SELLING IN CHINA

Chinese consumersEmbracing new economic ideas and habits, and devouring goods that have long been unavailables, unaffordable or forbidden. However:It’s a part of a consumer culture and an economic system that remain quite different from those of developed countries

Introduction

1,3 Billion customers: It’s a number that has

captured the attention of every company in the

world that wants to do business in China• Multinational companies are more gettingexcited from the opportunities offered by

theworld’s largest consumer market • Largest recipient of foreign direct investment.

Introduction (cont.)

China in FiguresLand Area 9, 640 m m2

Population: 1,346mLife expectancy:Men 72 yrs / Women 76

yrsAdult literacy: 94%Average annual incomeper household $10,220

The EconomyGDP per capita $8,394

Agriculture 41%Industry 46%Services 43%Unemployed 4%

Main Exports:Office equipment/ ClothingTelecoms equipment/

Electricalmachinery

Main Imports: Electrical machineryPetroleum productsProfessional & instrumentsMetal ores & scrap

CHINA’S DEVELOPMENT

• China oppened and it’s growth rates are impressive (since 2008)

• China's cities have expanded at an average rate of 10% annually

• In the last two decades, almost 200 million people have been lifted out of poverty employed =+10 million/year

• Pressure for more socially responsible products which affect competitiveness as China’s economy integrate the global economy.

How to do business in china

Marketing / PromotionExhibitionPromotion & Testing in retailer

Distribution ChannelDistributor – sell to retailerRetailer – sell to consumerOnline Selling – direct sell to consumer

Sales TeamHypermarkets; Tesco, Carrefour, Hua lian,Lotte MarkHotels, restaurants, small stores

PartnersAs a joint venture, sign confidentiality/ non-competeagreement to be protected.

• Ministry Of Health – approve on ingredients, especially additive, preservative and colouring

• Ministry Of Agriculture – approve on ingredients• Ministry Of Commerce – check on the market

competitive and commercial impact to china local market

• Gong Shang Department – Brand name of the product, patent / copyright

• Custom – Tax rate• Labeling Control department (AQSIQ) –

What are the Major Concerns:

Advantages of selling in China

• Strong middle class is emerging (25 million to 30)

• Strenghts in Mass Manufacturing• Large electronics and heavy industrial

factories• Highly Segmented Market

Desadvantages of Selling in China

• No effective law governing business• High Governmental interference • Involving of the complex Guanxi

Networks• Bureacratic systems and widening of

social gap.• Environmental Damages (China

occupyes the second place among the major greenhouse gas emitters worldwide)

• Fast rising wages reduce competitive advantage

Opportunities for selling in China

• Chinese spend more in Durable goods and innovative products (cars, phones, high techs..)

• Mix of cheap labor and stable prices and stable politics is what foreign companies find appealing.

• Incentives (tax breaks, low import duties, low-cost land and low construction costs for new factories)

Threats foreign companies face when investnig in china

• Fierce & unethical competition (local/ foraign)=> Dog-eat-dog world

• Lack of Intelectual Property regulations even if protection is pushed by government, still it’s practice is virtually non-existant

• Lack of requirements for safety equipment• Highly fragmented domestic market.• Corruption.• Protectionism.

Cases of companies facing this problem:

Intellectual property infringement

Burberry

corruption Johnson and johnson

Local competitors Tesco

Foreign competitors Tomas Lyte

protectionism Coca-cola

QUESTIONS ?

Most common business favor of guanxi is to receive introductions to one’s contact ( create valuable connections)

• Chinese are more encouraged to do business with people they are comfortable with.

• If MNC’s develop good guanxi with chinese businesspeople, the laters may refer customers to thm.

• Guan xi is useful to gather essential information and to meet important potential partenrs

1) What are the implications of Guanxi networks networks for selling in China?

2) An important Chinese cultural issue is the avoidance of loss of face. Discuss its

implications for selling in China.

• Overseas Businesses have to pay attention to not doanything the Chinese consider as humiliating.

• To avoid losing face and damage Guanxi Chinese prefer

indirect forms of influence to deal with difficult requets and

embarassment.

≠ of the MNC’s use of direct and open ways to deal with

requests this can create conflict between the partners and

spread confusion to solve even the most simple problem.

3) Explain the concept of self-reference criteria and its implications for selling in

China.

The concept of self-reference criteria :to forget about self like if a company is going to another country then the going company will have to take care about the culture.

For example: if a foreign company enter the chineese and wants to open its outlets in china the name of the company should respect the culture of the host country .

A real case is the following:

Esso, the brand name of a gasoline, was a successful name in the United States and would seem harmless enough for foreign countries; however in Japan the name phonetically means stalled car an undesirable image for gasoline.

Thank you very much