Most executives of multinational companies (MNCs) are generally aware that growing a business in China presents very real and unique challenges that should be factored into the initial investment and the overall business objectives. However, in the rush to take advantage of the so called never-ending growth and scale of China, companies can make strategic and often operational miscalculations that can compromise their ability to meet their goals.
Here's a list of a few most common misunderstandings about China:
1. China is just like America was in the 50's (or Japan in the 80's, or Mexico in the 90's, etc).
It seems like this might be a good historic analogy; however, China is simply too big, too complex, and very much integrated with the rest of the world. Also, China's consumer culture is skyrocketing in its own and very unique path.
2. China's public / government data are generally unreliable.
There have been tremendous strides recently in the availability and quality of public data, especially for urban demographics. Close attention should be given to the development plans of the central and city governments. Their plans are clear for the most part and also quite ambitious. It is also highly recommended to gain access to the local Mayor of the city you target for your primary business plans. These local government officials are usually more than willing to assist new business development and provide various and important data / facts (i.e. population density, retail clusters, transportation infrastructure, etc) in order to help stimulate growth within their communities.
3. China's internet is like the rest of the world.
As Google's drama in China was recently highlighted, their internet is quite unique and worth the extra time to investigate. In fact, many of the large US based sites such as; eBay, Amazon, Facebook, Twitter, etc are for the most part insignificant and practically non-existent. China has its own internet pulse and it is significantly different compared to the Western world.
4. China's consumers are split between urban and rural.
This is partially correct; however, most global brands are actually spending their time and efforts within a few limited parts of China, usually inside the 6-8 mega urban cities. The majority of China's consumer market is overwhelmingly clustered within cities that have staggering populations. More important however, is the proximity to the country's cultural centers, such as Beijing, Shanghai and Hong Kong.
5. There are big generation gaps between each decade.
Generation gaps are in fact huge, and they crop up more often than every decade. This is a direct result of an extremely fast economic growth. Changes in both technology and culture result in wildly different formational environments. Today's young adult in China grew up listening to various Asian boy bands and teenagers meanwhile are watching China's version of reality TV. Is it any wonder they embrace a different outlook, which in turn baffles their elders?
6. China is rapidly westernizing.
There's no doubt that China is modernizing, and becoming more and more influenced by the Western culture, just look at all of the KFCs and McDonald's across the country. However, can we really call it westernizing if those US based restaurants offer congee as part of their breakfast menu? While there is a notable increase in Western brands and lifestyle options, it is also matched by an increased interest in historic Chinese culture. In fact, there is a strong argument that China is becoming more Chinese. In addition, there's another often-overlooked influence, and it's located in North Asia. Japan, the world's second largest economy, sits off China's shore, and its cultural influence is at least as significant as that of the Western world. South Korea also has a strong and considerable influence on the young adults of China.
7. Chinese youth are divided into tribes.
There is some truth to this, and young people are segmenting themselves at earlier ages these days; however, these tribes look different from their Western counterparts. In the West we can use magazines, music and brand affiliations as a way to best describe a group or tribe. These don't quite work in China, because the print media is relatively small and the music scene is very disjointed as a result of piracy. Brand preference can be easily descriptive in the larger cities, but in the rest of the country, brand differentiation is considerably more blurred. So, in these cases, the kids gravitate towards celebrity preference, hobbies, and use memberships in multiple online clubs, etc to differentiate themselves. In China, this can say a lot about a person; however, there is also a tremendous amount of fluidity and change within this particular demographic.
As we have witnessed over the past 10-15 years, market dynamics within China are changing very rapidly as a result of high growth and an influx of both foreign and local private enterprise. So, market research data must be regularly refreshed and reviewed in order to remain current. In addition, proper consideration must be made to a company's governance model that integrates their China operations with a global perspective, while retaining in-country business unit autonomy.