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Doing business in China: trends and advice

Doing business in China: trends and advice
The current consumer trends in China are creating many opportunities for businesses. However, with opportunities come challenges. We chose two reports focusing on the Chinese market: the current top trends and the main struggles that even large and successful businesses might face in China. Both reports offer advice to businesses currently engaging with this consumer market.

Consumption in China: Ten Trends for the Next 10 Years

Consumption in China is changing rapidly. Businesses wanting to derive the most opportunities need to learn about and adapt to the current consumption trends in the region to continue growing successfully. The key trends business owners need to be aware of include the growing middle class (which has increased spending and decreased savings), rapidly aging consumers (creating opportunities in products and services for elderly, such as health, supplements and insurance), and the rise of digital natives (who consume at a much higher rate than other demographic groups and demand quality, variety and convenience). Other important trends include the expanding sharing economy and technological advances, including high speed transport and internet, 3D printing, Artificial Intelligence and the Internet of Things.

In order to create growth opportunities, businesses in China need to focus on offering highly personalised and quality products and services. This can be achieved through the use of data and consumer insights. It is also important to integrate products into the overall consumer experience, be adaptable to rapid transformations within the market, implement a strong digital strategy and offer products and services with a corporate social responsibility and/or sustainability focus. Finally, companies need to work together with academic institutions, the government and other businesses if they want to successfully adapt to these trends in the present and future.

Read the full report on the Bain & Company website.

Why Western Digital Firms Have Failed in China

Many large Western digital companies such as Amazon and Google have successfully expanded internationally. However, to date, they have failed to succeed in the Chinese market. While many believe that the reasons for failures are cultural differences between the West and China and censorship by the Chinese government, these are not the only factors as these companies have been successful in other markets that are very different to the West (e.g. Arabia, Thailand) and companies in other industries have been successful in China despite these factors.

Recent research shows that the main reasons these companies failed in China were a lack of understanding of the Chinese market, poorly managed relations with the Chinese government, implementation of global business models that do not work in China and an inability to outcompete local businesses or collaborate effectively with local partners. These and other factors have cumulatively led to failure.

What Western companies can do to be successful is to have a holistic approach to growing their business in China. Success will not result from simply addressing issues that led businesses to fail in the past. Instead, businesses need to create advantages and compete across different areas of the business process. They need to engage in ongoing improvisation and experimentation in innovation; customize their business models, products and platforms; learn from the local digital businesses on how to integrate offline and online operations; and collaborate with successful local businesses.

Read the full report on the Harvard Business Review website.

The middle-class kingdom: ‘Made in Japan’ is now big in China
The demand for ‘made in Japan’ products is on the rise at such a rapid rate that it is starting to overtake the demand for locally produced goods in China. Due to the growing middle class that brings with it higher incomes, affluence and sophistication, Chinese consumers are now turning to Japan for top quality premium products. The demand for ‘made in Japan’ products is coming not only from China, but also other Asian markets as the middle-class grows across the region.

This growing demand means that Japanese manufacturers that were on the decline are now quickly recovering their sales numbers and rapidly increasing their production to meet the demand. Chinese businesses are also profiting from this trend by opening their factories in Japan, which enables them to use the ‘made in Japan’ label on their products with authenticity. The demand for Japanese-made products means more opportunities for businesses in China and other Asian countries if they collaborate and integrate with Japanese manufacturers and suppliers in their product manufacturing operations.

Read the full article on the Wall Street Journal website.

The digital archipelago: How online commerce is driving Indonesia’s economic development
E-commerce has become a lifeline for many developing Asian countries by helping SME growth and making products and services available and accessible to consumers across the region. This McKinsey report outlines research on how e-commerce has powered Indonesia’s economic development and how it can continue to benefit this economy in the future.

Indonesian consumers are enthusiastic users of social media and smartphones, and the country has seen significant business opportunities rise due to greater connectivity, growing social commerce and improved access to services. However, challenges such as fear of and aversion to technology and online shopping still remain and slow the progress of e-commerce. In order for e-commerce to develop further and to create significant opportunities and benefits, businesses need to help to improve logistics and infrastructure within the supply chain. There is also a growing need for seamless, secure and scalable payment opportunities (especially cashless payments) and a professional and digital commerce ecosystem comprising micro, small and medium enterprises (MSMEs). Businesses can also help by encouraging a strong local talent pool and creating a healthy investment climate. By learning about the e-commerce landscape in Indonesia and taking steps to participate in its development, businesses can also create further opportunities for themselves as Indonesia’s economy grows and prospers.

Read the full report on the McKinsey & Co. website.

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