by Alistair Nicholas
July 4th, 2013

Despite the fact that China has been the world’s fastest-growing market for more than two decades, a staggering 48% of foreign businesses, including leading multinational corporations, fail and withdraw from the country within two years of establishing operations there. Unfortunately, too often they fail because of a lack of understanding of basic market principles and cultural differences. Yet failure could have been avoided if they had “done their homework” and taken advice from established market experts.

Factors that often impact a company’s success in China include:

1. Employee pilfering and theft, including theft of critical intellectual property (IP)
2. Failure to localise and customise products and services to suit the domestic market
3. Failure to seek or to heed local advice
4. Poor senior management appointments
5. Underestimating local competition
6. Insufficient or improper market research
7. Inability to communicate with the local market in culturally appropriate and sensitive ways
8. Underestimating the important role the government plays at every level of society including commerce

Businesses looking to succeed in China should ensure they understand the market there by undertaking comprehensive research before committing to it; adapting their products and services to meet local conditions and demands based on that research; and seeking quality in-market advice and then heeding that advice. They also need to engage with both traditional and social media to reach their target audiences.

Companies venturing into China need to stay lean and stay clean. Keep your business small and focused, and avoid graft and corruption – people telling you to play dirty are the wrong advisors and should not be listened to; the risk is not worth it and it is not necessary for success in China.

Alistair Nicholas is  senior advisor for Public Affairs, Australia, at Weber Shandwick. Alistair lived and worked in China for more than 12 years, including seven years running his own successful public affairs company.

This article was taken from Alistair’s presentation at the Australia China Business Week forum in Melbourne. A copy of Alistair’s presentation slides can be obtained by emailing him at anicholas@webershandwick.com.

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