The Challenges Facing Foreign Firms in China

5686453003_f760699e90_nMany foreign firms attempt to launch and expand operations in China because of the country’s rapid economic growth. Robin Li, CEO of Baidu, the largest search engine in China, has said that companies (such as Google) often stumble because they don’t understand the complexities of the local market. In 2010 Google left mainland China, redirecting traffic through Hong Kong after regulation issues and government resistance. Baidu now has a commanding market share in China.

Fernando de Gongora has over 15 years of experience working in China, most recently as founder and managing director of two private companies. “I fully agree with Mr. Li´s opinion,” says Gongora. “Most international companies doing business in China lack a deep and thorough understanding of the local conditions. And this is also true (and even more relevant) in the rapidly and vibrant “Chinese Internet.”

International executive Gary Goldman is new business development expert specializing in major branded consumer products.  He also agrees with Mr. Li about doing business in China and the Asian rim. “As a maker of goods in Asia and a senior licensing executive, I see that too many companies do not take the time and R&D to review what they need to understand prior to ‘jumping in to this new marketplace.’ for them,” shares Goldman. “I have lived and worked thru out Asia for the past 28 years and I do feel there is still so much more to learn and understand.”

So how can foreign firms negotiate the transition and handle the challenges associated with moving business to China?  “Because this is a very sensitive sector for China´s development and also for the stability of the Communist Party, multinationals companies trying to get a slice of this huge market need to develop a profound understanding of China´s political and social conditions,” Gongora explains. “How to do this in the right way is the key issue but my feeling is that companies have to look at this market through a ‘China lens’ rather than through the ‘superiority lens’ that we westerners are so fond of using when dealing China. Understanding how the locals (like Mr. Li and others) develop this market and deal with the ‘red lines’ from within is key.”

Dr. Andre Walton, founder of organizational consultants Creative Paths, has spent more than 30 years exporting and helping others develop export markets. “Generally business, large or small,  focus on litigious issues such as regulatory factors, employment law, import regulations and incorporation/fiduciary duties,” says Walton. While these are important they are the ‘bricks and mortar,’ and represent nothing more than buildings, vehicles, computers and office furniture. Few companies ‘budget’ to tackle the real issues involved in market entry that involve learning how local markets operate, including how everyday people do business. This is a shame because, in my experience, most people go out of their way to be helpful to new, foreign, ventures most of the time UNTIL they sense that you are abusing their customary practices; then they may go out of their way to be obstructive.”

Walton believes the issue affects more than just China. “Although most of my clients have been crossing the Atlantic in one direction or the other, I have observed these issues when traversing borders in many other regions. Although the US shares many thousands of miles of border with Mexico, for instance, there are remarkably few businesses from either side of that border that have succeeded crossing it!”

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