Entering any new market is difficult. This is especially so when companies attempt to expand into territories where there are stark cultural and operational differences between the nationality of the company entering the marketplace and the host country.
As we’ve identified countless times at the Market Research Blog, and in several white papers on the subject, entering a market such as China can be fraught with difficulty for the unacquainted, and that being prepared for a different way of doing things is the best possible grounding.
Paul Denlinger, a strategic consultant in China, has identified some reasons why US companies in particular have struggled in the People’s Republic. Key amongst his findings are that US operations cannot simply be “scaled outwards” when starting out and that very different ground-rules apply:
Why most US Entries Fail in China
July 14th, 2008
By Paul Denlinger
The consulting industry in China is flourishing. After all, it is the largest potential single market in the world, and everyone is flocking to it. New companies need information and advice about how to tackle the unique challenges of this market. For any MBA who is fluent in Chinese, or who has grown up in China, and is familiar with the tools of the trade, such as financial modeling, business negotiations and company valuations, China represents an “iron rice bowl” which will make their careers for years to come.
Or is it? My experience is that there are errors which are repeated over and over again. It gets like being condemned to watch a single Broadway show, over and over again, where the only things which change are the sets and the actors; the lines are the same.
I have covered one of the major fallacies in a previous posting, Getting Past the China Market Hype, which covered their initial reasons for entering China. This posting will cover some of the reasons for failing post-entry…