Entering the Chinese market is a bit like job hunting — you need to grab attention and get yourself through the doors first. This might sound like an oversimplification, but it’s pretty accurate in telling you how to enter the Chinese market. Despite how the country embraces the consumerism found in other countries, China’s market is insular; it isn’t always welcoming of new businesses breaking into any of its industries.
With this in mind, a marketing strategy in China is only as good as the entry strategy that precedes it. Read on to learn more about what the Chinese market is like and how to break into it successfully with these China market entry strategies.
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The Chinese Market and How It Treats New Businesses
China has gotten to where it needs to be economically through its industrial policies. According to the International Trade Administration, the Chinese Communist Party has taken hold of many of China’s economic sectors. This gives the government enough influence and power to implement its industrial and economic policies.
Two Things to Consider: Challenges
Over the years, China has implemented an economic policy that favors domestic industries. More specifically, the Communist Party has used economic tools that subsidize and offer other forms of support to domestic industries. Other forms of support have come in the form of market access restrictions and added pressure to rely on Chinese B2B firms for logistics and technology.
Another obstacle for foreign businesses is how diametrically different Chinese cities can be. Contrary to popular belief, the Chinese consumer market consists of several sub-niches specific to a city. Each city, in a way, is its own consumer market.
To illustrate, the businesses that flourish in Shenzhen will differ from the kinds of businesses that will dominate the market in Xi’an. Likewise, while Beijing is favorable to the IT and communications industry, household markets will be better off in Zhejiang.
Opportunity in Challenges
All in all, the implementation of these economic tools has created a business climate that isn’t conducive to foreign companies breaking into the market. Add this to the fact that every city is a unique market, and you will have a country where successful entry is like hitting a moving target. Notwithstanding these obstacles, opportunities abound for businesses that successfully enter the Chinese market.
China is home to at least 1.4 billion people. This statistic alone is inviting to anyone looking for a broad consumer base. In addition, the growing presence of foreign brands in the country is emblematic of the public’s acceptance of business from the West.
In short, entry into the Chinese market may be challenging. However, opportunities lie in wait for those who choose to press on.
Knowledge Is Power — the Value of Market Research
Knowledge is power when it comes to an effective market entry strategy. With that in mind, you need to conduct market research.
Market research allows you to get an idea of consumer trends. This can help you tailor your marketing strategy by knowing what is in demand in China’s various megacities.
Besides obtaining consumer data, market research can also give you a picture of how your competitors are faring. The competitor data you need to obtain is data on fellow SMEs. Small to medium enterprises (SMEs) can experience difficulties in the Chinese consumer market — and even more so if they’re foreign.
Using this data, you can plan your strategy accordingly. From your data, you will be able to work towards the best possible business outcomes in your target city.
Conducting market research begins with knowing where to find data. For better or worse, China has an entire market dedicated to big data. Some sources of consumer data can include:
- Business organizations in the country
- The Chinese Chamber of Commerce’s market reports (for instance AmCham)
- The National Bureau of Statistics of China
- The Chinese Organisation for Economic Co-operation and Development
- The Chinese Ministry of Commerce
Take note that some of these sources are government sources. Nonetheless, you should be able to request access to data if you channel your request through government channels.
Chinese Marketing Agencies
In addition to the above-mentioned sources, market research is also a business of its own in China. Marketing agencies are an excellent go-to option for all things marketing. With Chinese marketing agencies conducting your research, you will be saving yourself the headache of navigating a market with which you are barely familiar.
Chinese Big Data Firms
Other than marketing agencies, there are also big data platforms in China. Big data platforms and companies provide data analytics and other services regarding data. While the big data industry might seem like an affront to privacy, the market exists to cater to marketers and business owners.
The Most Common Strategies to Enter the Chinese Market
Many SMEs have successfully penetrated the Chinese consumer market. As you might imagine, they had assistance. Beyond partnerships forged in the country, foreign businesses need to negotiate with the Chinese government.
The policies of the Chinese government require business to be done in certain ways in the country. These methods determine the entry strategies of entrepreneurs breaking into the country’s consumer market.
Here are some of the most common ways foreign businesses have used to enter the Chinese market:
Foreign Investment Law (Replacement for WFOE)
For foreign investors and business owners, this is a very common way to enter the Chinese market. The usual way was to enter the market via a WFOE which enables business owners to retain managerial control of branches in China from their headquarters in another country.
WFOE was replaced in 2020 after a law was voted in 2019. The process of registering a company in China has not changed significantly. The main difference lies in the fact that rules applied to Chinese-owned companies are now applied to foreign-owned companies as well. (Read more on the topic here)
You can think of joint ventures as a partnership between your business and one that’s in the country. Having a Chinese investor or owner as a partner allows you to have someone with experience in doing business in the country. A Chinese investor or partner will likely know about government policies and regulations for business practices, reducing the chances of running into legal problems.
Third-Party Rep Office
On a budget, foreign SMEs can set up rep offices manned by a third party. Easy to set up and affordable, a rep office allows your business to exist in the country, though on a small scale. This is excellent for foreign businesses testing the water. Be aware, however, that this will result in the least managerial control as you might have limited control of hiring practices and operations.
China Market Entry Strategies: 6 Steps for foreign business
How you wish to enter the country and the investment you’re willing to put in will determine your Chinese market entry strategy. For many, everything begins with choosing a common entry strategy.
Step 1: Choose an Entry Strategy for China
The right strategy will depend on the scale your business has achieved and your willingness to go all in. it will also depend on how much of the country you initially know. Of course, in the absence of knowledge, strategies like joint ventures and third-party rep offices might make more sense.
Step 2: Do Your Homework – Understand the Market
Homework means more than conducting market research or enlisting a company to do this on your behalf. China is a country where nearly everything receives government oversight. Doing anything business-related without considering this can result in disaster.
This is why knowing the government’s policies on foreign-owned businesses is key. Earlier, we mentioned government sources for market research. These same sources can be used to access information on business policies in China.
As regards market research, get data on which cities will allow your business to thrive. As mentioned earlier, different industries dominate different cities in the country.
Step 3: China is Huge, Choose where you gotta start
China has a heterogeneous market. What this means is that, as a whole, the demand for products and services varies greatly by city. This is why you need to factor in your niche against what market data shows.
Not only do needs and demands differ from one Chinese province to another, but the digital platforms and marketplaces used in the 1st et 4th tiers of Chinese cities are also vastly different.
Step 4: Bolster Your IP Before Entry
Copyright infringement is one of the most common pain points for most new businesses in China. With the prevalence of copyright breaches, it’s crucial to work with international property rights specialists in the country. It’s equally important to develop your strategy for property rights early on — preferably before entering the country.
NB: China does not have trademark deals with most countries, whatever trademark registered in your home country won’t cut it. You need to register your product in China!
Step 5: Develop Your Marketing Strategy
Marketing in China will require a different approach. Luckily, there are agencies that specialize in Chinese SEO and Social Media marketing. These agencies can guide your marketing efforts. But here is a quick picks at some of the marketing must-do in China:
- The Chinese internet is heavily censored, so take this into consideration for any campaigns you are gonna run in China.
- Chinese consumers are proud and somewhat “sensitive”; don’t be cheap with your localization expert. Faux-pas cost too much in a country where your branding investment is so high.
- Social media is huge in China, and WeChat is the dominant platform. Brands need to have a WeChat account if they want to reach Chinese consumers. But Wechat is not enough. There are tons of social media more or less niche. Study them and choose the ones that fit your industry the best.
- Video content is very popular in China and is growing rapidly, so brands should consider creating videos for Chinese audiences.
- eCommerce: If you are selling FMCG, online selling channels are barely an option. Just like social media, the landscape is varied, and you’ll find the one platform that answers your needs and budget the best.
Step 6: Hire Chinese Managers Then Staff
Hiring Chinese staff will result in lower operational costs. When hiring, prioritize management staff. This will allow you to have a point person on top of someone overlooking operations for you.
When it comes to hiring staff, you can delegate this task to your on-site HR manager if you’ve hired one. Of course, you can always hire staff from your country as long as you’re aware of the higher costs.
Success Awaits in China
A marketing strategy is only as good as the Chinese market entry strategy that comes before it. Indeed, entering the Chinese market is challenging. Nonetheless, by following the steps mentioned in this article, not only will you enter the market — but your business will also find the broad consumer base it deserves.
If you need help breaking into the Chinese market and making a good impression on Chinese consumers, we have solutions for you. Get in touch with us now and see what we can do for your venture in China.