(OLD) Case Studies - Market Entry
China’s global profile has boomed in the first two decades of the 21st century, drawing attention to its politics, economics and culture. While the growing importance of China and its relationship to the world is often framed as complicated, one thing remains unequivocal – the allure and potential of the enormous Chinese market.
The China-Britain Business Council (CBBC) is the UK’s primary national business network promoting trade and investment between our two countries. Founded in 1954, the CBBC advises UK organisations seeking to expand into China, connecting them to the relevant businesses and institutions in the People’s Republic (as well as working with Chinese companies seeking to do business in the UK).
With offices in 13 Chinese cities, the CBBC shares its decades of experience and expertise with a membership of about 800 UK businesses. Industries from tech and fashion to sports and culture are responding to the call of the economic powerhouse.
“China’s an important market because of its scale and how fast it’s growing and changing,” says Mark Hedley, CBBC director and tech and knowledge economy lead. “It has been like that for many years. China is a developing economy: it’s often easy to forget that, just a few years ago, the Chinese economy was relatively small in global terms. It’s only in the last 10 to 15 years that it began competing with the US for the title of the largest economy in the world.
“At this moment in particular, the West and Europe has been hit the hardest by coronavirus, which has impacted growth in many home markets. What China and the wider Asia region offers is fast-growing consumer markets.”
But while China may offer incredible opportunities to a business, it can be a very different market to those that companies based in the UK and other Western countries are familiar with. Executives need to recognise these potential challenges and accept that there are likely to be gaps in their knowledge. Fortunately, the CBBC is part of a network of organisations that exists to help UK companies mitigate these risks and smooth the way to working in China.
One common set of issues that a UK business may face is understanding China’s cultural differences and how that can affect the success or failure of its product. “If you’ve developed a product or service for a Western consumer, it is likely to have been positioned in line with local cultural mores here in the West,” says Hedley. “Often those things don’t translate.” Brands need to ensure that products are localised for China’s unique cultural values and characteristics.
If you’ve developed a product or service for a Western consumer, it is likely to have been positioned in line with local cultural mores here in the West. Often those things don’t translate
Being aware of these differences and preparing to meet them are key to succeeding in China. This includes understanding the laws relating to intellectual property, data storage and handling, and product testing and approval, as well as any additional regulations that may apply to a business’ specific sector and circumstances.
“In terms of IP, whether it’s a consumer brand or tech product or service, there will always be some element of risk when entering the Chinese market,” says Hedley. “Some companies are not fully aware of their intellectual property assets and fail to take appropriate steps to protect them. We’ve worked with a number of brands, from BP to Peppa Pig, helping these companies tackle the IP infringement problems that they have in China.”
Certain restrictions require foreign businesses to work with a local partner. It’s important for a company to do its homework and ensure that it can trust and rely on that partner to work in the organisation’s best interests. The CBBC serves as a “shortcut” by connecting new members into their existing network, offering peer-to-peer events and networking opportunities where organisations can connect with others that have greater experience and understanding of China – and, significantly, their own valuable contacts to share. There are also UK government resources to help with performing due diligence.
“I think one of the challenges when it comes to China is that there’s a certain opaqueness in how the market operates,” says Hedley. “For example, there is a lot of written legislation in China – but often, until that legislation is tested in a court of law, it can remain open to interpretation. Sometimes that leaves some uncertainty for foreign businesses in terms of what they can and can’t do, which in turn affects their overall strategy for China.” It’s important for businesses to seek advice to make sure they’re staying on the right side of the law.
When it comes to coverage of China in the media – which often portrays a narrow view of the country based on geopolitical events – the CBBC can help businesses to “look beyond the headlines” and better understand the more long-term risks and rewards on offer. “There’s a lot of good information out there for companies, so it is possible to see a way through some of the murkier issues,” says Hedley.
The CBBC serves as a “shortcut” by … offering networking opportunities where organisations can connect with others that have greater experience and understanding of China – and, significantly, their own valuable contacts to share
The Covid-19 pandemic has changed how companies operate all over the world, and the CBBC is no exception. Quarantine restrictions and fewer international flights have made it more difficult for UK companies to travel to China and develop new opportunities. Responding to this, the CBBC has launched its new services to help UK companies leverage its network in China, allowing its members to maintain contact with customers, partners and suppliers.
“Ultimately, the long-term impact might be quite positive,” says Hedley. “Once we come through Covid, I think it will be a lot easier for businesses to follow up and stay connected with their customers and suppliers in China. We are learning that there are ways and means to do that online. Maybe we don’t have to fly around the world six times a year to manage business overseas.”
This digital shift is at the forefront of the CBBC’s attention. It has watched over the decades as the Chinese market transformed from the ground up, and sees this new digital stage making the country accessible to UK businesses as never before. “You can connect from your mobile to a consumer or business in China – even its remotest parts – a lot more easily than ever before. With translation technologies, the increase in Mandarin education, and the sheer number of Chinese students studying English and living in the UK, it’s easier than ever for businesses to connect. I think that the future will only lead to closer connections and collaboration. We’ll be driving that. There are some risks and challenges, but it’s important to focus on the opportunities. China is only going to increase in importance.”
What must be remembered, with the growing accessibility of doing business with China, is that due diligence in legal, regulatory and ethical matters remains paramount in order to ensure that a business can fulfil the promise of success and growth that the country offers.