By Michael Barbalas, PRI Senior Consultant
Every company wants to grow sales and profits, and strategizes to accomplish these goals. The most productive places to target significant growth are more rapidly growing markets such as China. Gaining sales in growing markets is often easier and potentially more profitable than competing for market share in established and slowly growing markets. Companies need to consider China as part of their global growth strategy.
In 2020, China was the only major economy to post positive growth. Over the next five years, economists estimate that China will contribute about one third of total global growth. This is equivalent to the growth expected for the USA, Europe and Japan combined. China is not a market that any growth oriented company and strategy can afford to ignore. By the end of this decade, China’s economy will also pass the United States and become the world’s largest economy. No company can afford to ignore the China market.
Besides size and complexity, China also stands out for its competitiveness. The rise of Chinese firms competing in every industry has added a new global dynamic that has spilled over China’s borders to affect industries and markets around the world. Companies that avoid the China market often soon find themselves competing with Chinese firms in markets around the world, including in their home country market. Companies can choose to minimize or exclude China in their global strategy but will soon find Chinese companies in their home market challenging their strategic position and home field advantage.
If your company’s strategy can work in China, it will have succeeded in one of the world’s most competitive landscapes. In addition to gaining access to a rapidly growing market, this competitive discipline can provide benefits to other parts of your global strategy and businesses.
China is not a simple piece in the overall strategic puzzle. In the United States, there are eleven cities with a population exceeding one million people. In China, there are 102 cities with a population over one million people. Designing marketing, logistics, manufacturing and distribution to enter and address a market of this size and complexity requires a deep understanding of the local economies and situations. How does a company address a market of this size, complexity and competitiveness?
One advanced manufacturing company approached PRI with that same question in 2020. The company’s relationship with China at the time only consisted of using a contract manufacturer in China to make their products for export to the US and Europe. PRI worked with their leadership team to develop a comprehensive China strategy. This included performing a market study to reveal domestic demand for their product with specific sales leads from both privately owned Chinese companies and state owned enterprises. At this point one year later, PRI has helped the company navigate RMB sales of their products, register a China legal entity, and identify and hire six engineers, sourcing specialists, and sales leaders to take advantage of the rich growth opportunities in China.
Regardless of how you approach these challenges, China needs to be a part of your strategic plan. If you are not proactive in adding China to your global strategy, you will soon have Chinese companies adding China to your plan for you as they enter your home market and compete with you in other global markets.
While complex, China is not an unsolvable puzzle. If the best time to work on your China business strategy was yesterday, the second best time is today. We would be delighted to talk with you about how to build smart strategic plans and turn them into reality.
PRI is a premier management and consulting company with over 30 years of experience
doing business in China. The PRI team leverages this vast experience in dozens of industries to provide world-class operations solutions that simplify the complexity of doing business in China and empower businesses to succeed.
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