Many strategists may wonder when it is the right time to enter China. However, such a view may be misleading, as to do business successfully in China, timing may not be the only issue to be considered. Other issues must also be taken care of. For example, factors such as the market entry mode, the ability to form strong strategic alliances with local partners, the knowledge on Chinese culture and business practices, an in-depth understanding on consumers behaviors and perceptions in doing business in China are more critical to the success of a firm.
Nonetheless, the nature of the business will determine whether it is now the right time to enter China. For manufacturing businesses, it may no longer highly profitable or relevant to enter the Chinese market, or to outsource manufacturing activities to China. The reasons include: (a) high inflationary pressure in China, (b) rising labor costs, and (c) better opportunities in other countries such as India, Vietnam, and etc.
For services oriented industry, those particularly focusing on luxury market segment, it is perhaps the perfect time to enter the Chinese market. Some of the points leading to such as point include: (a) rising living standards in China, leading to higher purchasing power, (b) the transformation of Chinese economy into a value add and service oriented nature, and (c) government decision to spur domestic demands.
Several characteristics of Chinese market are identified and discussed as follow.
From growth dependent on FDI to seeking growth through outbound FDI. China is at the transforming stage, whereby from a country heavily dependent on Foreign Direct Investment for economy growth, China is becoming the important players in outbound foreign direct investment around the world recently. According to Yang et. al. (2009), China is the eight largest supplier of outbound Foreign Direct Investment in the world (spearheaded by Chinese MNEs such as Haier, Lenovo and TCL). In fact, it is reasonable to expect a trend whereby China will emerge as one of the top three countries contributing to the outbound Foreign Direct Investment in the future.
Still on an early stage of learning curve in internationalization process. Besides, the internationalization of private companies from China is also at the infant stage. Many of the MNEs are state-owned or supported by government. At current stage, most of the Chinese companies internationalize in order to acquire brand name, resources, technical and managerial know-how, and exerting economic or political influence to other nations. The rise of privately owned MNEs, primarily due to profit seeking activities is still a new phenomenon. However, such a trend is expected to grow fast and eventually leading to many big Chinese brand names in the global marketplace in the future.
From manufacturing oriented to service based economy. The Chinese market is also transforming, one that focus on growth by securing outsourcing jobs from the developed world to one that start to move up the value chain, that will increasingly dependent on servicing industry, knowledge based work, and innovation and technological improvement for further economic growth.
From export oriented to a more domestically driven economy. Previously, Chinese economy is driven by export oriented industry. However, due to the financial crises in 2008, the economic outlook in US is becoming gloomy, forcing the firms in China to innovate and change their marketing target from US or Europe consumers to domestic consumers in China.
Why defining Chinese service is so complex? Identify and discuss some of the approaches which Haier can be used for this purpose.
Defining services is already a complicated process, and that matter can become more complicated when the task is to define services in the Chinese context. Several reasons outlined below are causing the situation whereby to define Chinese service can be very complex.
Cultures among the Chinese are changing. Traditionally, Chinese are often characterized as having a collective, long term perspective, high-context, and relationship oriented culture. However, this might not be true anymore, as researchers such as Luo (2009) found that Chinese are fast to adopt new culture in the recent years. It is argued that a trend of individualism is rising among the population in China (Melewar et. al., 2004).
Chinese from different regions have different cultures, beliefs and attitudes. According to a comprehensive research performed by Li, An and Ahn (2009), it is found that people from different regions in China (whereby, in the research, China is separated into the following regions: Beijing, Wuhan, Shanghai, Qingdao and Shenyang) have different perceptions. Besides, they tend to have different purchasing behaviors. Different factors (e.g., normative, emotional or cognitive factors) may affect them differently (Melewar et. al., 2004).
Different generations have highly different attitudes and consumers behaviors. The younger generations of Chinese are having highly different characteristics if compared to the older generations of Chinese. This is primarily due to the single-child policy implemented by the government. As results, these younger children are a little spoiled, more self-centered, less price sensitive, love to chase high tech, and tend to purchase something only for own selves. In contrast, the elder generations are more price sensitive, more willing to share and having a more collectivism culture (Luo, 2009; Torres, 2011). All these complicate the situations and are causing the Chinese service to become more complex.
Thus, from the argument presented above, it is found that the task to define Chinese service can be highly complicated. Although China is a single country, the consumers in different regions, of different age, of different gender can be highly different. In fact, China is too big to be characterized as a single culture, behaviors or having similar perceptions. Thus, the market of China is largely segmented and fragmented. Accurate definition of Chinese service can become much complicated when the consumers perceptions and preferences are changing. All these complicate the matter to accurately define Chinese service.
Haier is a successful Chinese company, and the success stories can be used to learn the viable and possibly profitable manner to define Chinese service (Omar, 2009). Several reasons indicate that Haier is relevant for the study: (a) Haier is the most branded company from China (Lin, 2006), (b) its services and products can be found around the world, and in various regions in China, (c) the products are accepted by the Chinese market, and (d) the strategies used by Haier in accurately targeting effective services to the consumers can be studied. Thus, in order to define Chinese service, a study on the success stories, as well as the approaches taken by Haier in the past can be done. Through reverse engineering, and an understanding on the rationales behind the company moves, many insights on Chinese service can be done. An interview on Haier management can be performed, to understand the mindset utilized and adopted by the management. The successes of Haier will ensure that the perceptions and understandings of the Hair management are accurate in terms of knowledge regarding Chinese service.
The high growth of China economy in the recent decades is bringing up new firms within China at a very fast pace. Such as situation set the atmosphere to the formation of distinctively different marketing management of Chinese firms. The following paragraphs will identify several differences between Chinese and global marketing communication.
Different target audiences. It is not hard to note that many of the Chinese marketing communications are designed and delivered towards the domestic country, as little advertising and promotion is performed in the international context (Shenkar, 2009). Even the marketing communication efforts can be found in the global context, they are targeted towards niche market segment, as how Hair targeting its niche refrigerators to industrial segment in the US. This is primarily due to the reason that many of the Chinese companies are still competing in the domestic market, as the market is huge enough for large profitability and growth potential. Besides, it is also found by Chen (2004) that even in China, the target audiences of marketing communication programs by the Chinese firms are also different. Many of the larger multinational corporations targeted higher income population, while the Chinese marketing communication is targeted to price sensitive middle and lower income consumers. Not only are that, many of the Chinese firms also targeted the less affluent non-central market, as businesses in big cities such as Shanghai are becoming more competitive.
Less focus on building up brand equity. It is also argued that Chinese firms are relatively slow, or perhaps giving less focus on building up a strong brand name or reputation in the marketplace (except those very few successful multinational such as Haier, Lenovo and etc) (Wei, 2010). In fact, marketing communication is often ignored in order to keep the costs down, as the pricing competition within China for various industries intensify and proliferated.
Low price strategy. As depicted by Chen (2004), many of the Chinese companies design their marketing communication strategies to emphasize on the lower price they able to offer to the consumers and mass public. Most of the marketing communication stress on the saving that people can gained from their purchasing decision, but less emphasizes are put on marketing or promoting the new innovation or breakthrough delivered by the firms.
Use of low-cost media coverage. Perhaps due to the highly competitive business environment, many of the Chinese firms resort to usage of low cost media coverage (example: news report, media interviews, expert comments and endorsement) for the marketing communication purposes. As evidence, Chen (2004) pointed that the top four advertisement spender in the television industry in China are all foreign operators, while the local China leading TV manufacturer, namely ChangHong ranked number eighth.
Adoption of a follower style. As argued by Shenkar (2009), one of the barriers faced by Chinese MNEs is due to their limited capability to learn, acquire, diffuse and apply technology and managerial know-how into core competencies possessed by the firms. Such a challenge is causing many of the Chinese MNEs to adopt a more follower approach in marketing and brand management for their products. Apparently, although it is reasonable to expect that the Chinese MNEs will overcome such limitation very soon, it is noted that Chinese marketing communication style and methods still have a lot to be improved on. The marketing messages delivered should not focus on stressing an idea being communicated by the competitors, but should bring out new ideas that can sound more appealing to the market around the world.
There are many factors affecting the operations, interests and management style of the Chinese MNEs, and thus subsequently affecting the Chinese MNEs’ marketing strategies around the globe. These cause the Chinese MNEs to have apparently highly distinctive marketing strategies if compared to other MNES from other nations. In this section, the factors leading to the differences of Chinese MNEs to other MNEs are discussed.
Firstly, many of the leading Chinese MNEs are state-owned or state-controlled enterprises, where as the MNEs from other countries tend to be privately held or controlled (Yang et. al., 2009). According to Wei (2010), many of the Chinese MNEs are supported by Chinese government. Supports provided include ‘fiscal incentives, insurance against political risk, assistance to private sector international expansion through government agencies and double taxation avoidance agreements’. Thus, ownership factors are creating different marketing strategy or management style among the Chinese MNEs and other MNEs around the world. As Chinese MNEs are controlled and mainly owned by the Chinese states or government, the MNEs strategy is formed more to acquire assets, securing natural resources as well as building a global brand, in contrast to the used-to-be motive of maximizing profits around the globe.
Not only is that, it is also observed by researchers that as the Chinese MNEs are largely owned or supported by governmental agencies or bodies, the MNE strategies in other countries are largely affected by political consideration. Wei (2010) argued that some of the political considerations affecting Chinese MNEs include: (a) promotion of exporting related Foreign Direct Investment, (b) concerns for acquiring natural resources required for the development and growth of China, (c) enhancing China’s economic and political influence around the globe, and to (d) expand China’s international trade relations. As such, it can be reasonably expected that Chinese MNEs will organize different marketing strategies to achieve these purposes, where the traditional MNEs from other nations, that are primarily privately owned, tend to engage in marketing strategies purely for profit seeking reasons.
Besides, it is also cited that Chinese firms seems to be reluctant to shift their focus to the global market, to avoid losing focus on the huge domestic market. Thus, when these MNEs expand, very often, the objective is to expand to become a global brand, which later can contribute in consolidating their competitive position in the domestic market and to compete against other leading global brands operating in China (Yang et. al., 2009). As the marketing focus and desires are different, the marketing strategies of Chinese firms are distinctive from that of the Western or Japanese MNEs.
The motivation to expand abroad is also different. For most of the MNEs from other countries, their motivation is to tap into larger market in the foreign market. However, Chinese MNEs are more motivated by resource-seeking reasons. As cited by Yang et. al. (2009), one of the biggest motivations of Chinese MNEs is to transfer the technical and managerial know-how from the foreign acquired subsidiaries back to China.
Besides, it is argued by Wei (2010) that Chinese MNEs are lacking of firm specific advantages when expanding to global market. Thus, the market strategy of the Chinese MNEs is not to utilize its firm specific advantages to penetrate the foreign market, but to learn up new technology, experience in innovative activities, managerial skills as well as crucial marketing skills from the expansion to overseas. Thus, the marketing strategy of Chinese MNEs is actually to adapt and assimilate the more advance foreign knowledge and value-add technologies from abroad.
Apart from that, it is also highlighted that instead of building up strong name and efficient distribution channel in the global market, Chinese MNEs were more likely to buy over established foreign brands and distribution networks. The reason for such a trend is because the Chinese MNEs are urgently requiring market information in order to enhance the exporting businesses from their domestic countries (Wei, 2010).
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