China’s economic power has been on an increasing rise ever since China opened up it economy few decades ago. This move has allowed China to develop and progress tremendously. The growth of the China market is overwhelming to both the Chinese and the world around. Statistics showed that China has been enjoying a two-digit growth from 2003, and its economic growth rate in 2006 even reached 10.7%.
However, China market does have its risky side. Chinese consumers have a strong national pride so multinational companies could lose important market segments by seeming too foreign to the locals.
Government regulations on foreign investments involve a lot of complexities for foreign companies when they try to enter into the China market. As most of the foreign investors are unfamiliar with the bureaucratic procedures, many faced a lot of difficulties and delays in their business opportunities. Hence, it is crucial for foreign companies to familiarize themselves with China business style before starting on their plan to enter into the China market.
The Chinese have a collectivist mindset whereby most of them like to fit into the society and they like to establish good relationships with others. The Chinese are usually concerned of the views of others. In China, the word “Guanxi” means having a close relationship with others. It does not matter whether the relationship is on a social or business level but as long they have a network with others, the Chinese believe that they will be able to get things done faster.
In China, the people treat “Guanxi” with high regard. The parties involved will try to keep the relationships as much as they can and enjoy mutual benefits. Usually, the Chinese will seek for a win-win situation by giving-and-taking most of the time. This type of business style usually differs from that of the foreign companies. However, foreign investors need to understand the amount of importance that the Chinese places on “Guanxi”. In China, the people need to have a good trust foundation to have business dealings with others.
Foreign investors can familiarize themselves through market research or to seek an appropriate local partner before plunging into the China market. Having a local partner would enable the foreign companies to link with the local market and thus increase efficiency and minimize any risks involved. A local company would know how to negotiate with local suppliers and wholesalers and they also have a better idea on how to handle complicated administrative procedures with the government.
Many foreign investors actually consulted local individuals or parties such as business or consulting firms who are able to provide professional advice and assistance regarding the China market. With professional help, foreign investors would find China market entry to be less complicated and frustrating. Furthermore, local professionals would have the necessary network to allow foreign investors to establish their business in China.
In addition, even though the China market is full of business opportunities, the market is saturated with competition. With the increase of local companies partnering up with foreign companies, the domestic industry is increasing in the product quality and gaining more market share. Thus, foreign investors have to keep in mind to fight against the strong local competition as many of them had to lower their prices seriously to gain more market share.
One of the ways to fight against strong local competition is to have a detailed consumer research to find out the demands and needs of the present consumers and what products are substitutes and complement products to them.
