The purpose of this section is to explore some key issues of this market.

Should Your Company be in China?

Many companies in the US and Europe are no doubt are viewing China with a combination of interest and puzzlement. The promise of this market is undeniable, but can also be a difficult market to crack, and cannot be approached in the same way as Western Markets. Who is right for China, and how should one proceed in dealing with this market?

The first thing to say there is that Not Everyone is Right for China, Right Now, and some may never be.

If, for example, a US company produces a product (a meter, for example) with common technology, and no clear advantage or point of distinction, there are probably domestic Chinese companies that make a similar product for half the cost, with an established set of customers. It is unlikely that this company will succeed in China at present, and the domestic meters here will only get better.

However, another company may offer a product that is distinct, or does have superior technology/value. This company- and there are many US and European companies in this category- should take a serious look at China, and consider the advantages of a presence in this market. Here are three:

1) Access to Domestic Market- Current and Latent. This is the main reason. In      many industries, the only way to access Chinese markets on a level playing field      is to have a presence here- and in some of these cases this must be with local      production. The reasons for this are not complex- lower production costs, control      of sales channels, shorter lead times, etc. Furthermore, in some cases only by      developing markets today can one best target latent markets that are currently      developing.

2) Potential Export Base. This is not usually the main reason a company invests in      China, though this can certainly be a factor.

3) To Match Competitors. If one’s competitors are active in this market, then it      may not be a good idea to cede this market to them.

Establishing a China presence does not have to come with a large investment, and does not have to be all at once. Starting small, and then gradually expanding one’s presence is both feasible and in many cases desirable.

There is no logic which says that one must come to China only after one has established a presence in other “more established” markets. Some companies, for example, that have invested in Thailand or South Korea over China have had to face growing labor costs and a relatively static domestic market.

Most companies in most markets cannot know whether China is right for them until they make a careful examination of this market.

For additional info, see:

Entry Structure & Overview

Common Mistakes

Sales & Distribution

Operational Considerations

Protecting One's Technology

12 Questions to Ask

About GCiS China Strategic Research

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