The Importance Of Adjusting Your Business To The Local Chinese Market

[dropcap]W[/dropcap]hat has changed in past decades in the once economically, technically and technologically undeveloped China?

So many things.

Let us ask the basic question: How much do the local conditions and business context influence doing business in China?

What do we mean when we say local conditions? By these we first and foremost understand the institutional framework and capital sources in the host country in which the company does its business.

Maybe it is easier to explain these conditions on an example that we all know – AMAZON.

AMAZON is the number 1 trade in the world but in China it only occupies place number 7. Why such a great difference?

There are three potentially greatest reasons for it:

1. Great geographic distance from the Amazon HQ in the USA which determines slower decision making when Chinese market is in question and which is by nature very dynamic.

2. The outlook of its web page, its design and architecture do not suit entirely the Chinese buyer and market which both are used to a different type of e-sale.

3. If we compare Amazon with its direct competitors in China, Amazon has significantly less offers and discounts, which Chinese buyers are used to, and this is a major requirement for any number 1 e-trade in China.

Let us give another interesting example of an American giant in selling electronics – BEST BUY. This company has pulled out from the Chinese market in 2011.

There were several reasons for this fiasco:

1. The first reason is the organizational logic on the territory of China. Namely, BEST BUY has insisted that all deliveries should use company delivery vans. In comparison to the BEST BUY strategy, other companies (Chinese as well as foreign) have used local companies for deliveries. The use of vans on which BEST BUY insisted upon lead to an unnecessary expenditure which lowered the competitiveness of this company on the Chinese market.

The second reason is the question of employees. It is clear that for a foreign company on the Chinese market the matter of human resources is of key importance. There are many sources that claim that managers (non-Chinese origin) did not behave well towards Chinese employees which additionally worsened the situation.

The third giant, GOOGLE, has also given up on Chinese market. Although it has been said that GOOGLE is forbidden in China, the story is actually quite different. Namely this giant has given up on Chinese market back in 2010.

Why?

There are several reasons for it, and these two are the basic ones:

1. GOOGLE did a bad job in localization, thus it had a much worse market part in comparison to its Chinese competitor – the major Chinese search engine – BAIDU.

2. China has a strict control over internet content. The government is the one that controls the content and there is no place for negotiations. GOOGLE did not want to submit itself to such a control in China which contributed to its decision to pull out form the Chinese market.

Thus, when we talk about local conditions we must get to know them very well before the start of each business activity in China, since the culture is different, the market is different and the expectations of buyers are different.