What to Expect if Foreign Investors Plan to Enter Into China Market
Foreign investors have always feared entering into the China market due to culture differences and language barriers. Many of them are worried that a change in their organization structure or a huge amount of capital will be needed when entering the China market. However, with the appropriate measures, a correct approach can be taken to ensure a smooth entry into China.
It took a long time and a huge effort of the government for China to become what it is today. The modern China is prospering and booming in its economy and the standard of living in China has been raised tremendously. In addition, the Chinese government has been supporting the growth of China’s economy whereby policies have been changed over the years to boost China’s revenue. China market is moving towards the direction where the market forces are the ones influencing the economic activities in China.
Huge global giants such as Coca Cola, Nike and Walmart had successfully entered into China and became a household name for themselves. Even though they may have the resources and capability to engage huge market research, this does not mean that smaller enterprises would not have the same success in China market. We have some guidelines on how foreign companies, regardless whether they are Multinational companies (MNCs) or small-medium enterprises (SMEs), can enter into China market and gained success thereafter.
1. Understanding the culture
The Chinese culture is a unique culture compared to the rest of the world. Being the only nation with the most number of Chinese nationals, China has a rich heritage and history which they are very proud of. Their culture values are what led them to what they have now.
The Chinese are very respectful to each other and thus, they tend to seek for others’ opinion before settling on a decision. Hence, a Chinese business negotiation would usually take much longer than what the foreign investors usually take in their own countries.
If both parties do not understand each other’s culture, the Chinese would think that the foreign companies are too hasty and impulsive with their decisions while the foreign investors would find the Chinese too long-winded with their decision.
There must be someone communicating the thoughts of the two parties to ensure that the locals and the foreigners have the same understanding of each other’s stand. Thus, most foreign companies would either engage a translator or a local organization to be the key link between the locals and them.
2. Establishing a relationship (“guan xi”)
Many companies would have heard of the term “guan xi” which is commonly used in China. The Chinese like to establish a good network in the market as they believe that having good relationships with others would allow them to work more efficiently. The locals prefer to work with others whom they are able to trust and speak their mind freely. Hence, the Chinese often work with companies whom they have “guan xi” with. Furthermore, having a good “guan xi” with the government would allow them with the upper hand as they would have a better idea on the correct administrative and registration procedures which they can reduce in waiting time and avoid spending unnecessary cost.
Most of the locals have some kind of “guan xi” with different parties hence, foreign companies would need to develop their business network and learn how to expand their “guan xi” around China.
3. Domestic competition
As more and more foreign investors enter into China, the domestic companies are improving as well. Benefiting from the country’s technology advancement and government’s support on knowledge and skills, the local companies are sharpening their marketing tactics and improving the quality of their products.
Thus, foreign companies should not expect a low-grade competition from the Chinese companies as they tend to have a higher market share due to their brand presence and the appropriate “guan xi”. In addition, the Chinese tend to have an inclination towards their own country’s products as the Chinese have a high sense of national pride.
One way for foreign companies to tackle this issue would be to ensure that their products would not appear too foreign to the locals and the foreign companies should try to understand how they are able to either work together with their local competition or to fight against them.
Alina Hoon is a consultant of Starmass International. Starmass provides professional consulting services to assist foreign companies in China market entry, China market research, competitor study and China market analysis till export to China. Visit more business resources at: www.starmass.com
Article Source: ArticlesBase.com - What to Expect if Foreign Investors Plan to Enter Into China Market