International Marketing in China - Research Paper Example

International marketing in China Introduction Formulation and actualization of effective entry and marketing strategies is needed to take organizations into the ‘territory’ of success. And one of the ways to take the organization into the territory of success is to literally move the organization into another territory or market or country. With every organization having quite a number of good opportunities in foreign territories due to various factors including globalization, the organization by effective strategies can reach the customer’s minds and garner a optimal market share. So doing a complete environmental survey is very important. “Environmental scanning is the monitoring, evaluating, and disseminating of information from the external and internal sources.” (Whellen et. al, 2004, p.9). Several multinational corporations try to foresee things in crucial areas. The foreign countries will have certain enticing factors, which will aid them to actualize a successful entry. After this is done firms will or should have to analyze the challenges that may impede its entry. Also, there will be country specific challenges as well as industry specific challenges in those foreign markets. For example, the Asian country of China has some distinct aspects, which will surely act as a challenge for the new firms, who are planning to enter it. So, this paper will analyze and asses the challenges faced by companies with regard to the communication challenges that international company’s face in China and also the opportunities for foreign multinational firms in China. One of the biggest problems that companies face in China is with regard to its general and marketing communication. There are several cases in which the companies failed miserably in China. Chinese speak Chinese and they are no so much good at English. The culture of the people is also unique and it may be quite perplexing for a westerner and western companies to understand it easily. The later part of the paper will have more focus on the communication problems. But before that we have to understand why companies strive hard to do business in China. The market opportunities are plenty so as problems. Here are some of the reasons. China a diverse market with growth opportunities China is witnessing a fast economic growth with every sector of its economy showing optimum progress. The economic potential and thereby the purchasing power of every Chinese is increasing. This scenario will also continue in the future, with every Chinese household’s purchasing power increasing and that will give opportunities to all the businesses. In the year 2010, 40 million households will take home more than 48,000 renminbi ($6,000) per year, which is equivalent to $24,000 in terms of purchasing-power parity and good enough to make the grade of a middle class by U.S. standards (forbes.com, 2004). Remember earnings do not give any lee way in the companies’ communication approach. Whether the company targets the poor or the rich it has to hit the bull’s eye as far as its marketing communication is concerned. So, prosperity is a positive factor in China and it will be apt for the foreign firms. “Rising prosperity and a rapidly commercializing economy have transformed China into the world’s most important emerging market “(consume.bbk.ac.uk). But there is a huge potential in the middle and low income groups. These groups provide volumes and hence foreign companies can’t ignore this group as it would help them to achieve economies of scale. But it is not easy as the Chinese companies have lot of strengths as they know the target segments and also provide at a low cost and also has the trust of the local public and more specifically they know how to communicate their marketing strategy to the local public. “the crux of marketing process is the identification and serving of customer needs” (Rajan, 2007, p22) China too big a market to neglect A large number of foreign companies, particularly consumer goods companies, position their products targeting the biggest and most sophisticated markets, such as Beijing and Shanghai. A number of global companies like the FMCG majors Coca-Cola, Nestlé, and Procter & Gamble are having good success having touched billion-dollar sales with this strategy. But other foreign companies have found or still finding it extremely difficult to cross even the break even cost. It is such a difficult situation for the companies. Foreign companies will continue to target and strive in the premium segment as the market is still growing and margins are big enough to earn a reasonable return and also it is easy for them to strike a perfect or in other words easy communication with the elite segment. But whether foreign players have already hit the $1 billion mark or are still striving for their first $100 million, many companies expect big growth in the much larger middle- and lower-income segments, which account for 90% by volume of Chinas entire consumer goods market. (forbes.com, 2004). The local companies just follow selling concept and just have the strong communication advantage and nothing else. The selling concept has a premise that “consumers will buy products only if the company promotes” (Kotler and Armstrong, 2006, p10). Examples of communication failures in China Several giants across sectors have been stumbled in China. The names are quite popular to all of us and in fact make us surprised to know the kind of mistakes that occurred in China. Pepsi for example failed miserably in the “Generation Next” marketing campaign in China. It literally translated the “Generation Next” in China which the Chinese people mis-interpreted as bringing the ancestors from the grave. “Meanwhile, the Asian world was offered the empty promise, "Pepsi will raise your ancestors from the dead!"” (Wadharmi). Pepsi a huge multinational was a laughing stock in China because of their poor marketing communication. It is not only for Pepsi but for most of the companies that are interested to do business in China faces such problems in case if they are a little slack in their marketing communication. Even the UK giant Marks and Spencer also attribute their failure to marketing communication in China. Reason for failures Chinese people have poor English knowledge. The understanding is extremely poor and spoken English is even more pathetic. This is the biggest problem for multinational companies entering China. “Numerous disadvantages exist for the Chinese, to say the least. Poor English-language skill is a formidable disadvantage in providing knowledge-driven services to Western clients. The Chinese government has launched numerous programs to "popularize"” (Verma, 2005). English but most of them have been ineffective on the ground Companies face greater problems in non-personal communication channels. Many companies even faced problems in buzz marketing where in the company cultivates opinion leaders and getting them to spread information about a product or service to others in their communities. China has a huge farming population in rural places and buzz marketing can be a potential tool to establish communication in China. Importance of integrated marketing communications During the past two decades companies have mastered certain aspects like the art of mass marketing selling highly standardized products to masses of customers. In the process, they have developed effective mass media advertising techniques to support their mass marketing strategies. However there was a constant need for other areas according to the requirements. Today markets are getting fragmented. The explosion of internet technology has completely changed how companies communicate with their customers. Companies which are keen in being successful in communication in China will have to understand the basic principles of integrated marketing communications. Integrated marketing communication really needs to be addressed in a market like China. Chinese people have a lot of suspicion on foreign companies and any inconsistent marketing communication will lead to the collapse of the entire SBU in China. “Within China, the sense of injury from foreign critics is compounded by an education system that instills a deep sense of suspicion that Western powers are bent on weakening and dividing China, as they did in the 19th century” (Dean and Batson, 2008). Hence it is all the more imperative for the organizations that operate in China to concentrate on IMC. Here the focus is to integrate all forms of marketing communication so that the consistency is achieved by the company. Areas like advertising, sales promotion, and personal selling should be looked at very carefully by the companies. The rural urban divide China’s rural urban divide makes it a difficult market. It is difficult for any foreign company to understand the huge gap between the cities and the rural communities in China. Communication is extremely tough with the rural people. Some concepts like buzz marketing if applied can do miracles for the companies as it would reduce the price of the product. To communicate the promotional strategies companies should take that extra effort. The company should take concrete decisions regarding the brand name. Several companies keep western names that may convey a negative meaning to the Chinese people. It is a certainly an acid test for the MNCs. It will test them against the strengths of the local companies. So, most of the companies quite understandably focus mainly on the urban markets. Here concepts like scenario planning are necessary for business corporations to apply in China. Scenario planning is a structured way for business corporations to think about the future. “They form a method for articulating the different pathways that might exist for you tomorrow, and finding your appropriate movements down each of those possible paths.” (economist.com, 2008). It will also help them to understand the change in marketing communication styles that will help them to predict the future changes required in communication patterns. Human resource When firms are established on foreign shores, it would have ‘collage’ of workers. That is, foreign firms including retail firms will be composed of workers from two national or country categories. The employees from the parent country, where the firm is usually headquartered or based are called Parent Country nationals (PCNs). The employees from the host country where the firms may be located are called host country nationals (HCN) (Scullion & Collings 2006). But, in China, recruiting the local employees has become a challenge because of the lack of qualified labour. That is, the Chinese labour is not equipped to handle the necessities of the foreign firms because of their lack of people skills. Companies like Wal-mart manage it with out offending the locals. “To succeed in China, Wal-Mart had to expand its model and bring not only good ideas and cash but also its human capital to develop its local business” (Guérin, 2005). It is always better to hire local people to fulfill the integrated marketing communication aspects. For example, the sales person has be a local Chinese as people there understand only Chinese. Employing local Chinese will also bring cheer from the Chinese government as the policy of the Chinese government is encourages foreign companies to employ locals as far as possible. For the companies though it takes care of the marketing communication problem which is of greater importance. The success story of retail giants The Chinese market for retail firms have been on the positive side. That is, even with these above mentioned challenges, some favorable factors are aiding and will also aid foreign retail firms to achieve success. Actually, the retail sector has good opportunities, brought out by the increased buying power of the Chinese people. “China retail industry has been showing upward trends for quite some time now. Growth in this sector is particularly spurred by the changing buying patterns of consumers and rising per capita income in the country” (newswiretoday.com). They have been well received by the customers and it shows in the total sales volume as well as in their expansion plans. “Statistics shows, 70 percent of the top 50 retailers in the world have set up footholds in China. Wal Mart has opened 19 chain shops with a goal of 100 shops in China. Carrefour opened four new shops in Jinan and other Chinese cities. Nearly 80 percent of supermarkets, the main channel of retail sales in China, are dominated by foreign retail companies.” (China-embassy.org). “British home improvement company B&Q, have rapidly built up their presence in China since foreign participation in the sector was permitted in 19 operating 31 retail stores across China—from Shenzhen in the south, to Kunming, Yunnan, in the west, and Harbin, Heilongjiang, in the north”(rhul.ac.uk, 2007). The other main reason why the Chinese retail marketplace can be considered as a thriving market for the retail firms is, because of the changing priorities of the Chinese people. “Ji Xiangqi, chairman of the Shandong Provincial Commercial Group, attributed the thriving growth of overseas retailers to the contradiction between growing domestic demand and the status of small scale, sparse distribution and poor quality offered by domestic commercial departments” (lists.iatp.org, 2007). Wal-Mart for a case has been consistent in its marketing communication in China. If not for the successful communication Wal-Mart would not have opened branches after branches in various parts of China. The people of China trust the brand Wal-Mart, and the companies’ marketing communication is so perfect that it wiped of all other marketing challenges. Solutions and other marketing issues After spending considerable amount of time in deliberating on communication issues then the best that companies can do is appoint a local Public relations official and take his/her help in designing the strategies there. Taking the help of a translator is essential in marketing communication to the Chinese. The company should make sure that the person they appoint is from the urban place like Beijing or Shanghai or even Hong Kong. People in such cities speak better English and more so don’t have the communist attitude which otherwise is very much prevalent in many parts of China. Another aspect that needs to be remembered is the communication is easily understandable to the young and old of China. The Chinese government is making stern efforts in educating the Chinese English and it will be a great boost to all the foreign multinational companies in people of China speaks some English if not perfect English. Being close among the Chinese people is very crucial to do successful marketing in China. To do the said thing successfully it needs successful marketing communication. Apart from communication organizations have to take strategic decisions also to make the Chinese accept them and not to see them as aliens. To do that one need to partner with the local organization and the biggest benefit is it takes care of the communication hitch that exists in China. Conclusion China definitely is an exciting and enterprising market. It is too large a market to neglect. So companies that eye the market has to sweat it out in China. The marketing challenges are mammoth but not impossible as the retail sector has already set wonderful example. One needs to respect the culture of the local people and know the tact of competing in the price conscious rural China. The marketing communication has to be perfect. As already mentioned in the paper even a seasoned international players like Pepsi has stumbled in China because of the marketing communication problems. Aspects like advertising in the print media, television, out door advertising have to be taken seriously by foreign MNCs. The positive aspect for companies which wants to do individual marketing is the growth in the use of internet. Companies can target and be clearer about their communication with the help of locals through the internet. Buzz marketing is also an area that is not used to its potential in China. Foreign companies can take care of marketing communication and other marketing issues then China will sure be a dream land for the international marketers. References china-embassy.org, 2004, Foreign commercial giants favor Chinas retail market., Retrieved May 10, 2009 from http://www.china-embassy.org/eng/zt/1/t142318.htm consume.bbk.ac.uk, Multinational retailers in the Asia Pacific. Retrieved May 12, 2009 from http://www.consume.bbk.ac.uk/research/gamble.html Dean, J and Batson, A, 2008, China Battles Image Woes. Retrieved May 10, 2009 from http://www.amcham-china.org.cn/amcham/show/content.php?Id=3152 economist.com, 2008, Scenario planning. Retrieved May 11, 2009 from http://www.economist.com/business/management/displaystory.cfm?story_id =12000755 forbes.com, Marketing To Chinas Consumers. The McKinsey Quarterly, Retrieved May 10, 2009 from http://www.forbes.com/2004/11/04/cx_1104mckinseychina5.html Guérin, D., 2005, Chinas Rising Advertising and Media Industries. 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