International Marketing Management

Prof. Dr. Jörg Fuß

Doing Business in China

© 2010 School of International Business and Entrepreneurship (SIBE) I www.steinbeis-sibe.de I 1

Doing Business
in China

04.09.2010 ©FUSS2010 ©FUSS2007

2
 Map of CHINA
Industrial Projects
Training Projects

04.09.2010 ©FUSS2010
3

Entry
y into the Chinese market

Guide for small and medium

medium--sized
enterprises

1 Reasons for entering the market

2 Realism before euphoria
3 Market entry case study
4 The cooperative
p imperative
p
5 Terms and conditions
6 Negotiation tips
04.09.2010 ©FUSS2009
4
 1 Reasons for Market Entry
y

60
Production of Refrigerators ((mio
mio units
units))
50
Size
40

Stage of 30
develop--
develop
ment 20

10

0
79 81 83 85 87 89 91 93 95 97 99 2001 2003 2005 2007 2009

04.09.2010
5

1 Reasons for Market Entry

y

pro Kopf:
27 l
43 l
130 l

6
 1 Reasons for Market Entry
y

China demands
Chi d d for
f higher
hi h share
h
of the world economic cake
Yesterday
Y t d Today
T d Tomorrow
T
(1980) (2005) (2020)

% Rank % Rank % Rank

Population 22,5 1 20,8 1 19,5 1

GNP 0,9
09 19 41
4,1 5 75
7,5 2
Import 1,1 16 3,9 4 10 2

E
Export
t 10
1,0 23 44
4,4 4 10 1

FDI 0,1 k.A. 6,4 1 ? 1

Savings 1,9 11 3,8 8 >10 1

04.09.2010 ©FUSS2009
7

1 Reasons for Market Entry

y

Chi
China on the
th way to
t the
th top
t
GNP (Bio. USD) and year of going ahead
14 3
14,3

4% of world economy,
2025 ?
but 16% of
world economic 2010
growth
2009
44
4,4 49
4,9
2007
2001 2004 3,7
2,3 2,3 2,7
1,7
0,9 1,2
y

n
a

e
a

nd
ia

En ly

na

A
an

pa
nc
re

di

US
Ita
ss

hi
In
Ko

m
Ru

Ja
gl

C
Fr

er
G

©FUSS2009
8
 1 Reasons for Market Entry
y

04.09.2010 ©FUSS2009
9

1 Reasons for Market Entry

y

10
 1 Reasons for Market Entry
y

Comparison
2007 China India
Population 1311 Mio 1094 Mio
Population Growth 0,6% 1,4%
Infant Mortality 25 º/oo 58 º/oo
Illiterats 102 Mio 295 Mio
GNP 2283 Mrd U$ 799 Mrd U$
GNP/Cap. 1740 U$ 730 U$
Oil Cons
Cons.. ((mio
mio b/d) 8,5 2,5
Mobile Phones 523 Mio 26 Mio
PCs /1.000 resres.. ca. 50 14
Internet Users 220 Mio 30 Mio
Import+Export 934 Mrd U$ 194 Mrd U$
FDI 102 Mrd U$ 23 Mrd U$

04.09.2010 ©FUSS2009
11

1 Reasons for Market Entry

y

For many products China is already the worldwide

production center

1
• Mobile Phones
2 •
•
TV
Apparel
• Shoes
• Hard Discs • Beer
• Cigarettes
•
•
Printers
Microwave • PCs 3
• Sewing Machines • Loudspeakers
• Window Frames • CDs • Optical Discs
• Air Condition • Furniture
• Refrigerators • Elevators
• Buses • Cars
• Trucks

04.09.2010 ©FUSS2009
12
 1 Reasons for Market Entry
y

Growth
Rate
Raw
Materials

Economic
Structure

04.09.2010 ©FUSS2007
13

1 Reasons for Market Entry

y

Location

04.09.2010 ©FUSS2007
14
 1 Reasons for Market Entry
y

Geely 2012

04.09.2010 ©FUSS2010
15

1 Reasons for Market Entry

y

Bio €
70
Timing
g
German trade with China
60
Source: Federal Statistical Office
50

40

30
Import

20

10
Export
0
79 81 83 85 87 89 91 93 95 97 99 2001 2003 2005 2007 2009 2010
1-6 exp

04.09.2010
16
 1 Reasons for Market Entry
y

Lieferungen 2008 (Mio

(Mio Euro)
von Deutschland nach China von China nach Deutschland
Land- + Forstwirtschaft 66 Land- + Forstwirtschaft 291

Ernährung 118 Ernährung 1016

Chemie 3262 Chemie 2878

Maschinen Maschinen
10295 4089

Fahrzeuge 7335 Fahrzeuge 2137

Elektro- + Messtechnik 3095 Elektro- + Messtechnik 10933

Computer 227 Computer 10170

EBM 3363 EBM 3925

Sportartikel + Spielwaren 172 Sportartikel + Spielwaren 6159

Kunststoffwaren 611 Kunststoffwaren 1304

Lederwaren 39 Lederwaren 2131

Textil 139 Textil 2381

Bekleidung 41 Bekleidung 5715

0 2000 4000 6000 8000 10000 12000 0 2000 4000 6000 8000 10000 12000
17

1 Reasons for Market Entry

y

18
 1 Reasons for Market Entry
y

19

1 Reasons for Market Entry

y

U$ billion
billi
406
Foreign direct investments in the
People’s
People s Republic of China
up to 2009
(realized)
( )

Total U$ 946 billion

(agreed U$ ~1800 billion)
www.fdi.gov.cn

74 69
56,6 52
42 41
16,3 12
6,6 5,4

HK VI J US TW SP SK D UK F MC

04.09.2010
20
 1 Reasons for Market Entry
y

Opportunities

Conditions

Horizon

04.09.2010 ©FUSS2009
21

C
Company/Product
/P d t Sl
Slogan Chi
Chinese Translation
T l ti
American Express Don't leave home without it Stay home with it
Avis We try harder We try to be hard
Budweiser For all y
you do, this Bud's for All yyou g
get for y
your work is
you a beer
Budweiser When you say Budweiser, After Budweiser, you will not
you've said it all be able to speak
Camel I'd walk a mile for a Camel A camel asked me to walk
two kilometers
FedEx When it absolutely has to get For when it can wait until
there overnight tomorrow
Intel Intel inside You have eaten Intel
Kentucky Fried Chicken Finger-lickin' good Tastes like human fingers
Marlboro Come to Marlboro Country Leave China
Nike Just do it! Have sex!
Pepsi Cola Now it it'ss Pepsi for those who New Pepsi is for people with
think young the minds of children
Philip Morris Call for Philip Morris! Shout for cigarettes!
Timex It takes a licking and keeps Lick it like it is a bomb
on ticking
Visa It's everywhere you want to It's only in places you can't
be go
04.09.2010 ©FUSS2010
22
 2 Realism before euphoria
p

Careful weighing
up procedure

Selection of countries

04.09.2010 ©FUSS2009
23

2 Realism before euphoria

p

Employees

Strategy

Demand

04.09.2010 ©FUSS2009
24
 2 Realism before euphoria
p

Be flexible

China is looking for ideas

“Mutual benefit”

04.09.2010 ©FUSS2009
25

3 Market entry
y case study
y

‘Watering can’ ‘Piggyback’

155
Chi na199

U. S. 199

J apan199

ROK199

I ndi a199

160 ROK1999 91
India1999 35
140

120 108,71 Local telephone

100

Demand?
? 80
R&D/GDP
subscribers
i (million)
( i i )
60 1

40,7 0, 8

40
1995 1996 1997 1998 1999 0, 6
0

0, 6 0, 6 0, 64 0, 69 0, 83 0, 4

20 2,14 3,12 6,85 0, 2

1,92
, 0
199

0
?? 1978
??? 1980 1985 1990 1995 1999 31.03.01

04.09.2010 ©FUSS2009
26
 Phase 1: homework in Germany
y

First: Desk Research

04.09.2010 ©FUSS2009
27

Phase 1: homework in Germany

y

Desk Research

Machine Case

Phase 1: 3 - 6 months

04.09.2010 ©FUSS2009
28
 Phase 2: Local market research
Group trips 2010

04.09.2010
29

Phase 2: Local market research

Group trips

04.09.2010 ©FUSS2009
30
 Phase 2: Local market research

Decision trees
Essential stops:
• Foreign trade chamber
• Embassy
• Banks
• Joint ventures
• WFOE
• International trade fairs
• Canton Trade Fair
Provinces
Partner search

04.09.2010 ©FUSS2009
31

Phase 3: Direct marketing & advertising

• Awareness
• Brochure in Chinese
• The more technical the better
• Photos of delegations
• Large
L quantities
titi
• Trade journals
• Which advertising media?
• Large print runs
• Advertising agencies
• Export
p cataloguesg
• Profitability
• Contact specialists

04.09.2010 ©FUSS200
32
33

Phase 4: Trade fairs and symposia

Selection
Effectiveness
Exhibits
Stand concept
Symposium
Long--term effect
Long

04.09.2010 ©FUSS2009
34
 The Hong
g Kong
g springboard
p g

Agent
Personal sales
Presence
Interests
Future of Hong Kong

Jacob Jebsen 1922

04.09.2010 ©FUSS2009
35

4 The cooperative
p imperative
p

Remain open
p
Yibu yibu
Training and consulting
• Security
S it
• Foreign trips
• Technology transfer
Service stations
Software
Production

04.09.2010 ©FUSS2009
36
 5 Terms and conditions

Price level
Pi
Price information
i f ti
Introductory discounts
Estimated prices
Financing
Letters of credit
Documentation
Warranty

04.09.2010 ©FUSS2009
37

6 Negotiating tips

Time and patience

p
Qualified employees
Honesty
C
Consistent
i core team
Preparedness
Calmness
Generosity
Delegations
g
Love of China

04.09.2010 ©FUSS2009
38