Many Chinese companies seek to internationalize their future growth overseas, either in specific countries, regions or even globally. There are many stories about why Chinese companies fail to achieve their goals when doing business abroad. This article is not one of those kinds of articles. This article focuses on what China companies can do to improve their ODI success probability.
In this article, we offer senior management teams practical advice focused on the key checklist items that we believe all Chinese companies need understand and apply in order to succeed overseas. This checklist is intended to guide and empower Chinese leadership teams to organize its internal and external resources to insure that the journey abroad to seek new markets and business opportunities will deliver success. We hope that this checklist will be copied and shared. Naturally companies, based on their own realities, may change the priority, discard some of these and also add others. We hope that this stimulates a dynamic within each company to prepare properly and not become myopic because of the company’s own strong business culture and success domestically.
1. Understand Your Target Customer
Focus on the needs, preferences and desires of the target market consumer. Get to know the likes, dislikes, aspirations, and dreams of the target consumer of the company’s goods or services. Do NOT assume that the overseas consumer wants what the Chinese consumer wants. Think about the foreign company that came to China to sell products that Chinese consumers did not want, and remember how miserably they failed. Think about the process through which consumer tastes change, and how your company can influence or participate in that process. Think about where the target market consumer taste has changed over time and try to learn how it may change in the future. This is true not just for fast moving consumer retail products but also industrial, technology or service sectors. The company may not be able to generate this consumer insight in-house for overseas markets. If that is the case, work with outside providers that can produce this valuable information. Making assumptions and taking the Chinese consumer as a model is playing with fire.
2. Build a Positive Reputation from Day 1
The foreign market’s perception of your company’s values matters. They want to buy from companies they respect and admire. They vote with their dollars and they buy from companies that stand by their products and services and share their values. Companies that pollute, discriminate, do not invest in the long-term well-being of their employees and communities, and that are not good corporate citizens supporting socially responsible causes find it very difficult to generate loyalty or affinity overseas. Cultivation of the perception by the consumer market is important and should be planned, carefully implemented and budgeted. Successful companies have a sustainable approach and articulate their mission and values clearly. Consumers know where they stand. Success in foreign markets, particularly in higher end segments, is not about the lowest price. Companies in foreign markets must be socially responsible, assure consumers of the quality of its inputs, and ensure the integrity its entire supply chain. Companies that fail to manage this important function and develop a bad reputation might lose the market/consumer forever as they will associate its name with either positive or negative messages. Prepare your message and drive it. If you do not have the capability to do that in-house, work with a local service provider.
3. Understand a Different Sense of Time
In today’s fast-paced world, many consumers in China expect instant gratification. TV and movies show a young consumer walking into a store and immediately buying a new tech gadget or putting something in his/her mouth and we see instant happiness. Not all societies overseas value instant product driven satisfaction. Chinese companies need to realistically assess the timing needed to secure a beachhead in foreign markets, as well as the timing needed to expand after a foothold has been gained. Thus the messaging to the market, and the niche the company intends to create need to be examined. Good things take time. Make a medium and long-term plan and budget for it. Do not expect instant gratification.
4. Be Sustainable and Holistic
In modern Chinese society, there seems to be a tendency to focus on money-making ability as the only measure of success. In overseas markets, companies focused on exploitative or short-sighted short term profits will have trouble achieving long term sustainability. Long-term success in overseas markets is not generated by cutting corners, but by focusing on quality and innovation, which takes time. It is important that the company’s products and services are adapted to fulfill the needs of local consumers, which also takes time. Fast-talking companies, with fast money, seeking fast returns, might be better served looking for speculation opportunities locally. Get rich quick opportunities overseas are seldom real. Do not expect that. Invest in the middle and long-term for sustainable benefits.
5. Look and Listen More Than You Talk
Chinese companies are often used to telling customers what they should or can buy. The nature of China’s markets in the past was one of shortages so in many sectors it has been seller’s market. Things have of course changed in the last ten years, but this background still permeates the attitudes of many companies in China.
Overseas, listening to customers for authentic feedback is critical, since it allows product and process improvement. In the business plan, insure that there is a complete and easy to use process to collect, analyze, and derive improvements from customer feedback. Building in after sales service programs also generates brand and enterprise loyalty. As the saying goes, you have 2 ears and 1 mouth, so you should listen twice as much as you speak. Listen to the market as it never lies about what it wants. The cost of fumbling in a foreign market with a product or service that does not meet market demand is a good way to destroy customer loyalty and deplete your cash reserves.
6. Focus on Quality for Premium Prices
Many foreign consumers want long-term quality, and not just cheap price. If your products or services can deliver quality over time, you can secure repeat income from high end customers over the long term.
7. Invest in Attractive Design
All things being equal, the consumer will select the most aesthetically pleasing product. Ugly widgets do not do well with any consumer profile, and they certainly do not justify premium prices. The branding and packaging of goods and services matters everywhere, but particularly in developed markets. Either develop the capabilities in-house to produce beautiful products, acquire this ability by investing in design-centric companies overseas, or work with outside providers in every market. If you learn how to attract, retain, and work with top design talent, you do not have to be the ugly duckling on the shelf, competing solely on price.
8. Invest in Country Specific Marketing
Every market will require a specific marketing strategy. Different countries have different demographics, internet and mobile phone penetration rates, social media adoption and media/advertising consumption habits. Consumers respond to different kinds of influencers, and spokespersons for your products should be selected accordingly. While in some countries you might want to work with the national football team, in others you might want to work with up-and-coming fashion designers or environmental activists. Listen to your local country teams, and either develop the capacity to produce successful marketing campaigns in-house or work with local service providers.
9. Remember to Keep It Simple
Simple, elegant and efficient solutions work better for almost everything. However, different consumers will have different sensibilities, and what is considered elegant in one country can be considered unrefined or even offensive in another. Once again, devoting resources to understand the tastes of consumers in each individual market pays off in the end.
10. Rely on Outside Professional Tams
Hiring and paying skilled professionals is a must internationally. Closing a deal overseas is about a signed contract prepared by lawyers. Tax returns are done with full disclosure by accountants and tax advisors. Marketing and advertising campaigns are developed and executed by independent agencies. To run a global operation it is necessary to enlist the support of a network of reliable professionals.
We hope that more Chinese companies will adopt these and other tasks as priorities on their journey to the west.