Foreign Companies in China Making It Big
The challenge of China market entry is crucial for Western businesses of all shapes and sizes. Despite a challenging economic climate in the US and Europe, China’s economy has continued to grow at double-digit rates over the last couple of years. With the country poised to overtake the US as the second largest economy by 2020 and destined to remain an engine of global growth for the next decade, understanding how to enter the large and complex market has become critical to most foreign companies.
Declining sales in their home countries have forced many Western companies to relocate to China as one of their long-term global growth strategies. Successfully breaking into the China’s market can seem like such an impossible task to foreign companies in China with no or limited experience of doing business there. The Chinese market is unique and quite challenging to compete against the local firms without adapting to local execution. Despite all the challenges, individual foreign companies in China are still doing great either by tapping into consumer trends, successfully localizing products or by being the right brand for the moment in China. Below are many of them and what their success says about the Chinese consumers right now.
Ikea offers you more than just a place to shop, and it’s more of an amusement park. It has cozy beds and sofas instead of rides, complete with some inexpensive ice cream and hot dogs. Ikea maximized on the need of customers looking for a place to cozy or even doze off hence the choice of furniture. Ikea’s one of the foreign companies in China that is giving the customers exactly what they are looking for or even more. In 2014, the annual summary proved that it was the best year yet, with sales up to 25% and new store openings.
Its popularity is influenced by Ikea’s decision to lower the prices and also China’s drive to promote consumption and urbanization. China is a traditionally saving country and with more people moving to the urban areas, then it will be more of a consumer-based economy and people would spend more.
Over the past few years, Starbucks has been opening a new store each day, and it now has approximately 1,600 locations. It has localized production by adding more variety for instance, for individuals who find coffee bitter; there is an alternative to fruit or green tea. In 2014, the company made a 12% profit in Asia with China significantly impacting its growth rate.
Starbucks learned the rules of the Chinese market and played them right. It is one of the foreign companies in China that has done value addition whereby, Starbucks is no longer the place you grab a coffee on the run, but people meet there with their friends, it’s like a rendezvous where they chill, take selfies and post on their respective social media platforms. Starbucks is tapping into individuals’ craving for indulgence and experience and used that as a springboard to build such a successful inspirational brand out of it.
The luxury sector has been affected by the anti-corruption drive done by the government and also by people’s tastes moving from bling. They have almost reached saturation point in China’s market since they are facing fierce competition from the local players. Also, people consider luxury items in China to be obnoxious, making affordable products well-placed. Hence, Coach has benefited from rich Chinese business class people. In 2014, they made 8% profits making it one of the foreign companies in China still riding high.
There are a plethora of up-and-coming Chinese electronic brands most especially in the Smartphone category including OnePlus and Xiaomi, which are quite stylish but come at a much lower price than the iPhones. But hey, there is just something about the iPhone and especially the iPhone 6 that people just can’t resist maybe the large screen plays a role too. Apple has been quite focused on China and according to CEO Tim Cook, the gold phones with sleek designs were made with China in mind. That personal relationship paid off, though, because, in 2014, iPhones were more popular in China than in the US. In fact, Apple is thinking about doubling the number of stores in the next two years.
Coke is one of those companies that get a soft-landing in any economy. It has been in China since 1927 and by 1948, it was shifting more than a million bottles to Shanghai in a year making it the biggest city out of the US for the company. Clearly is one of the more successful foreign businesses in China which have remained successful through the years.
McDonald’s and Yum! Brands’ KFC
KFC started in China in 1987 while McDonald’s arrived in 1990. The two companies have learned the art of keeping up with the rapidly changing China market. According to McDonald’s, they are all learning how they need to work with the changing social attitudes and continuous inspirational trade-ups even with the Chinese themselves. He warns that you can only thrive in China if you stay relevant and not assuming that whatever worked in the mature markets will work there too.
In 2013, KFC had 4,400 restaurants in 850 cities and was planning to add another 700 in 1 years time. On the other hand, McDonald’s has been opening 10 restaraunts a week between 2012 and 2015. These two are the biggest foreign companies in China providing jobs for both locals and foreigners.
This German car maker uses China as its biggest market, representing a third of its global business and it also has seven production plants in the pipeline.
Apart from the above, there are so many other foreign companies doing big in China such as Adidas, Samsung, L’Oreal, VW, Giorgio Armani, Nike, Unilever’s Omo, Philips, General Electric and Intel. These are some of the foreign companies in China which garnered the necessary knowledge of the needs and the size of the Chinese market, were willing to explore relevant aspects of their lives and had the level of resources required. They braved the tumultuous Chinese market, strategized on the best city to put up their businesses in China, looked for the best talent and joint venture partners inside and outside China to bring to their team, took a leap of faith, and the success the companies are experiencing now is just insurmountable.
It can be quite intimidating when you make the first step into the Chinese market since they are a myriad of obstacles preventing you from achieving your success. However, some foreign companies in China successfully navigated through the pitfalls to such a record-breaking position, and they are now comfortably enjoying the rewards as they create more jobs for the locals and foreigners. With China’s growing and opening market more foreign companies are doing business in China and enjoying the bitter-sweet feeling of working the world’s fastest growing economy.