law and copyright law.
5. Don't underestimate the cost of doing business – Whilst unskilled labor and commodity supplies can be extremely cheap in China, many of the items critical to running a successful business are astonishingly expensive to foreign companies.. Training costs can be astronomical. Entering the Chinese market is not a low-cost process, and any company must be confident in the revenue streams it will generate before doing so. Thus most of the companies will choose agencies to outsource their staffing process. What's more some agents are even able to provide the professional conduct for the startups such as EY, KPMG, Talent Spot, etc.
6. Have a flexible business model – The Chinese market is developing so quickly that new opportunities emerge on a regular basis. Any company entering the market must be prepared for a degree of 'trial and error' as it reconciles its existing business and expertise with that of new employees in a new business environment. Everything from positioning to routes to market is likely to evolve substantially as the company develops its business and it is critical that marketing teams and management are not too rigid in their thinking.
7. Establish a comprehensive local presence – Chinese buyers are increasingly confident in and loyal towards Chinese companies, and suspicious of 'fly by night' foreign companies who lack a permanent presence in terms of service teams and senior management. Whilst a foreign brand is a strong asset when entering the Chinese market, brand values can be quickly destroyed if the company is not seen to live up to its brand promises in terms of quality, innovation and service. It is critical that a Western company entering China makes a firm promise to the market and lives up to it through all of its interactions with that market.
8. Establish firm and frequent two-way lines of communication between local and parent office– The best foreign companies establish frequent communications between different layers and locations of their businesses. This ensures the sharing of expertise, knowledge and best practice, and consistency of offering. As companies establish centres of innovation within China and Chinese businesses become of increasing strategic importance, the benefits to head offices of this interaction are greater than ever.
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