The massive Chinese consumer market presents both a big commitment and big reward for Western companies, said Benjamin Wey, president at New York Global Group, a middle-market advisory firm specializing in China.

Wey said for Western companies, entering the Chinese market is no easy task.

Market Research

Twenty years ago in China, a Western brand and technology alone could command the attention of consumers, said Wey. 

Now, this is no longer the case as Chinese consumers have become increasingly sophisticated; the market is already saturated with Western products and entrenched domestic products command customer loyalty.

Wey has several recommendations. 

One, make sure it’s a product that Chinese people actually need. For example, a toaster wouldn’t sell well in China because Chinese people “don’t like to eat hard things,” he said.

Two, make sure the product is acceptable to the Chinese market.  If necessary, modify the product and marketing to tailor it to China.

Three, check out the domestic products that already exist; there may be established players in the market and Western companies need a strategy to compete with them.

Infrastructure

Doing business in foreign countries can be expensive and China is no exception.

One needs to fund inventories, set up distribution networks (which probably involves hiring locals), and compete for limited shelf space. For some products, custom manufacturing is required to meet government regulation.

Marketing efforts also require capital.

One “shortcut” is partnering with a local company, said Wey. The Western company would combine its technology and brand with the existing infrastructure and network of the local company. This arrangement can be the best strategy in some cases.

The Ultimate Prize

Despite all these challenges, almost all big corporations have a presence in China because they can’t afford not to be in China. Increasingly, medium and even small businesses are arriving at the same conclusion.

Leaders of Western businesses think that if they’re not in China, they’re “not in the largest growth market in the world,” said Wey.

To enter this prized market, companies need to be prepared to invest time and capital (and perhaps partner with a local company). He said they need to put aside the short-term quarter-to-quarter mentality and be in it for the long haul. 

Many companies that entered China many years ago and successfully executed their long-term strategic plans are now rewarded with a piece of the country’s rapidly expanding consumer market.  Going forward, the size and importance of this market will only become more apparent.

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Email Hao Li at hao.li@ibtimes.com

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