entering china market

It is critical to spend time researching and understanding the regulatory environment prior to making any decision to enter the market. Copyright © 2020 B2B International. Entering the Chinese Market and Culture One key difference between entering the Chinese market is the strong cultural ties that China has with its own history, norms and ways of doing business. Ultimately, the best vehicle for a foreign enterprise entering the market for the first time will vary according to the size and scope of an enterprise, along with the specific characteristics of the market it is entering. One might include a mixture of various legal, practical and technical measures designed to prevent infringement and ensure legal rights are enforced in the event of an infringement. Market in China is indeed a growing pool of investments, trade and production. Beyond these legal measures, there are a number of practical measures that foreign companies can adopt to protect their IPR. China has a “first-to-file” patent system, which means that it is possible for local Chinese companies to register another company’s patents even though it is not the original inventor of a technology. Equally, actively pursuing legal proceedings against any IP infringers should act as a deterrent to other potential infringers and will alert the authorities to future IPR infringements. The challenge of China market entry has become an increasingly important one of Western companies of all shapes and sizes. It has been difficult to enter this huge new market because China has a vastly different culture from the ‘West’. In particular, there seems to be a growing trend of exports, joint ventures and purchasing from China by companies in the Midwest. Not only do Tier 2 cities have the advantage of lower set-up and operating costs, but the increase in consumer spending power in these areas is creating a rapid growth in demand for foreign manufactured goods and products. A key benefit of hiring a Chinese manager is the local market knowledge and deeper understanding of Chinese business they bring to the role. Understanding government policy and regulations is critical to success in Chinese b2b markets. Although a growing number of foreign companies are ‘going it alone’ in China, the joint venture (JV) business model still brings with it many advantages and can often be seen as a lower-risk strategy than the wholly foreign owned enterprise (WFOE). Lesson: Bridging cultural gaps helps consumers understand the value of the product. In the past, foreign businesses have often been drawn to coastal provinces such as Zhejiang, Guangdong, Jiangsu and Shanghai, due to higher populations and incomes in those areas. The first realization that foreign companies often need to make is that China is in no way a uniform and homogeneous market. Ultimately, when choosing which form is most appropriate, a company should consider each of these factors, along with the overall costs of setting up a local entity and hiring local employees. Making that first step into the China market is an intimidating step for most companies in the b2b arena, with an almost endless series of potential pitfalls to be negotiated. All sessions of the series are free and open to public. Entry mode often depends on a number of factors, including industry landscape, the geographical size and scope of the market, whether the company plans to manufacture locally or import its products, and the level of on-the-ground sales and technical support required by customers. As such, it is certainly no exaggeration to state that rather than representing a single, unified market, China is actually a collection of individual sub-markets defined by vastly differing demographic, economic and cultural characteristics. While failing to understand the market can cause you embarrassment, as detailed in our last post, failing to understand the law can have much more serious repercussions. Figure 3 – Foreign Investment Vehicle: Advantages & Disadvantages. The quality of human resources available will also be closely related to where the company is located, and it is generally the case that the quality of people available is much higher in Tier One cities such as Shanghai and Beijing than Tier Two and Tier Three cities. Although some basic due diligence can be carried out in-house, nowadays there are also numerous legal and risk assessment consultants with offices in China that provide business intelligence, individual background checks, and risk analysis consultancy. Regulation is becoming more stringent, as are to efforts ensure that companies actually conform to them. Similarly, declining sales in their home markets has forced many US and European companies to relocate China firmly to the centre of their long-term global growth strategies. As in many countries, China has actively encouraged the setting up of industrial clusters in specific cities or regions, and in many cases entire industry supply chains can be concentrated in a small handful of cities. Any foreign company looking to set up local production in China should first consult the China foreign investment catalog, which divides foreign investment projects into ‘encouraged’, ‘restricted’ and ‘prohibited’ categories. In particular, cities such as Shenzhen, Tianjin, Wuhan, Chongqing, Chengdu, Nanjing, Qingdao, Dalian, Suzhou and Hangzhou all offer strong commercial opportunities for foreign companies across a range of sectors. China’s enormous market size and related market growth potential are key factors in its attractiveness. After years of unsuccessful attempts to enter China’s massive $27 trillion payments market, Mastercard announced today it has won approval from the People’s Bank of China … Losing local managers will also risk losing access to their guanxi networks and local market knowledge. Factors affecting viability of entry. If you import from China, direct sourcing through a reliable China sourcing agent is your best choice. Entering the China market. As such, there is no one-size-fits-all approach by which foreign companies should approach the China market. With the country poised to overtake the US as the second largest global economy by 2020 and destined to remain an engine of global growth for the next decade, understanding how to enter large and complex market has become critical to most companies in the B2B sphere. Invest in China with the relevant investment vehicle . The nature and make-up of markets in different parts of China also varies considerably, which means that foreign companies should think carefully about which geographical location offers the best vantage point to target the broader China market. The barriers to entry are manifold in China, including language differences, the … Get most of your jobs done in China with a top-notch China Virtual Assistant. Shanghai, Beijing and Guangzhou) – highly populated areas with a large, middle-class representation and income levels well above the national average. Despite a difficult economic climate in Europe and the United States, China’s economy has continued to grow by double-digit rates over the last couple of years. The following is a list of the more common challenges experienced by companies and organizations looking to access the Chinese online population, both consumers and businesses alike. China has been a popular target of market attractiveness studies for more than two decades, with companies timing entry, level of investment, and market strategies to coincide with regulatory and market growth expectations. While market growth is gradually cooling, … In industries with greater levels of regulation (such as the healthcare and food sectors), foreign companies will need to attempt to unravel the web of complex laws and regulations, and try to understand which authorities have primary responsibility for implementing them. The objectives of the market analysis section of a business plan are to show to investors that you know your market and that it’s large enough to build a sustainable business. With Appovation's regional presence and expertise, challenges associated with China market entry can be assessed, addressed and overcome. Within China, rapidly changing demographics, rising incomes, increased consumer spending and an increasingly open business environment have all helped to make the Chinese market increasingly attractive to Western businesses across a variety of industries. Mandarin, considered the hardest language to learn for native English speakers. Business-to-Business Market Research in China: China – Recruiting And Retaining The Best Employees: Brand Strategy & Brand Architecture Research, Customer Loyalty Research & Touchpoint Surveys, China Market Entry Strategy: A Guide To Entering Chinese Business-to-Business Markets. From a culture perspective China is a higher context culture than many other countries within the world. Employing expatriates tends to be seen to offer greater operational control, although is also more costly in terms of salary packages, relocation costs, insurance and other expenses. Government regulations can very often impact significantly on the timeline and costs of market entry, and companies are advised to examine the implications of such regulations prior to committing to the market. In its bid to enter China, Starbucks needed to be as inoffensive as possible to the Chinese culture. Improved living standards, a growing interest in tourism and relaxed travel regulations for Chinese citizens has led to a huge rise in the number of outbound Chinese tourists. For China market entry, businesses must focus on finding the right entry channels and recruit the right employees for uninterrupted operations. It is well known that the China market … Foreign companies are now required to go through lengthy environmental assessments before gaining permission to produce locally. Typically, this initial in-house ‘desk research’ can help firms to determine whether further, more detailed research is required and can assist with setting goals for more detailed research later on. Prof. Letty Kwan. Marketing and Selling to Chinese Businesses Business-to-Business Market Research in China Market Sizing In China, To learn how our China expertise can help your business enter China, To find out more on how our market research expertise can help your business. Thankfully, as China’s economy continues to grow and become more open to foreign companies, the rewards increasingly outweigh the challenges of doing business in China. Figure 2 – Selected Cities According to Industrial Orientation. The reality is that if you have no plans to enter Asia in the near future, you are missing out on a new frontier with exponential growth opportunities. In the wake of the melamine poisoned milk scandal in 2008, the Chinese authorities have taken a tougher line against companies that openly flaunt the food safety law, whilst the SFDA is also tightening regulations on pharmaceuticals and medical devices to avoid similar events from occurring in the future. According to a leading consulting firm, 76 percent of China's urban population will be considered middle class by year 2022. Market research plays a key part in Starbucks’ major market entrance strategies. Breaking into the China market successfully can seem like an almost impossible task to foreign companies with limited or no experience of doing business there. On the other hand, some businesses can only achieve increased sales, brand awareness and business stability if they enter a new market. China’s economy has been on the rise for decades. Different definition​ In China, the meaning of probiotics is different from the FAO/WHO standards, … As China continues to progress in recent years, many foreign companies in China are benefiting as well. Fastest growing internet, mobile smartphone, and online shopping markets. It has also been a closed economy for well over a 100 years. “Ways to enter the Chinese market” focuses on the different options open to European SMEs considering to enter the Chinese market. Equally, staff turnover rates are extremely high in China and retaining quality managers over the long term is challenging. Get the information you need to do safer, better business. Although China’s entry to the WTO in 2001 helped to liberalize China’s trade environment to some extent, many industries remain heavily regulated. Although there are often many obstacles in the way of achieving success in China, the rewards of successfully navigating this difficult course are also immense. A thorough and well executed market research study can help prevent poor decision-making and establish a clear strategy map for the future. We work as your own sourcing office in China. Very often, the enterprise type will determine the human resources available, and foreign companies tend to have greater freedom with WFOEs and rep offices than JVs in this respect. If you don’t want to miss such a huge market with tremendous potiential and strong resilience, we can provide you with the necessary support and services. The profusion of English-language publications on China available through the internet makes it relatively easy for Western companies to carry out some initial research on the Chinese market. Choosing the right vehicle for entry is one of the most crucial decisions a business can make when entering China for the first time. For example, in the medical and pharmaceutical sectors, long product or clinical trials may be required, which result in a longer sales cycle than may be the case in other countries. Economic growth and rising incomes in China’s Tier 2 cities have made entering these markets much more attractive to foreign suppliers than it was in the past. China now has a host of different ministries and regulatory organizations with responsibility for industry regulations and laws. As China market Entry is also about cross-cultural adaptation, we are happy and proud to work with a great international team. But it’s all changing, things are getting easier… Premier Xi again made opening up China a priority in the latest 5 Year Plan. In particular, foreign companies involved in consumer markets have tended to focus their attentions on these higher income coastal regions. This white paper has attempted to illustrate some of the fundamental considerations that any company must take when approaching the China market for the first time. Challenges in Entering the Chinese Market With growing competition and stricter regulation across the European Union, Forex brokerages have started to turn to China for expansion. We’ve put together four basic tips to get you started thinking about Chinese law. Over 50 different ethnic groups with different dialects. Chinese regulatory bodies often operate in a quite opaque manner, making it difficult to anticipate regulatory changes before they happen. Whether hiring staff, investing in a joint venture or appointing a local distributor, carrying out due diligence is also an indispensable activity when setting up in China for the first time. Many have termed China as the world’s factory where lots and companies around the world are entering into China to further expand their business. Uneven rates of economic growth in different parts of China over recent years have served to exacerbate many of the economic and social differences that already existed between different provinces. The first step of any effective China market entry strategy is therefore to identify the geographical location of the target market(s) and the best specific location to target first. When to enter China Research findings can assist in testing assumptions, evaluating needs and informing crucial decisions.Analyses of market research studies can keep you on the right track and identify problems early enough that changes can be implemented. The HiSTEP 2020/2021 – China Market […] Largest and fastest growing source of international tourists for most countries. A further problem is that China’s regulations are often vaguely worded and open to interpretation, which can be unsettling for foreign companies used to a more transparent regulatory environment. Entering the China Market. For example, China severely restricts foreign companies’ involvement in the field of petrochemicals, energy and telecommunications sectors. The guidance and recommendations we received were most helpful, resulting in a great response from US management. Having entered the market, it is equally important to constantly monitor for any changes to legislation or regulations and how these could affect your business. China - Market Challenges China-Market Challenges Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country. Although being based in a Tier 1 city may offer the lowest risk point of market entry, it will also mean that the company faces higher operational costs and more competition. As a consumer market, China’s rapid growth represents a significant opportunity for companies looking to grow or expand overseas. Opportunities. It is crucial to start with a beginner’s mindset and test your current solution in the new market. Entering the China Market: Top 10 Legal Issues By: Fang Shen With more than 30 years’ rapid growth, China has become an enormous market that many American companies simply cannot afford to overlook. Start with a Riskiest Assumption Test (RAT) or Minimum Viable Product (MVP) mindset in order to validate what is and is not working. We finish with a brief summary of the ‘Dos and Don’ts’ that any foreign company approaching the China market for the first time should take into consideration. Therefore, our services are multi-language and multi-cultural. 24 Aug 18. While it is true that China represents a huge potential market for foreign manufactured goods and services, it is also the case that understanding where these opportunities lie and how to access them can be extremely challenging. Find a Local Partner. We help you grow your business in China and get closer to your Chinese customers, Start Your China Business With An Experienced Representative. China is a country that is constantly changing and its markets are evolving more rapidly than almost anywhere on earth. Likewise, new market entrants should ensure that all trademarks are registered both in English and Chinese, and that any internet domain names are properly registered. The Department of Business, Economic Development & Tourism (DBEDT) and the State of Hawai‘i Beijing Office (SHOB) are conducting a webinar series for Hawai‘i companies on entering the China Market beginning October 22, 2020, via an online platform. As always, companies should consider their own resources, previous export or business experience abroad, and long-term business strategy before entering the China market. We also provide proven business training for you and your staff to adapt to a new and complex market in an easy and faster way. 5 Top Tips for Western Companies to Ensure Business Longevity in China: The three most common distributor problems. Although foreign companies in the b2c sector still remain focused on coastal cities, business-to-business markets are often far more geographically scattered. The quality of the research delivered by B2B International is always first class, achieving better results than what we had previously received before. Entering China Market, our consulting business offering China market entry strategy, and Chinese marketing services. China also has a “first-to-file” trademark system, which means that a foreign company’s legitimate brand and logo cannot be used if these trademarks have already been registered by a local Chinese company. Through research it was established that the usual advertising methods may come across as a direct attack on the tea culture that prevails. IKEA in China. Try the Course for Free. Market Entry Mode. Digital in China offers the best ROI, simply because you have the greatest exposure at … Make China an innovation centre – The company that makes China an operations centre and not an innovation centre is missing a huge opportunity, as well as risking ‘missing the mark’. Despite a difficult economic climate in Europe and the United States, China’s economy has continued to grow by double-digit rates over the last couple of years. Dealing with China Market Entry Challenges with a PEO. An experienced market research company will then build upon this initial foundation of knowledge with more detailed information collected via Chinese-language desk research and in-depth interviews with leading industry experts and decision makers. Although China is unified in the geo-political sense, socially and economically the picture is much more disparate and fragmented. Developing a market-entry strategy involves thorough analysis of potential competitors and possible customers. Everybody knows, China is a big market, including a gigantic consumer market of 1.3 billion people. For example, while WFOEs are often the main modus operandifor high-tech firms with large IP inventories, companies specializing in more commoditized products often find that risk is mitigated by partnering up with a well-established local company. There are still a lot of industries that remain off-limits to foreign companies, and many industries where severe limitations remain in place. Whether it be the large Western multinationals with an established China presence or the first-time market entrant with no previous China experience, foreign companies of all shapes and sizes often find their China success stymied through insufficient lack of local understanding. Entering the Chinese market is not a low-cost process, and any company must be confident in the revenue streams it will generate before doing so. 6 Reasons Your Business Needs to Enter The Chinese Market By The End of 2014 Published on November 7, 2014 November 7, 2014 • 14 Likes • 0 Comments Another important consideration is whether registering a patent could actually serve to disclose key technical information that could otherwise be protected through employee non-disclosure agreements (NDAs) and other practical measures. All Rights Reserved. Another key decision to be made is whether to employ expatriates in senior management positions or whether to localize these roles. The world’s largest middle class. As China’s economy develops, it is also accumulating a growing number of industry-specific regulations and standards, which both domestic and foreign companies should conform to. Companies planning to set up a local manufacturing facility will be required to research a broader range of factors, such as local manufacturing and transport infrastructure, access to key raw materials, local investment policies, the availability and cost of human resources, and a myriad of other factors. Last Published: 7/30/2019. Arguably, the single biggest determinant of a company’s ultimate success in China is the quality of staff it employs. Unfortunately, in many industries the supply of highly skilled local managers with industry experience is extremely limited, and employers may still be forced to pay a premium to attract the right calibre of employees. A market analysis is smart for those who are thinking of entering China. 1.4 Billion people and growing. Not only are salary and insurance costs lower for local employees, but Chinese employees very often have existing contacts (‘guanxi’) with suppliers, customers and local government authorities that can be fully utilized. … The Do’s and Don’ts of Gift-Giving in China, Marketing and Selling to Chinese Businesses, Business-to-Business Market Research in China, Petrochemicals, chemicals, pharmaceutical, automobile, electronic apparatus, financial, Automobiles, electronic appliances, textiles, apparel, toys, petrochemicals, chemicals, Chemicals, textiles, communications, petrochemicals, steel, foods, auto parts, biomedicine, IT, semiconductors, biomedicine, communications, electronics information, Light industry, plastics, textiles, apparel, toys, metallurgy, household electrical, furniture, kitchenware, Agricultural, oil & foodstuffs, pharmaceutical, Can employ own people without restrictions, Higher start-up and operating costs (registered capital), Tax and repatriation of profits challenging, Opportunity to utilize existing sales networks and customer base, Finding a trustworthy partner is critical, Challenging to agree terms of the partnership, Success may depend on having staff on-the-ground to oversee operations, Partner likely to negotiate terms in their favor, Good for marketing, partner auditing and admin, Carry out extensive market research before entering the market, Segment the market (by geography, income and customer habits), Determine the best entry vehicle according to results of research, Determine the best routes to market and channel partners, Consult with legal experts to create an IPR strategy for China, Register trademarks in China prior to market entry, Carry out due diligence on prospective partners and employees, Rely on hearsay or third-hand market information from Chinese partners, Assume that similar market conditions apply throughout China, Invest in a local presence prior to researching the market thoroughly, Choose partners or employees without proper due diligence, Assume that IP rights are automatically protected under Chinese law. , which with 1.4 billion people companies involved in consumer markets have tended to focus predominantly China. 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Safer, better business now have operations in China, Starbucks needed to be as inoffensive as.. Helpful, resulting in a niche market without ever expanding into new markets strategy map for first! Help prevent poor decision-making and establish a clear strategy map for the first that. Your Chinese customers, start your China business with an Experienced Representative host of different categories may be! For Western companies of all shapes and sizes culture that prevails and economically the picture is much disparate...

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