Monday 4 July 2016

Doing Business in China: Avoid These 6 Common Mistakes

In this article you will learn about the difficulties foreign companies face in China….  

Chinese consumersHow has the Chinese middle class grown in recent years?  

CultureWhat makes the Chinese business culture unique?  

MistakesWhat are six of the common mistakes western companies make in China? 


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Marketing to New Class of Chinese Consumers 

The growth the Chinese economy has opened a new market for companies interested in global expansion. In the year 2000, only about four percent of the Chinese population were classified as middle class, but twelve years later, that number had jumped all the way to sixty-eight percent. China has the largest population in the world, so this amounts to an enormous number of people, all purchasing goods and services they were previously unable to afford.

China’s growth has frequently been portrayed as a threat to Europe and other parts of the developed world. Chinese production of affordable quality products has forced some Western companies to innovate their marketing strategies and the country is more typically regarded as a competitor than a place to do business.

Yet some forward-thinking entrepreneurs, like Harjeev Kandhari of Zenises Group, think this assessment of the situation is a mistake. To Mr. Kandhari, China’s challenge to the status quo is an opportunity rather than a something to be concerned about. He believes the way to counter the number of luxury Chinese products streaming into Europe is to expand our own brands to appeal to the vast new market of discerning Chinese consumers inside the country itself. Zenises already offers many Chinese manufactured brands, including Westlake and Kapsen lines, which are testament to the quality that Chinese consumers expect.




Navigating a Different Business Culture 

Harjeev Kandhari is not alone in this belief, but many CEOs interested in expanding inside China are tripped up by a business world that doesn’t always follow the same rules. The Chinese culture goes back thousands of years, with customs that can seem even more foreign to westerners than other places in Asia. Business concepts are sometimes regarded from a different point of view, and, without a careful and open-minded study of the Chinese perspective, foreign entrepreneurs are certain to make false steps and miscalculate.

Expansion into China is not impossible. Many foreign companies have successful operations there, including, Volkswagen, Nike, General Electric and IBM. However, these are countered by an equal number of companies that have been forced to make a ‘strategic retreat’, like Pepsi, Best Buy, and Nestle.

These are six of the most common mistakes western companies tend to make, as well as how to avoid them. 
  • Assuming what works in the west will work in China – consumers think differently in different parts of the world, especially China. Companies that attempt to use a standard business model and marketing strategy everywhere will fall flat, especially with the strong competition from local businesses. Successful companies like Nike have established an entire campaign aimed at researching and developing products based on the needs of Chinese consumers. This made the Chinese people respond positively to the brand, feeling that their individual needs and tastes were being catered for. This approach also gave Nike an innovative line of products they could experiment with in other parts of the world. 
  • Seeing China as a single market – many foreign companies focus on major cities like Beijing and Shanghai. Consumers outside the major well-known cities have a very different attitude and competition can be less stiff. Companies that focus their early operations on second, or even third and fourth tier cities have a much better chance of success. 
  • Not allowing enough time – many successful foreign companies, like Nike and Volkswagen have been operating in China since the early 80s. Of course today’s market is a lot different, but any company interested in developing in China needs to think long-term. CEOs often make the mistake of constantly replacing their overseas executives without allowing enough time for them to begin negotiating transactions in Mandarin and Cantonese, not to mention understanding the nuances of Chinese business culture. 
  • Misunderstanding business relationships – Chinese business practices are based around ‘Guanxi’, a complex concept that is difficult for westerners to understand. The basic idea is one of teamwork, in which closely connected individuals work together to achieve a common goal. However, personal relationship and trust needs to be established before ‘Guanxi’ is understood and teamwork can begin. Establishing trust can be difficult for a foreigner, since ‘Guanxi’ is a cultural understanding rather than measurable quantity. Once established however, ‘Guanxi’ can take precedence over a legal contract. Many successful foreign ventures in China establish a footing with a locally based partnership, but it’s crucial that foreigners make sure their associates understand the relationship in the same way. 
  • Pushing an Individualistic Approach – westerners see individual success and outspokenness as an attribute. In China, businesses are very hierarchical and upstaging a partner or superior is a grave fault. Communication that is too forthright can easily be misinterpreted.  


Corporations like Zenises that already operate on a global scale will have found the transition easier, but any company will need to make adjustments when it comes to doing business in China. Cross-cultural training programs like REV in Shanghai now help foreign personnel understand and deal with some of the cultural hurdles. This is a valuable investment for any company wanting to establish a footing in China.