The Globalization of economy and internationalization has led to emergence of a new market in the modern business world. With a huge expansion in international business due to sufficient scale and reach, the multi-national corporations do not enjoy monopoly in business. In the recent time Increasing numbers of business organizations of unreliable scale creating a necessity for expanding their activities across different countries. In certain cases, the motivation comprises of the information related to international markets (Kim & Mauborgne, 2014). Firstly it has become essential for a business organization to understand the international market and the competitive advantage. According to the pragmatic experience of international expansion, it suggests an evident prospective to achieve result through practice. The question related to the reality envisions through ‘best practice’ in international expansion strategy. It is related to precise and transferable management skill. In order to penetrate in international market it is important to expand business opportunity through market oriented strategies. The main purpose to expand business is either for the purpose of Market access and resource-seeking (Verbeke, 2013).
The growing Chinese economy has a control on the rest of the world. Chinese companies in the recent time have become more and more competitive and influential. This is bringing attention of the international companies to develop amicable relationship with Chinese country.
The challenges of China market entry have become important in the recent time. Despite of difficult international business environment the Chinese economy has continued to grow in double digits. China is competent enough to overtake US economy in terms of Market access and resource-seeking. Within China there are rapid changes in the demography, income, increasing consumer expenditure and an open business environment (Shaw, 2015). All this is accompanying in creating ample of opportunities for the international business organizations. Declining sales in the local US and European market has created wide opportunities in the Asian market. China is firmly taking place as a center of their long term global growth strategies. Breaking into the Chinese market is tough for the foreign companies die to lot of restriction. The aim of this essayis to highlight the key challenges that foreign companies are facing while entering Chinese market. It also includes practical recommendation that requires market entry and expansion plan (Hedley, 2017).
In order to enter in China market, the primary focus of the companies is to have an easy access to the market. As a competition intensifies and changes in market policies there is a necessity to find out an effective market entry strategy to gain effective growth. This is particularly important for a business to gain effective entry structure while expending business. This is important for the business to gain effective market strength by gathering information in order to attain market possibilities (Tan, 2017). The entry mode depends upon the number of factors including the industry and the geographical size and scope of market. While choosing the entry mode it is important to find effective business strategies that ultimately help in overall costs of setting up of local business and hiring the local workforce. China is firmly taking place as a center of their long term global growth strategies. There are three ways through which an international company can expand its business operation to China (Cavusgil et al 2014). It can expand its business through:
These three are the channel through which the international business can make advancement to Chinese market. WFOE is one of main modus operandi procedure to enter into the market. The consumers are looking for greater value, quality and integrity in the products they want (International Expansion Strategy.2017).
The Chinese consumer market is quickly growing with an increasing number of customers. The local customers are looking for premium quality products and are willing to pay for it. The reasons behind evolution of Chinese market depend upon the following factors:
The Chinese consumer market has begun to evolve in a way it was not predicted previously. The consumers are looking for greater value, quality and integrity in the products they want. Price consciousness still exists in the market but there is an increase in the product range. The increasing competitiveness in the local market has shifted drastically creating multifold opportunities for the international investors. The Chinese companies and multinational companies do not see consumer marketplace through a different lens. The maturing local market has benefitted the local market in a way it helps in creating ample of opportunities. The evolving maturity in the local market has helped in making a strongest competition (Roach, 2016).
Due to an emerging Chinese markets in the recent time the multinationals are f forced to develop new strategies. There are changes in the organizational structures that completely depend upon the country they are working. the operation required to be managed efficiently through people and processes. Organizational redesigns is a complicated process and politically messy that ranges from outright denial to reluctant acceptance.The rapid changing marketplace structure has helped in creating distinct opportunities through exploring distinct market structure. The availability of skilled employees in the country itself has changed the scenario in terms of getting work done. The only problem a MNC can face working in Chinese market is related to the culture disparities. The local population is more inclined towards the culture and gives preference to the local companies. There is a vast gap in cultural practice between Asian countries and the western countries. The gap has created a vast scope for the local companies to get more preference over the international brands. For example: McDonalds has adopted the Chinese culture and food preference in their menu in order to gain desired result (China – Market Entry Strategy, 2016). The only way for a company to gain success is by adopting the local culture. But this gap can be reduced by imbibing the cultural practice. This will allow the local people to imbibe the culture in an easy way. This will help in adding a capacity over the other companies. In the recent there has been a change in mode of business practices that has helped in improving the strengths of the international brand. The only strategic intervention requires in the current scenario is a concrete business strategy. This will allow the business organization to penetrate in the Chinese market in an easy way. Today more and more consumer in China requires value in their product. This allows them to create a competitive environment. An Australian renowned brand Bulla Dairy Foods is selling their dairy products in China is an example of business expansion. Australia has a good variety of dairy products that is attracting opportunities in Chinese market. Consumers are moving upscale and willing to pay more for the products they are purchasing. The companies are adding a critical component in the growth. The focus on quality instead of cost encourages companies to develop a vibrant atmosphere. The encouraged cost structure has helped in providing a requisite amount to the investors within a stipulated time period. The differentiator trend model has allowed the multinational brands to create brand loyalty. Within a short period of time the brand has allowed them to gain effective result. China represents a huge potential market for the foreign companies. There are ample of opportunities for the foreign companies to expand business through Asian market (Sui & Baum, 2014). Foreign companies of all shape can enter the market in an effective way. In terms of investment it is important for the international company to understand the Chinese market. The Chinese market is fragmented and requires a lot of study. In order to make a fruitful expenditure in China it is important to hold an understanding related to the local market. For the purpose of gaining an edge it is essential to have a Strategic and operational understanding related to Chinese market. The cities need to be Selected According to Industrial Orientation. Success of business venture directly depends upon the effective investment. The investment depends upon the availability of resources in the local market.
Whichever entry mode is chosen it is important to undergo an efficient market research the final decision related to the market entry is being tam depending upon the route of market entry. The international expansion however creates necessity to develop an efficient operations and logistic function. An increase in the global market expansion has created a necessity to increase the overall potential pertaining to operation management and logistic control. For the purpose of procuring raw material or goods from a third country it is important to give attention on the logistic and supply chain. Moreover in case when the goods are being exported to other countries it is necessary to adopt an effective supply chain. China has a concrete infrastructure and technology. It has allowed the country to make successful intervention in gaining a systematic growth. Market opportunities are increasing at a fast rate creating a need to develop an improved function allowing easy transport of goods (Kamau, 2014). The supply chain allows the business organization to gain a systematic growth. Thus it is relevant as per the current market condition that the company needs to develop an effective market capacity in order to attain significant result. The purpose is to enable a systematic supply chain by managing the business unit in order to fulfill all its business operations (Chung, 2013).
(Source: Hedley, 2017).
China has remained a single largest contributor to the word GDP. The global economy is developing at a fast pace creating significant changes in overall investment structure. No developing country comes close to China in terms of global growth; China is expected to account around 73 percent of the total BRICS grouping. It remains as one of the largest contributor on tars of economic growth in terms of expansion and development (Prange, 2016). There are three key factors behind the persistent Chinese growth:
Conclusion:
To conclude, it is important to understand the mode of entry into Chinese market. While expanding the business it is important for the business organization to gain a competitive advantage. According to the pragmatic experience of international expansion, it suggests an evident prospective to achieve result through practice. In the recent time the Chinese market has evolved as a most appropriate market. The Chinese companies and multinational companies do not see consumer marketplace through a different lens. It is important for business organizations to develop different types of production/distribution firms. It allows the business organizations to develop effective marketing strategies in order to gain concrete results.
References:
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
China – Market Entry Strategy.(2016). (ONLINE). Retrieved from: https://www.export.gov/article?id=China-Market-Entry-Strategy (Accessed on: 11 June 2017)
Chung, C. K. (2013). Exploratory study on Emerging Market Entry Strategy: System thinking approach. In International Conference of the System Dynamics Society, Cambridge, MA.
Hedley, M. (2017). Entering Chinese Business-to-Business Markets: The Challenges & Opportunities. (ONLINE). Retrieved from: https://www.b2binternational.com/publications/china-market-entry/ (Accessed on: 11 June 2017)
Hedley, M. (2017). Entering Chinese Business-to-Business Markets: The Challenges & Opportunities. (IMAGE). Retrieved from: https://www.b2binternational.com/publications/china-market-entry/ (Accessed on: 11 June 2017)
Holtbrügge, D., & Baron, A. (2013). Market entry strategies in emerging markets: An institutional study in the BRIC countries. Thunderbird International Business Review, 55(3), 237-252.
International Expansion Strategy. (2017). (ONLINE). Retrieved from: https://www2.deloitte.com/tr/en/pages/strategy/solutions/customer-and-market-strategy-services/international-expansion-strategy-services.html (Accessed on: 11 June 2017)
Kamau, A. (2014). Market entry strategy. GRIN Verlag.
Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.
Prange, C. (Ed.). (2016). Market Entry in China: Case Studies on Strategy, Marketing, and Branding. Springer.
Roach,S.(2016). Why China is central to global growth. (ONLINE). Retrieved from: https://www.weforum.org/agenda/2016/09/why-china-is-central-to-global-growth (Accessed on: 11 June 2017)
Shaw, K. (2015). Foreign Market Entry Strategies. China-USA Business Review, 395.
Sui, S., & Baum, M. (2014). Internationalization strategy, firm resources and the survival of SMEs in the export market. Journal of International Business Studies, 45(7), 821-841.
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Verbeke, A. (2013). International business strategy. Cambridge University Press.
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