A Few Things MultiNational Executives Get Wrong About The P.R.C.
Most multinational executives are aware that growing a business in China presents unique challenges that should be factored into the initial investment and the overall business objectives. However, in the rush to take advantage of the so-called never-ending growth and scale of China, companies can make strategic and operational miscalculations that compromise their ability to meet their goals.
Here are a few of the most common misunderstandings about the P.R.C.:
1. China is just like America was in the 50's (or Japan in the 80's, or Mexico in the 90's, etc). China is simply too big, too complex, and too integrated with the rest of the world to work as a historical analogy. Also, China's consumer culture is skyrocketing and carving its own unique path.
2. China's public and government data are generally unreliable. There have been advances in the availability and quality of public data, especially for urban demographics. Close attention should be given to the development plans of the central and city governments. Their plans are generally clear and quite ambitious. It's often smart for a company to gain access to the local Mayor most relevant to its primary business plans. These officials are usually more than willing to assist new business development and provide various and important data in order to help stimulate growth within their communities.
3. China's Internet is like ours. As Google's drama in China recently highlighted, China's Internet is quite unique and worth taking the time to investigate. Many major U.S. based sites such as; eBay, Amazon, Facebook and Twitter, etc are insignificant. China has its own internet pulse and it is significantly different from the West's.
4. China's consumers are split between urban and rural. This is partially correct; however, most global brands are spending their resources within a few limited parts of China, usually the 6-8 mega cities. The majority of China's consumer market is overwhelmingly clustered in them.
5. China has generation gaps between each decade. China's generation gaps are huge, and even more frequent than every decade. This is a result of an extremely fast economic growth. Today's young adult in China grew up listening to various Asian boy bands. Meanwhile, are watching China's version of reality TV. Is it any wonder they embrace a different outlook, which baffles their elders?
6. China is rapidly westernizing. China is modernizing, and becoming more influenced by Western culture. But the increase in Western brands and lifestyles is also matched by an increased interest in historic Chinese culture. China is arguably becoming more Chinese. In addition, there's another often-overlooked influence. Japan, the world's second largest economy, sits off China's shore, and its cultural influence is at least as significant as that from the West.
7. Chinese youth are divided into tribes. There is some truth to the observation that Chinese young people are segmenting themselves at earlier ages; however, these tribes look different from their Western counterparts. In the West we can use magazines, music and brand affiliations as a way to best describe a group. These don't quite work in China, because the print media is relatively small and the music scene is disjointed as a result of piracy. Brand preference can be easily descriptive in the larger cities, but for the rest of the country, brand differentiation is more blurred. Instead, the kids gravitate towards celebrity preference, hobbies, and use memberships in various online clubs, to differentiate themselves.
As we have witnessed over the past 10-15 years, market dynamics within China are changing rapidly as a result of high growth and a surge in foreign and local private enterprise. Market research data must be refreshed and reviewed to remain current. To accommodate this vast challenge, a company should integrate China operations with a global perspective, while retaining in-country business unit autonomy.
About the Author
Ron Hartfeil is the President at R9 International Sourcing and Consulting (http://www.r9international.com), an independent consulting firm specializing in the Consumer Goods industry. Previously, Mr. Hartfeil was the GM for Gibson Guitar, China Division, COO of Gibson's Global Baldwin brand, and Director of Global Footwear Operations at Nike, Inc.
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