Introduction Chinese consumersEmbracing new economic ideas andhabits, and devouring goods that havelong been unavailables, unaffordable orforbidden.However:It’s a part of a consumer culture and aneconomic system that remain quitedifferent from those of developedcountries
Introduction (cont.) 1,3 Billion customers: It’s a number that hascaptured the attention of every company in theworld that wants to do business in China• Multinational companies are more gettingexcited from the opportunities offered by theworld’s largest consumer market• Largest recipient of foreign direct investment.
The Economy GDP per capita $8,394 Agriculture 41% Industry 46% Services 43% China in Figures Unemployed 4%Land Area 9, 640 m m2 Main Exports:Population: 1,346m Office equipment/ ClothingLife expectancy: Telecoms equipment/ Electrical machineryMen 72 yrs / Women 76 yrs Main Imports:Adult literacy: 94% Electrical machineryAverage annual income Petroleum productsper household $10,220 Professional & instruments Metal ores & scrap
• China oppened and it’s growth rates are impressive (since 2008)• Chinas cities have expanded at an average rate of 10% annually• In the last two decades, almost 200 million people have been lifted out of poverty employed =+10 million/year• Pressure for more socially responsible products which affect competitiveness as China’s economy integrate the global economy.
How to do business in chinaMarketing / Promotion Exhibition Promotion & Testing in retailerDistribution Channel Distributor – sell to retailer Retailer – sell to consumer Online Selling – direct sell to consumerSales Team Hypermarkets; Tesco, Carrefour, Hua lian, Lotte Mark Hotels, restaurants, small storesPartners As a joint venture, sign confidentiality/ non-compete agreement to be protected.
What are the Major Concerns:• Ministry Of Health – approve on ingredients, especially additive, preservative and colouring• Ministry Of Agriculture – approve on ingredients• Ministry Of Commerce – check on the market competitive and commercial impact to china local market• Gong Shang Department – Brand name of the product, patent / copyright• Custom – Tax rate• Labeling Control department (AQSIQ) –
Advantages of selling in China• Strong middle class is emerging (25 million to 30)• Strenghts in Mass Manufacturing• Large electronics and heavy industrial factories• Highly Segmented Market
Desadvantages of Selling in China• No effective law governing business• High Governmental interference• Involving of the complex Guanxi Networks• Bureacratic systems and widening of social gap.• Environmental Damages (China occupyes the second place among the major greenhouse gas emitters worldwide)• Fast rising wages reduce competitive advantage
Opportunities for selling in China• Chinese spend more in Durable goods and innovative products (cars, phones, high techs..)• Mix of cheap labor and stable prices and stable politics is what foreign companies find appealing.• Incentives (tax breaks, low import duties, low-cost land and low construction costs for new factories)
Threats foreign companies face when investnig in china• Fierce & unethical competition (local/ foraign)=> Dog-eat-dog world• Lack of Intelectual Property regulations even if protection is pushed by government, still it’s practice is virtually non-existant• Lack of requirements for safety equipment• Highly fragmented domestic market.• Corruption.• Protectionism.
Cases of companies facing this problem:Intellectual property Burberry infringement corruption Johnson and johnson Local competitors TescoForeign competitors Tomas Lyte protectionism Coca-cola
1) What are the implications of Guanxi networks networks for selling in China? Most common business favor of guanxi is to receive introductions to one’s contact ( create valuable connections)• Chinese are more encouraged to do business with people they are comfortable with.• If MNC’s develop good guanxi with chinese businesspeople, the laters may refer customers to thm.• Guan xi is useful to gather essential information and to meet important potential partenrs
2) An important Chinese cultural issue is the avoidance of loss of face. Discuss its implications for selling in China.• Overseas Businesses have to pay attention to not doanything the Chinese consider as humiliating.• To avoid losing face and damage Guanxi Chinese preferindirect forms of influence to deal with difficult requets andembarassment.≠ of the MNC’s use of direct and open ways to deal withrequests this can create conflict between the partners andspread confusion to solve even the most simple problem.
3) Explain the concept of self-reference criteria and its implications for selling in China. The concept of self-reference criteria :to forget about self like if a company is going to another country then the going company will have to take care about the culture. For example: if a foreign company enter the chineese and wants to open its outlets in china the name of the company should respect the culture of the host country .
A real case is the following: Esso, the brand name of a gasoline,was a successful name in the UnitedStates and would seem harmless enoughfor foreign countries; however in Japanthe name phonetically means stalled caran undesirable image for gasoline.