Entering the Chinese market offers many opportunities for business growth. Increased consumer spending, a booming population and progressively open business environments position the China market as an attractive prospect for the right innovation businesses.
In this blog, we explore market entry strategies and advice and share the story of two businesses’ journeys towards flourishing on the international stage.
How do you enter the Chinese market?
There are many routes to market access, from exportation and distribution to franchising and direct investment. Whichever route you take, follow these vital steps to encourage long term growth.
China market research and analysis
Before deciding to enter the Chinese market, thorough market research is essential. Quality research can help you to assess the risks, premeditate potential pitfalls and develop a clear business model.
This research could include:
- Assessing the China market size for your offering
- Competitor research
- Market trends
- Customer research (including buyer personas)
- Distribution channel assessment
- Risk assessment
Customer segmentation and location
Once you have done some initial research, you will need to narrow down your target customer. Geographical targeting is an important consideration for the China market as there are great disparities in economic growth and spending habits across different regions.
Commonly, businesses test the waters in ‘Tier 1’ cities that have higher spending rates. However, this comes with more competition and higher operational costs.
- Where is there a gap in the market for my offering?
- Where do my customers live?
- What are their spending habits?
- Where are my suppliers located?
- How do distribution channels vary across regions?
There are many different factors, including infrastructure and local culture, to consider when refining your target consumer base.
Our specialist advisors can help you do the groundwork to identify the best geographic markets for your innovative goods or services.
China market online
Online and digital markets in China are thriving. Keep digital at the forefront of your plans when it comes to developing your marketing strategy - and don’t forget mobile or Chinese social media platforms!
International trade shows and events
For internationally oriented companies, there is no shortage of opportunities to attend tradeshows, exhibitions, workshops and brokerage events around the world. But whether you can seize such opportunities can depend on your resources.
Larger companies have export plans, budgets for overseas travel and can access funding from local government. Smaller companies, on the other hand, frequently cannot afford to self-finance overseas missions and, due to their size, may fall short of the criteria for local funding.
However, our extended connections outside Europe may be able to provide the financial support to attend events.
Local partners and advisors
Having a local partner, collaborator or specialist advisor in the Chinese market to support you and advise on local business customs, regulations and trends can help you to reach new levels of growth.
The Chinese market is rapidly changing and evolving. Even once you have entered the market, you need to remain on the pulse of trends, regulatory updates and changing consumer behaviours. An element of flexibility should be built into the business plan.
If you’re coming from the UK or Northern Ireland, it’s likely that you will have to start from scratch when it comes to building your brand presence in China. This is where digital is key. Chinese social media platforms, forums and influencers may need to form an important part of your marketing strategy.
Brands are important in China, so a reputable brand presence is needed.
Barriers to entering China market
Entering this market can be challenging for western companies. It’s important to be aware of the following challenges so you can find solutions and minimise risks.
Identifying the right consumer market
With a population size of well over 1 billion and constantly developing markets, identifying the right market opportunity can pose a challenge. This is where understanding local markets and the differences in economic and social growth is essential. You will need to consider spending habits and demographics by geographical location and assess consumer behaviour against competition and costs.
Regulations and IP
While business in China is opening up for foreign companies, several sectors and industries are still heavily regulated or restricted.
You may need to have some understanding of Chinese law in your sector as well as an awareness of standards, regulations and procedures before making any key decisions. This is where having experienced partners and collaborators in your target market proves invaluable.
You will also need an IP strategy in order to protect your intellectual property and ensure you are covered in the new Chinese market.
Staffing and support
Finding the right people to work on the ground and represent your innovation business in the new market can be a challenge if you don’t have strong connections already in place. That’s why taking advantage of any networking opportunities in your target market can help you to forge relationships and get a feel for the business environment before you expand into a new market.
Set up costs and financing
As with entering any new markets, set up and development costs can become a barrier to entry.
Be sure to factor in all potential costs when devising your business plan. Don’t forget to include:
- Supply chain costs
- Packaging and labelling costs
- Operational costs
- Shipping, transportation and distribution costs
International market entry will always come with risks and challenges. When dealing with logistics, transportation and distribution across borders, there are many regulations and procedures to be aware of.
Before embarking on entering the market, first, ensure there are no major logistical barriers that will prevent you from entering or growing in the space.
Case study - Liling Ceramics Expo
In July 2018, EEN Northern Ireland received an email from EEN colleagues in Hunan province in China, inviting ceramic companies to exhibit at an international ceramic exhibition - the Liling Ceramics Expo. It was an exciting - and low-risk - opportunity. The previous year’s exhibition had featured 671 exhibitors from more than 25 countries.
The Chinese EEN were seeking potential exhibitors from companies producing daily ceramics, artistic ceramics, electronic ceramics as well as new material for ceramics, and ceramic equipment.
A first-time China visit
There wasn’t much time - as the opportunity appeared not long before the event. Neither company had sold or exhibited outside the UK/Ireland before, so they were provided with detailed pre-visit briefings by EEN.
The only items these companies had to organise were their visa for visiting China and the transport of their goods to the show. EEN colleagues in Hunan province organised and provided 100 per cent financial support for all transport, accommodation and the exhibition stand. They also provided promotional pictures and writings taken from the companies’ websites as background for the stands.
In China, EEN also provided a chaperone service and organised receptions. Both companies were also supplied with student interpreters for the duration of the show on their stand, which they found invaluable.
A great impact
The trip has had a great impact on both companies. They were able to view and make contact with ceramic brands from all over the world, made new business contacts and joined an international business network. They had the opportunity to sell in volume on site and made contact with distributors and purchasers. Their presence also provided them with local media exposure.
And they gained first-hand knowledge about Chinese consumer preferences and tastes in ceramics. One discovery: the Chinese associate terracotta with the clay used for bricks!
Both artisan businesses are developing partnerships with overseas clients and requests have been received for specific samples. And both would return to Liling next year if the financial support is again available, with a view to building on the relationships they have started to make. So one - apparently random - email has become the seed that will enable these two creative businesses to flourish on the international stage.
The Global Business Innovation Programme GBIP provides detailed market knowledge, introductions and cultural insight that SMEs would find difficult to obtain themselves. Prepare for and visit the market, connect with key players and access support to exploit new opportunities.