Most multinational corporation (MNC) executives are generally aware that growing a business in China presents very real and unique challenges that must be factored into the initial investment and overall business objectives. However, in the rush to take advantage of China’s so-called never-ending growth and scale, companies can make strategic and often operational miscalculations that can compromise their ability to achieve their goals.
Here is a list of some of the most common misunderstandings about China:
1. China is like the United States in the 1950s (or Japan in the 1980s, or Mexico in the 1990s, etc.).
It seems that this could be a good historical analogy; however, China is simply too big, too complex, and too integrated with the rest of the world. Furthermore, China’s consumer culture is exploding in its own unique way.
two. China’s public / government data is generally unreliable.
Recently, there have been tremendous advances in the availability and quality of public data, especially for urban demographics. Special attention should be paid to the development plans of the central and municipal governments. His plans are clear for the most part and also quite ambitious. It is also highly recommended to have access to the local mayor of the city you are targeting for your major business plans. These local government officials are often more than willing to assist new business development and provide various important data / facts (i.e. population density, retail groups, transportation infrastructure, etc.) to help stimulate growth within of their communities.
3. China’s Internet is like the rest of the world.
As Google’s China drama recently highlighted, their internet is quite unique and worth the extra time to research. In fact, many of the big US-based sites like; eBay, Amazon, Facebook, Twitter, etc. they are for the most part insignificant and practically non-existent. China has its own pulse of the internet and it is significantly different compared to the western world.
Four. China’s consumers are divided between urban and rural areas.
This is partially correct; However, most of the global brands are investing their time and efforts in a few limited parts of China, usually within the 6-8 mega urban cities. The majority of China’s consumer market is overwhelmingly concentrated in cities that have staggering populations. However, the most important thing is the proximity to the cultural centers of the country, such as Beijing, Shanghai and Hong Kong.
5. There are large generation gaps between each decade.
In fact, generation gaps are huge, emerging more often than every decade. This is a direct result of extremely rapid economic growth. Changes in both technology and culture result in wildly different learning environments. Today’s young adult in China grew up listening to various Asian boy bands and teenagers while watching the Chinese version of reality TV. Is it any wonder they take a different perspective, which in turn baffles their elders?
6. China is rapidly westernizing.
There is no doubt that China is modernizing and becoming increasingly influenced by Western culture, just look at all the KFC and McDonald’s across the country. However, can we really call it Westernization if those US-based restaurants offer congee as part of their breakfast menu? While there is a notable increase in Western brands and lifestyle choices, it is also accompanied by an increased interest in historical Chinese culture. In fact, there is a strong argument that China is becoming more Chinese. Also, there is another influence that is often overlooked and found in North Asia. Japan, the world’s second-largest economy, sits off the coast of China, and its cultural influence is at least as significant as that of the Western world. South Korea also has a strong and considerable influence on China’s young adults.
7. Young Chinese are divided into tribes.
There is some truth to this, and young people are being segmented at younger ages these days; however, these tribes look different from their western counterparts. In the West we can use magazines, music and brand affiliations as a way to better describe a group or tribe. These do not work at all in China, because the print media is relatively small and the music scene is very disjointed as a result of piracy. Brand preference can be easily descriptive in larger cities, but in the rest of the country, brand differentiation is considerably more diffuse. So in these cases, kids gravitate towards celebrity preferences, hobbies, and use memberships in multiple online clubs, etc. to differentiate. In China, this can say a lot about a person; however, there is also a tremendous amount of fluidity and change within this particular demographic.
As we have witnessed for the past 10-15 years, the market dynamics in China is changing very rapidly as a result of high growth and the influx of both foreign and local private companies. Therefore, market research data should be updated and reviewed periodically to stay current. In addition, the governance model of a company that integrates its operations in China with a global perspective, while preserving the autonomy of the business unit in the country, must be taken into account.
