Last night was the first event hosted by CRCC during my time here. I was quite excited as it was a business seminar based on branding an international product in China and vice versa, which is essentially what my entire degree is about!
We began with a talk from Arthur Hagopian from Strategic Public Relations Group, which covered the basics of the marcom (marketing communications) mix and how it needs to be tweaked for the Chinese market. He mentioned a particular case he worked on with is client Merz, an American pharmaceutical company whose global brand revolves around the idea of ‘curiosity’. Bringing this to China was a delicate matter, as curiosity is something acceptable in moderation, but could lead to some serious culture clashes if handled poorly. The way around this was to tap into a ‘childlike wonder’, which would be acceptable in the majority of countries around the world.
Most of what Arthur said was common sense if you have a background in marketing, but one thing he said stood out as something I had not considered before. The Chinese government focus on five-year plans, which are goals for social and economic development in the medium-term. As such, companies that are aligned with the government goals are more likely to have an easier time entering China. I’ve done a little bit of investigation and China’s current plan for 2016-2020 is focusing on the following areas:
- Innovation (modernising practice)
- Balance (bridging the welfare gap between urban and rural)
- Green (developing environmental tech)
- Opening up (increased international cooperation)
- Sharing (sharing the wealth)
There are two points on these that I think international companies are likely to neglect; namely, the welfare gap between urban and rural, as well as international cooperation.
Now I know what you’re thinking – surely the ‘international cooperation’ box is ticked by the very nature of the relationship – but it is a bit more nuanced than that. The keyword is ‘cooperation’, meaning that you can’t just enter China and do your own thing. You have to work alongside the government, work alongside Chinese investors, franchisees, and joint ventures. No one knows China better than the Chinese and setting up independently is almost certainly a recipe for failure. ASOS learnt that the hard way last year when poor research into competition and consumer behaviour resulted in them pulling out of the market with a £4m loss.
So how does an international company get around this? Typically we’re told that FDI (foreign direct investment) and joint ventures are the way to go. FDI is flawed in that firms try to maintain their independence, changing the company they buy to comply with the rules that work abroad – which is not so smart. Joint ventures allow you to access people with the cultural, legal and economic knowledge to adapt your strategy and make it work domestically; however, after a few years they will have learnt enough from you to terminate the relationship and develop their own method moving forward.
If you want to remain independent, at least use a Chinese PR firm. So many foreign firms are misinformed about China overall and tend to forget to segment the market on a national level. This is often seen from a socio-economic standpoint, where the cities are separated into tiers. Tier 1 consists of Beijing, Shenzhen, Guangzhou and Shanghai, areas with dense populations and front of the curve when it comes to trends. Naturally, these cities are targeted for market entry, with the expectation that once success has been obtained, the brand can trickle down into Tier 2, and then Tier 3. This is just how it’s done, or so it seems.
As someone who comes from a rural area myself, I understand that certain things may be slower to catch on, but growing up in the middle of nowhere, I often coveted those products and services that weren’t available in my area. They would have made life easier, but instead, we had to look on as those in the cities that already had better opportunities were given even more. Even though I understand the safety of following the tried-and-tested tier system, I am interested in finding out if there are firms focusing on the lower tiers first. Is it feasible? If so, why and how does it affect future growth? This would, of course, be in line with the government initiative for balance and could potentially pose an alternative way to enter the market, even if it does appear riskier than following the crowd.
Following the presentation from Arthur, he was joined on a panel by Georgia Yexley who is part of the team exporting the Chinese company Mobike to the UK, as well as Zilin Wei (I think that’s his name) localises Chinese games for the foreign market. Mobike raised some very interesting issues both in China and abroad, but given how long this post is getting, I’ll write these up in Part Two, available tomorrow.