Entering the Chinese market
Embracing a culture with many faces.
For many Western companies China is a nation of paradoxes. On one hand there is the tremendous speed at which things change and development proceeds. However, on the other hand, China is characterized by an extremely long term perspective that can be identified in other areas and through which small visible steps become gigantic leaps in development in a historical perspective. From this perspective any company must focus on identifying its concrete opportunities to create value in China and then to carefully select the strategy for how to achieve this. Just as Europe is a mosaic of cultures and opportunities China too has many faces as well.
A restructured market
Many of the Western companies that have gained success in China have been there for a long time. This implies that in most industries there is already strong competition among Western companies within China. However, the competitive field is undergoing a change. During its first phase of opening up, China wanted to encourage the in-flow of capital and knowledge and offered foreign companies very advantageous terms when establishing a business in China. This input of resources was then combined with long-term investments in infrastructure and education to prepare China for the next phase. This next phase, supporting the internationalization of China’s own companies, is now underway. The success of companies like Haier, Huawei, Lenovo and Geely has demonstrated that Chinese companies are now ripe to truly enter global competition. For Western companies already present in China or those considering entering China this adds a new dimension to the strategic considerations: how to deal with the issue of innovation.
Rapidly expanding markets
Leading Chinese companies are now rapidly applying Western business practices, and even developing them further to become global leaders in their own industries. For companies entering China this means that the role of China as the leading manufacturer in the world is today only part of the explanation for China’s success. Furthermore, China has, in industries such as the automobile industry, become the dominant market in the world. And, in various fields Chinese companies are already the global market leaders and innovation benchmarks.
Success in China
In crafting its China strategy an organization must balance the above reflections with the fact that, in many areas, China still lags behind Western development quite significantly. By traditional measures China is a developing country (with GDP per capita at about USD 4,400 in 2010), with large environmental challenges, an underdeveloped legal system, corruption and in many places an unpredictable bureaucracy. To maneuver in these conditions asks for considerable efforts to build an in-depth understanding of the particular conditions within one’s own industry, search for the right local partners with whom to work, and then patience when gradually building and strengthening the China strategy.