Winning North American Entry Strategies for Chinese and Foreign Companies

Three decades after the beginning of China’s opening and reform, the stories of Western companies struggling and often failing to enter the Chinese market due to a lack of understanding of local characteristics have become commonplace. But now that more Chinese companies are seeking to “go out” and expand their brands globally, the same can increasingly be said for the opposite side of the coin.

How can Chinese business executives and investors, running small- to mid-sized companies, successfully enter potentially lucrative North American markets? How can they prepare an effective market strategy, and thus save time and money while achieving their growth aims?

To begin, there are a number of misplaced assumptions and tendencies that will hinder the implementation of an effective market entry. Here are just a few of these all-too-frequently occurring mistaken beliefs and practices.

Expecting To Build Market Share by Cost Alone

In a developed consumer economy like the U.S. or Canada, offering products that compete on low price alone is no guarantee of success. North American markets are mature, and the buyers and distributors are demanding and sophisticated. Effective marketing and branding efforts are paramount even for products with great value.

Neglecting To Consider Geographic Differences

Many Chinese investors sink their resources into over-saturated, high cost markets like New York and California without a solid business case for doing so. For an example of contrast, consider second- and third-tier markets such as those in the American Midwest.

Many Chinese executives may be unaware that an estimated 80 percent of U.S. markets are within an eight-hour drive of Ohio. Ohio is strategically located near Chicago, Buffalo and Pittsburgh. Also, warehousing and real-estate costs are lower in these geographic areas.

Trusting Wrong Sources for Preliminary Research on North American Buying Habits

Perhaps not too surprisingly, management will often do all of their preliminary research on target markets at headquarters in China, where access to databases about customer demand and buying habits may be limited or inaccurate. Results will likely be superficial and invalid.

There is no substitute for research done on the ground.

For the U.S. market in particular, there is no substitute for research done on the ground, with direct access to customers and prospects through telemarketers, focus groups, even webinars. Taking the extra step to acquire local information is well worth the investment.

Having identified many of the challenges that Chinese companies face in going abroad, what are some steps that they can take to succeed in the North American marketplace? Below are a few.

Top Recommendations for Successful North American Market Entry

Use market research as a basis for creating brand “awareness.” This will help ensure your North American brand is one built on strength and durability.

1. Hire experienced communicators, including publicists and branding and advertising specialists within targeted markets. These professionals know how buyers and distributors think. They know the territory. They have deep knowledge of what customers expect in new products. Their expertise matches any found on the East and West coasts, and their fees and operating costs may also come in much lower.
2. Contact friends and associates who have moved to North America. They should have contacts and connections within local business communities; these contacts will have leads on branding and marketing experts. Still other resources are local chambers of commerce and business associations, including those exclusively devoted to Chinese-owned enterprises.
3. Get your feet on the ground! Colleges and universities are starting to offer two-to-three week seminars designed for visitors from China. These programs, with translators, as appropriate, feature lectures about business “basics” in North America, including sections on marketing and branding. Also, many seminars will provide tours so Chinese business executives can meet their American counterparts.
4. Attend trade shows. It’s a wonderful opportunity for gathering information about your competitors and your customers.
5. Think twice about shipping equipment and building a booth at trade shows. In this era of easily-accessed webinars and online video sharing technology such as YouTube, it might not be worth the return on investment.
6. Open a sales and customer service office in business “incubators.” Rents will be low, and these places often have tenants starting their own businesses. It’s an ideal location for sharing information and building your local network.

There are numerous opportunities in North American markets for small-to-medium-size Chinese companies that offer niche products and services that satisfy true need, and can sell and service those products and services with the highest professional commitment possible. In the Midwest, this is especially true in the fields of health care, alternative energy and the auto aftermarket.

Chinese executives and investors, as well as other foreign executives and investors, must prepare and realize there are local resources available and willing to assist them every step along the way. After all, establishing win-win cooperation with local stakeholders is a key factor in the success of any company seeking to expand globally.

About The Author George Becker

George Becker has spent more than 40 years in the communications industry, first as a journalist and then as a publicist counseling Fortune 500 corporations and entrepreneurs across the U.S. and in China, where he made his first trip in 1993.