Why many major American companies have struggled in China: A final word

Why many major American companies have struggled in China: A final word

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This is the final installment of an eight-part series about the importance of cross-cultural design which examined several attempts by large, well-known American companies to expand their reach by marketing in China. As this series exposed, the bulk of those attempts have failed to achieve much success, even though China is the second largest economy in the world, and it described some primary reasons why they failed.  Set forth below is a summary of the primary lessons which can be drawn by other American companies to help them successfully sell there.

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China holds promise for most American businesses. It is a large market that inherently desires high tech and luxury goods. Globalization is not only a trend, but a reality of how future business will be done. In response to some protectionist governments, Xi Jinping, the President of China, has come out urging all nations to actively welcome globalization. Fear of doing business in China is natural, but this should never stop an American business from trying to expand there. While there are many examples of businesses that have lost money (several of which are discussed in prior installments in this series), the ones that do make it in China reap great rewards. IKEA has dominated the home improvement market and Fitbit has inspirationally been able to learn from its past mistakes and even overtake its primary, initially more China-savvy, competitor.

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The examples discussed earlier (in prior installments in this series) demonstrate a few key things that all American businesses should be mindful of in attempting to put their best foot forward in China.

  • A lack of understanding about Chinese society and its realities.
  • Never have assumptions about how Chinese consumers will act based on experiences in other markets.
  • Find homegrown Chinese partners with which mutually beneficial guanxi is possible.
  • Never give the Chinese government a reason to root against your company.

Although this series has focused on attempts to enter China by large American companies, the lessons drawn are applicable to any attempt by an American company to do business in China, even those who have plenty of cash to invest in the attempt. And for those which must be more careful about or limited in their use of funds, the stakes of ignoring these lessons are even higher. More limited funding will no doubt mean a shorter runway for the attempt, and therefore less time to learn, and the consequences will likely be greater to the overall company. Companies that intend on banking on only the luxury aspect and brand name recognition of its product must be the most careful as short term success could cause complacency and failure to follow the lessons described above. Given the size of the Chinese market though, a smart attempt to sell there is likely to pass the risk-reward threshold for many companies.

祝你好运!(Good luck!)

The author is Clayton “CJ” Jacobs, who is currently an Entrepreneur-in-Residence with, and the Head of Cross-Cultural Design at, ReadWrite. An area of focus for him is helping American companies understand and enter the Chinese market through taking a modern user-centric product design approach. You can contact him directly at clayton.michael.jacobs(at)gmail.com or find him on Twitter & LinkedIn.

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