sen to pursue a China Rush strategy (i.e., a huge resource burn rate
with limited if any payout). Of course, there are exceptions just as
there were exceptions to the Alaska Gold Rush.
Your China Strategy
When formulating a China strategy the first question you need to
ask is “Why”? It’s a valid question and one that should be used in
a number of China related situations.
Understanding why you want to include China in your overall business strategy is essential to determining what it will take
to be successful. The following is a brief listing of some of the answers I have heard regarding why a particular company wishes
to include a China strategy in their business portfolio.
1. China’s economy is growing at a faster pace than any
other country.
2. All my competitors are going to China. If it’s good for
them, it’s good for us.
3. My board of directors said we need to be in China.
4. China has over one billion consumers.
5. Having a China strategy will improve our stock price.
“Deciding to enter the China
market either as an offshore
participant or from onshore is
not a trivial undertaking. The
resource burn rate and learning
curve for most companies is
truly significant. There are nu-
merous obstacles that must be
confronted and resolved in
order to move forward.”
Unfortunately, most of the companies who used these answers as to why they want a China strategy ended up very similar to those prospectors who rushed into Alaska, i.e., a failure
to achieve expectations).
However, when I discuss with companies about why they are
adopting a China strategy and they answer with any of the following I have noticed that they most often achieve some level of
success with their efforts.
1. I’ve been there. I understand the culture and the market. Our
company has prior experience doing business inside china.
2. Many of my long-term customers are going to China,
they have asked us to continue with our supply to them
but from an inside China location.
3. Our detailed market research indicates that our products fit
and are needed in China.
4. We have a China-based partner with many years of experience in the same markets that we intend to pursue.
5. We have solved the route to market along with essential raw
material supply and final product manufacture questions.
the world, soon to overtake the United States, it is a genuine force
to be reckoned with. Within the past few years there has been a
remarkable development inside China and the establishment of
a significant middle class.
This driving force has resulted in the release of a huge pent up
demand for consumer related products, which of course require
numerous sources of raw materials and technology. In the past this
emerging opportunity provided a slightly easier road for new entrants into the China market. Today, issues such as theft of technology (Intellectual Property) and China’s preference to have local
companies in the market as opposed to new offshore entities have
emerged as a serious obstacle for a number of Western companies.
Any company wishing to enter into China today will find it much
more difficult and more risky compared to what was in place a
decade or two ago.
No matter what approach you use, there is inherent risk associated with business particularly when you venture outside your
comfort zone such as entering a new region or country. There are
no guarantees of success or failure. However, there are proven approaches, which appear to enhance the opportunity for success.
Deciding to enter the China market either as an offshore
participant or from onshore is not a trivial undertaking. The
resource burn rate and learning curve for most companies is
truly significant. There are numerous obstacles that must be
confronted and resolved in order to move forward.
China is no longer a third world country or an emerging
economy. As the second largest and fastest growing economy in
Do your due diligence
If you have answered the question why you wish to have a China
strategy then you are ready to answer the second most important
question, “What defines success for your strategy.” All too often
companies pursue objectives without spelling out what the end
point looks like, that is, what will be achieved if they are successful. If your China strategy works just as well for the local
Burger King as it does for your company my suggestion is that
you don’t have a well-defined strategy.
It’s important to define what it is you wish to accomplish including timing, resources required and of course the impact of pursuing such a strategy on the rest of the organization. Remember,
nothing in life is free. If you have chosen to pursue a China strategy, something has to give elsewhere. The pursuit of a China strategy will draw on existing resources, which most companies feel are
finite in nature. Unless you double down with your resource loading (i.e., add people, cost, etc.) then you will need to back off in
other areas. The question you need to ask is, “Can we afford to
