Think Global How To Enter The China Market

From a business perspective, China’s economy is filled with lucrative industries as it has become the global economic leader. Entering China’s market means availing the opportunity to penetrate several profitable sectors. The rapidly changing demographics, rising disposable income, and consumer spending have made the Chinese market highly attractive to businesses. Furthermore, trade is rooted deep in the DNA of this economy and contributes to 47% of the GDP. China has become the world’s largest exporter in merchandising and the second-largest importer. Despite the ongoing pandemics, China, with its sturdy financial system, is the only major economy that has shown impeccable resilience against the economic shock set off by the COVID-19, with an 18.34% of global GDP output. Even though the growth continued at a slow pace, the fact that it was sturdy enough to take this financial blow and still end up on its feet is rather commendable. All these factors combined make the Chinese market more and more attractive to Western businesses across a variety of industries. Let’s learn a little more about this leading, yet challenging, market with some practical market entry guidance for foreign companies who enter the China market for the first time.  

HOW? Market Entry Strategy

There are multiple ways to penetrate the China market. Let’s dive deeper into them. The first and the most ambitious market penetration approach is a joint venture, it is used to reduce the overall costs by partnering up with another company to pool resources and expertise, mainly used for business expansion and investment. Joint ventures can help to reduce culture shock by enhancing the capacities to access the local market knowledge, distribution network, finances, technologies, and specialized human resources.  On the other hand, E-commerce as the direct sales channel is an effective way to drive sales. This is a relatively straightforward, cost and time-effective approach to eliminate the need for intermediaries to achieve sales activation. China’s e-commerce platforms include TMall, Taobao, JD Mall, Pinduoduo. A better understanding of the consumer demographics can help a brand to interact and communicate with its customers more effectively, and better align the products with their wants and needs. Thirdly, while discussing the practical market entering strategies, it is also imperative to cover digital marketing strategy for online exposure. China is the world’s largest social media market with more than 850 million Chinese mobile users in 2021. Thus, it is vital to have an online presence to reach out to a mass audience. The most powerful marketing tactics include public media endorsement, social media management, SEO, and KOL marketing. An appropriate digital marketing strategy helps to generate online traffic and allows businesses to spread brand awareness on a wide scale.  Lastly, product seeding is a method that allows businesses to reach potential consumers quickly and get feedback. Companies acquire valuable information to create user-generated content before the product launching stage, which also provides mouth-of-mouth referrals as a result. Product seeding works best for testing the market and gain product feedback.

WHAT? Market Entry Roadmap

After evaluating different market entry modes, it’s time to delve into the market entry roadmap during the pre, post, and execution stages of market penetration:  PRE Beyond anything, we should start with conducting industry research, market, and benchmarking analysis. This would help to answer the decisive questions of the market size, growth rate, and market segmentation. Learning how to optimize your core competencies and competitive advantage is crucial before stepping foot in a new market is critical. Next, businesses have to pick a business entry strategy taking into consideration of the short and long-term goals and the key stakeholders? Do you and your partner share a trusted bond to facilitate entry and market research? Businesses need to consider all of these questions in the first step for a deeper understanding of the China market.  EXECUTION The first thing to do in the execution stage is to consider your intellectual property, patenting, IPSS registration, and trademarking are the first things you do after entering the market, as the registration process is time-consuming. It is also worth mentioning that a legal and marketing team would make the complex IP registration process easier for your company. Besides, human manpower is needed with due diligence, and market monitoring is extremely integral. Without the shadow of a doubt, branding and marketing are the fundamental components for any business entering a new market. “Think global, act local” should be your go-to strategy. In addition to the basic language adoption, you need to ensure your brand story, core values, and key message is localized and align with your target audience accordingly. Also, be enlightened that you need to formulate marketing strategies for online as well as offline channels that can help to make a noise in the new market.  There is no point to keep on investing money into your R&D and execution departments if you fail to measure and review your performance and financial standing, you will need to identify the relevant KPI metrics to analyze your performance accurately for future business expansion.  It is equally important to bear in mind the challenges and risks when entering the China market, so you can be prepared and avoid putting your business at risk. The biggest challenge of market penetration is the cultural difference. You will likely face some resistance trying to enter a relationship-oriented market like China, people tend not to trust new businesses and you having some connection and networking from your local agency would make things easier for you. Moreover, due to local judicial protectionism and perceived bias against foreign firms, enforcing intellectual property rights is problematic. Furthermore, the common assumption that it is cheap to enter the China market is not accurate, as labor in China is not cheap anymore. The employer in China is also obligated to spend on housing funds and five insurances, meaning the employment cost will be 36% more than the gross salary.  Speaking of the inherent risks inherent in doing business in China. One of these risks is the challenges linked to the government’s policies, government policies pose a considerable risk to businesses. As China follows a dual structure that evolved from a centrally planned economy to a market economy with socialistic characteristics, government involvement can make things tricky.  Another critical risk is attached to the political sensitivity in China. With a completely different perspective than the West, it is crucial that how you go the market is localized in China’s market. By becoming entangled in competing for geo-economic and geopolitical agendas, all businesses face a new type of risk.  

Key Takeaways

Our discussion reveals that “there is no defined formula for China market entry”. A successful strategy should be resilient, flexible, and fast adapting, to listen to the needs and feedback from the China audience. One of the significant insights gleaned is that Entering this economy with a Chinese-based consultancy agency is imperative to overcome cultural issues and better understand market knowledge. Furthermore, ensure that your marketing strategy is backup by a comprehensive appraisal with data gathered via market and competitive analysis. An industry expert can be beneficial in this regard. As we speak, a diverse and professional team is proven to be advantageous in a new country to maintain effective and smooth communication throughout the market penetration process. Edited by DSIGN Team For cooperation, please contact: