The allure of doing business in China is undeniable. It is a country with a population of over 1 billion people; more than 50% of them are internet users, 98% of which are mobile users.
But the failures from giants such as Facebook and Google show that doing business in China is not easy. There's the language barrier, and differences in business culture and consumer behavior. Not to mention navigating the complex local laws and bureaucracy can be challenging.
However, it is not impossible. Here, we've rounded up 5 key takeaways from foreign companies that did manage to succeed in the competitive market.
- Follow the Rules
Strict internet censorship in China is a well-known fact. While it is a controversial topic and you may of course not agree with it, companies like Linkedin and Evernote owe much of their local success to their willingness to adhere to the rules. Linkedin for example, stores their Chinese data in local servers, granting the government access to it, and censoring some of its product features and content.
Evernote also stores its data locally and this year announced they would move the storage of all their data to Tencent Cloud, the cloud services business under Chinese internet giant Tencent.
- Make it Personal
Customizing your product as well as your sales and marketing strategy is key for success whether it be in China or anywhere else in the world. Again, Linkedin and Evernote created a localized marketing strategy. They adapted their product and used WeChat and Weibo to promote their business. They provide services Chinese customers are used to,such as real-time customer service accounts on WeChat and Weibo.
Linkedin also hired a local team, who were of course more familiarized with ways of reaching out to Chinese users.
- Form Local Partnerships
You know how when you travel, the best food and experience tips are given by locals? Well, the same rule applies in business. Partner up with locals in order to better learn about your customer behavior and market.
In the case of Linkedin they partnered with local venture capital firms Sequoia China and China Broadband Capital, which helped them manage how to best expand their business.
Coursera is another great example of a Western company leveraging the knowledge of their local partners to grow. Coursera first partnered with local online platforms Guokr and Yeeyan in order to distribute and translate their content. During the course of their expansion, they've continued to team up with local partners such as NetEase, Hujiang to reach more users and widely distribute their product and with China's top universities Fudan, Shanghai Jiao Tong and Nanjing.
- Be Flexible and Adapt
Being willing to be flexible and adapt to the local customer behavior is another key lesson learned.
A great example of this is Ikea, the Swedish retail giant that has managed to be successful and still differentiate themselves from local imitators blatantly copying their products and store layout, right down to their blue and yellow logo color scheme.
In China, shopping behavior is based more on experience. You will find this to be true once you visit an Ikea store in China. Follow the arrows that'll lead you to the mock bedroom layouts, with customers not just trying out the mattresses, but actually snoozing comfortably under the blankets. The couches and sofas in the living room area might be crowded with visitors browsing through their cell-phones or simply hanging out for hours. Large groups of elderly have been notoriously gathering in the cafeteria to enjoy the free coffee they get with a membership card.
Although this behavior might be considered excessive and beyond the limits of what's considered "testing out the product", Ikea was willing to accept this and adapt to the local way of doing things.
5. Importance of Guanxi
Guanxi is roughly translated as relationships or connections. It is the building block of how many personal and business relationships are governed in China. In business, these connections are developed and maintained through time, and often times in social settings. So in China, and in other countries in Asia, it is common for co-workers to go for dinner and drinks after work hours and invite each other for important life events like weddings, births and funerals.
Having good guanxi is believed to play an important role in a business' success. Guanxi is about building trust and has to do with a social obligation of reciprocity, which leads to good personal and professional relationships. This holds true, not only in China, but everywhere else as well.
So, whether you consider opening a new business, or expanding your company into China, take into account these insights we've gathered from others who've blazed the trail ahead.
You might also think about the benefits of setting up your company here in Hong Kong. Check out this article where we've outline the numerous advantages of incorporating your company here.