What do western firms need to learn about doing business in China? Here are my four key tips:
• Localise your strategy. China continues to operate as a collection of jigsaw-piece provinces, municipalities and autonomous regions. Some areas exceed in GDP that of the wealthiest European countries, while others barely reach third-world status. When Jaguar Land Rover considered its distribution strategy in 2010, it created dealership clusters to maximise sales opportunities. It grouped second- and third-tier cities alongside first-tier ones because disposable income and status aspiration is increasing faster in lower- tier cities.
• Localise your language. When Coca-Cola first entered the Chinese market, its name was represented by characters that mean “Bite the wax tadpole”. The Benz of Mercedes-Benz became “Die quickly” and BMW’s acronym translated as “Don’t touch me”‘. Multinationals are becoming smarter in how they communicate their brand values – Carrefour, for instance, is translated into characters that mean “Happy house”. Certain words register immediate emotional warmth with Chinese consumers – take local advice.
• Localise your media. You may be fluent in Facebook but it’s no use in China. Research by CKGSB shows that 80pc of Chinese consumers research their purchases on social media sites, but these are accessed by only 6pc of Western firms operating there, compared to half of Chinese companies. The strongest social media platforms are Weibo (China’s Twitter), RenRen (China’s Facebook for the college-educated), Pengyou, and WeChat, which dominates China’s mobile-driven social media community.
• Localise your leadership. In China, there is an established hierarchy in business – recognise and respect it. The Confucian values of virtue, order and harmony have led to prized concepts of long-term reciprocal relationships (guanxi), trusted middlemen (zhong jian ren) and holistic thinking (zheng ti guan nian). Chinese employees look to their leaders for insight (wu), moderation (zhong yong), company loyalty and the art of integrating Western best practices with Chinese wisdom. Smart European companies modify Western leadership values accordingly and aim to hire locals with these qualities.
Professor Sun Baohong is Associate Dean of global programmes at the Cheung Kong Graduate School of Business