Strategies on How to operate in China
You should fully research any local regulatory barriers that could block market entry in specific regions, and while already established, constantly monitor for any changes to legislation or regulations that could affect your business. You should also spend time mapping out customers’ and suppliers’ locations and understanding how distribution channels vary between different locations.
Advantages of researching
- It helps determine the size and nature of the market opportunity and acts as a benchmark against which firms are able to measure future performance.
- It helps identify potential roadblocks to market
- It identifies any weaknesses in a company’s product or service offering.
- It helps prevent poor decision-making and establishes a clear strategy map for the future.
If this all sounds too difficult for you to do alone, or you have questions regarding the market in Hong Kong, Paul Hype Page is able to advise you on the market conditions and how to best enter the market. We have a wealth of experience in the region and are able to advise you based on your specific needs.
Identify and Segment the Market
Know the geographical locations of these markets and how to access them by understanding the local environment of china. Below is how china market looks like:
It is socially and economically disparate and fragmented due to uneven economic growth rates in different parts of the country. There are huge variations between different provinces in terms of population levels, education levels, literacy rates, consumer spending habits, and lifestyles.
China’s markets vary in nature and make-up. Hence, a company should think carefully about which geographical location offers the best vantage point to target the broader China market by tending focus in the densely populated and higher-income coastal regions like Guangdong, Jiangsu, Zhejiang, and Shanghai.
A company should not ignore the economic growth and rising incomes in China’s Tier 2 cities like Nanjing, Wuhan, Dalian, Shenzhen, Chongqing, Hangzhou, Chengdu, Qingdao, and Dalian. As they have the advantage of lower operating costs and increased consumer spending power that is creating rapid growth in demand for foreign manufactured goods and products.
Choose the Right Market Entry Mode
Entry mode depends on many factors like industry landscape, geographical size & scope of the market, nature of the company & the level of on-the-ground sales & technical support required by consumers, the cost of setting up a local entity, and of hiring local employees. The cost will vary depending on the size and scope of an enterprise along with the specific characteristics of the market it is entering. A company can enter as a wholly foreign-owned enterprise (WFOE) or a Joint Venture (JV) business model
Carrying Out Due Diligence
Due diligence helps verify the trustworthiness of partners and employees and to expose any skeletons or any hidden agendas before proceeding with any sizeable investment. It can help in-house or through risk assessment consultants.
Develop an International Property Rights (IPR) strategy
The infringement of IPR is widespread in China. Therefore, any company entering the market for the first time should work under the assumption that its technology will be compromised at some point. Here for it is advisable that foreign companies, especially those with large IP inventories, should consult with lawyers and IPR specialists to formulate and IPR strategy for the China market.
A company should be sure to understand the first-to-file patent system, first-to-file trademark systems. Register trademarks in China before market entry and know how to register them both in English and Chinese.
Difficulties in Hong Kong and China
In Hong Kong, the official languages spoken are Cantonese, Chinese and English. In China, the official language is Chinese. For foreign investors from outside the region, they may not be experienced in the language, and may face communication problems.
The culture in Hong Kong and China is very different from western culture. The concept of Guanxi, dominates professional relationships. This affects how business is conducted and being an uninformed participant can cause riffs with their local stakeholders.
As mentioned above, IPR in China can be problematic for companies with patents relevant to their core business activities. This is due to the process that China has adopted, and the regulation surrounding it