Question

What economic, cultural, and other challenges do Western companies face in dealing with Chinese consumers? What recommendations do you have for American companies in marketing to Chinese consumers?

Answer 1

1. Following are the challenges do Western companies face in dealing with Chinese consumers--------

1. Chinese leaders and managers expect obedience without question. One important concept to master is “face.” Face represents a person’s reputation and feelings of prestige within the workplace, family, friends, and society. For instance, an American subordinate attending a meeting where his/her boss is making a presentation would generally not think twice about asking a question, making an alternate suggestion, or even disagreeing with something. In China, this would be a serious face-losing situation for the subordinate, boss, and even the company. Not pointing out others’ mistakes and giving credit for others’ good work are both good ways to help others save face.

Because China has a long history of being exploited by foreign countries, it is of particular importance to show respect as a Westerner doing business in China. Giving gifts, accepting invitations, acknowledging hierarchy, addressing people by their designation, attending meetings, and showing genuine interest in the local culture are ways to show respect in China.

2. It is common for Western businesses to move operations overseas to save on operational costs. However, in China, operational costs are getting more expensive. Foreign companies have been required to pay education and urban maintenance and construction taxes . In addition, the Social Insurance Law, imposed additional operating costs on companies that already provide international insurance coverage for their employees.

3. China’s growing debt is also of concern. Infrastructure has been a top priority of China’s government, with projects for roads, rails, electricity, and telecommunications…so much so, that China’s investment in infrastructure has hindered their growth.

4. There is a substantial difference in the role of government in Chinese businesses compared to Western countries. China has a planned economy closely tied to government. n China, more than 76% of assets are owned by the government, with people owning less than a quarter; while in the United States, assets are owned privately. This means that to do business in China, a company will most likely have to negotiate with the state. The bureaucracy involved in negotiating with the state can slow down the pace of business ventures.

5. Corruption in China has certainly become more of an issue as the Communist Party of China’s policies, institutions, and norms have clashed with recent market liberalization. Bribery, kickbacks, theft, and misspending of public funds cost at least three percent of GDP each year.

2. Recommendation for the American companies---------------

1. Brand awareness: Chinese middle-class consumers place strong significance on brands, particularly luxury brands. Status is a key factor – many people will buy luxury goods not because they necessarily like them, but because they are representations of success. Make sure to have a specific strategy focusing on brand localisation, brand building and awareness creation. New entrants to the market with a recognised brand may wish to consider a product launch or media conference to announce their arrival in China.

2. Price is an important consideration for Chinese consumers, particularly at the lower middle-class and lower income levels. As opposed to status items on which Chinese consumers are willing to spend more, non-status items are likely to be chosen based on price. This can impact on even well-known brands, whose makers may have to develop a lower cost alternative to their most popular products to address China’s price sensitivity.

3. Get familiar with how Chinese social media platforms like WeChat and Weibo work. Digital marketing is growing fast in China and savvy companies are running highly successful social media marketing campaigns there. If your advertisements are easily shareable, they will go far in the Chinese market where word-of-mouth recommendations hold a lot of weight.

4. Chinese business culture also has a longer decision-making period than Westerners are used to. It is not uncommon for Chinese businesspeople to extend the decision-making period past a deadline given to them. It is important for Westerners to be prepared for that and to not rush them into making a decision before they are ready. Patience is the key to success.