Stepping into the China market is a complicated process. China is a large and uneven country, and its market is complex and constantly changing. A company’s strategy is likely to be influenced by a number of factors, including local social factors, business environment, market need, customer preferences and so on. There is no single best approach by which foreign companies could rely on to enter the China market successfully. Facing such a complex economy as China, many foreigners may feel confused and discouraged. Therefore, Jingle Office has summarized a do’s list and a don’ts list for your reference to help you succeed in the China market entry process.
5 Do’s for China market entry:
#1. DO investigate the market carefully before your China market entry
China is a huge country with regional differences in economic development, income, regional strength, language and culture. So before diving too far into the process of entering China, we strongly advise you to take some time to conduct market research: the current competition, the key competitors and their strategy, laws and regulations in your industry, market demand, local consuming habits and preferences, the legality of your product or service, the cities suitable for your business, etc. If possible, you can make a visit to China to get a direct sense about the country and market, and start networking in China.
#2. DO have some basic knowledges about the Chinese culture
Keep in mind that cultural and social factors are important for the business of your China market entry. So before selling to China, make a deep investigation into the Chinese traditions, cultures and taboos, and pay special attention to them when conducting business activities. The other thing you need to do is build a good relationship with your customers, distributors, partners and government officials, which is an intangible power to boost your success in China.
#3. DO choose the right legal entity for your business in China
According to the product or service you offer in the China market, you have to choose a legal entity. There are different types of business entities you can choose from, the most common models being representative office (RO), joint venture (JV), and wholly foreign owned enterprise (WFOE). Each one of them comes with its own strengths and weaknesses.
A representative office is easy to establish and usually comes at a low-cost. However, it is not allowed to engage in any profit making activity, so it is not an ideal choice.
The joint venture, which may seem like a safe route, can turn into a disaster for some. In order to open a joint venture, you need a Chinese business counterpart. Mutual trust is difficult to build, so most of joint ventures fail due to different aspirations of both parties.
A WFOE is fully invested by one or more foreign investors. A WFOE owns the full control over its business transactions in the China market, so it is the most popular form for foreign companies. However, because of its complexity, there are a lot of documents required for licenses application. Each city or region has different requirements for the documents.
#4. DO write a good business plan before your China market entry
It is an important step to help your business succeed in China. Take the time to write a business plan before you enter the China market, and make it as clear and specific as possible. The time you spend on the plan will pay off in the long run. Put simply, a well-designed business plan can determine the fate of your business in China. Your business plan should include but are not limited to: description of your product or service, your advantages outweighing your competitors, what problems your product or service can solve, whether there is a need to adapt your product or service to the local market in China, post sale service, projected revenues, and budget requirements, etc.
#5. DO select a trustworthy partner in China
At the beginning of your China market entry implemetation, a reputable partner is indispensable. The partner can help you solve almost anything for you, ranging from market research to product localization, from registering your business to legal assistance. Your partner is more familiar with the business environment, laws and regulations, and cultural features in China than you do, which can save you time and prevent you from unexpected troubles. Nevertheless, it is not easy to find a reputable partner, so take your time to check his or her qualifications before rushing into an agreement. If you find such one, take your time to build mutual-trust and long-term relationship in order to succeed in China.
3 Don’ts for China market entry:
#1. DON’T act in haste
Many companies want to sell their products or services in the China market quickly, but time pressure can create problems later on. It tends to result in sloppy planning and analysis. Market investigation takes time. The more detailed the market research is, the more time it will take. Finding a right partner and identifying his or her qualifications takes time. Especially, bureaucratic procedures are often time consuming. All of these mean that entering China market will be a long and difficult process. So do not act in haste, and take your time to do thorough investigation. Understanding and accepting this will help make the process go more smoothly.
#2. DON’T rely heavily on Chinese laws
Some laws in China are vague and can be interpreted in many ways. China’s enforcement of protection of property rights is weak. In addition, although laws and regulations prohibit local trade protection, it exists in one way or another because of the vagueness of the laws and regulations. Seek help from your Chinese partner to get legal assistance when you need.
#3. DON’T treat China as one whole market
It’s a mistake to treat the China market as one single market. China has 56 ethic groups. Their life styles, consuming habits, traditions and cultures are quite different. And there are great differences between different regions, for example, East China and West China. So it is a big misconception that the same market strategy applies throughout China. To be successful in China, you need to do your research properly before entering China market, and select one region that suitable for your product or service and your business to start. If needed, localize your product or service to meet the requirements of local market. A Chinese partner who is familiar with the Chinese business and cultural environment will help.
Failure comes from a lack of preparation. Ensure you have taken the above lists into consideration before your China market entry. And don’t hesitate to contact Jingle Office for help if you need.
Related reading: 5 Strategies to Find a China Distributor for Your Business