Good Case Study On Entering The China’s Market

There are four modes of entering the Chinese market. Direct exporting via local distributors or own sales people can help the small and medium enterprises to sell their products in China and does not require many resources. A second option is licensing including franchising when a foreign company grants its intellectual property rights to a Chinese company and receives revenues in the form of royalties. A more complex mode of entry into China is the creation of the joint stock company and the main problem is usually to find a reliable partner in China. Finally, the foreign companies are allowed to open wholly owned subsidiaries (WOFES) in China. This mode requires sufficient resources and is the riskiest one. A lot of companies enter China via Hong Kong that has fewer restrictions and red tape than mainland China.
In order to prepare for entering the Chinese market, a company should analyze the cultural and linguistic differences, business ethics, quality and training of the local contacts and employees, political and economic issues, experience of the partner company, and connections in China. Foreign companies can consult with the trade organizations for more information about China.
Understanding the local culture and Guanxi (networks of influence) are two vital factors to success in entering the Chinese market, because the Chinese society is mainly relationship based.
Guanxi is a trait of the Chinese society, and especially businessmen. Sometimes it may help resolve the problems, achieve the business goals and set up valuable contacts with the government and local businessmen. When meeting a new company or a partner, it is important to have an introduction from the existing local partner. At the same time, Guanxi sometimes causes bribery and corruption and therefore the foreign companies may find it difficult to adjust to the personalized business culture in China.