China is the fastest growing market in the world today. Therefore, it represents a huge opportunity for companies that are interested in selling their products in China. At the same time, it has tremendous natural resources and work force, at some of the lowest costs in the world, providing the Chinese companies a competitive advantage, in China and globally. However, it also allows foreign companies to reduce their production costs by transferring manufacturing or development facilities to China.
In contrast to the enormous prospect that exists in China, the entry of foreign companies to this market, and succeed in it, is quite difficult. The cultural and business differences, coupled with the strong governmental regulations that still exist, make the penetration of foreign companies very difficult. However, success in the Chinese market is not altogether impossible. Numerous companies have succeeded greatly in the Chinese market and are enjoying the fruits of their labor.
As Chinese companies expand worldwide, they are becoming a substantial competitive force that must be dealt with. Companies must find ways to overcome the Chinese cost advantage, either by reducing costs themselves, or by using other marketing methods.
In this document, we address two issues: penetrating the Chinese market and dealing with the Chinese competition worldwide.
Penetrating or Expanding Into China
Companies are interested in penetrating the Chinese market for two major reasons. The first is to sell their products in this huge market, which is growing at the fastest pace in the world. The second is to take advantage of the low production costs that exist in this market. Expanding into China presents a challenge and must be done systematically.
Barriers to Entry
To succeed in China, companies must overcome the barriers to entry that are unique to the Chinese market. The barriers are a result of the geographic conditions, the culture, and the distinctive economic structure.
Lack of Information
Unlike the western and developed markets, the Chinese market suffers from a noticeable lack of information and access to data. The government does not publish extensive information about the macro conditions, and even when it does, it is not always reliable, there is a lack of industry associations to provide data on different industries, and research companies are not commonplace. Private companies, those in western countries provide vast information about the products and services, through their web site and company collateral, do not provide such information in China. In fact, companies are very hesitant to provide any information at all, they are very suspicious of any one who ask for an information, and even when eventually do provide information, it is usually very limited and in Chinese.
The diversity that exists in China is apparent in a number of different aspects. Many different regions of the country vary in regards to the geography, demographics, natural resources, etc.
The coastal area in China, including Beijing, Shanghai, and Guangdong, is much more advanced and developed than the western provinces. Most of the international companies operate in the …