China Market Entry
Understanding how to enter the Chinese market is the first step in successfully developing your brand, product, or service in China. Daxue Consulting provides comprehensive market entry support for any international brand or company looking to enter the Chinese market. At the core of our China market entry service, we focus on market intelligence and strategic set up. Our market entry projects in the past have successfully concluded a/an:
- Exploration and extensive understanding of your market in China and the related opportunities
- Contextualization of the brand’s business and of its product or service’s consumption
- Market sizing and evaluation of potential for definition of the market entry scope
- Value proposition validation with end-consumers and local professionals
- Marketing mix design or adaptation for the Chinese market
- Consumer segmentation and definition of localized marketing personae in China
- Marketing plan with road-map for the first 18 to 24 months in China
- Allocation of investment and modelization of revenue generation
- Business plan
Thus, the market entry strategy is the key framework for your expansion into the Chinese market. Daxue can assist in determining your businesses needs and create a tailor-made market entry strategy for China ensuring you with a strategic road-map and kick-off plan to match your business situation, competition, and long term objectives in China. Daxue’s tailored product enables foreign companies to enter the Chinese market and establish prospects for long-term growth vis-à-vis our:
- Rigorous and proven methodologies
- End-to-end approach
- Experienced international staff and Project managers
This allows our clients to have a comprehensive vision and insight into the know-hows in selling and providing access to various distribution networks throughout China and other second-tier cities like Hangzhou, Guangzhou, Shenzhen, and Tianjin. Our team of international consultants at our offices in Beijing and Shanghai have worked with more than 250 brands over the last 5 years for projects in various industries.
How to strategically plan a step-by-step market entry in China?
In the strategic set up of your China market entry plan, Daxue enables your firm or company to tap into the Chinese market by providing a formulated market entry structure, which includes:
1. Market Overview and Potential Assessment
Our team will work on mapping out the challenges, opportunities and existing & future environmental conditions and how they will impact the business’ development model of your brand in China. For the most exploratory projects, we will deeply focus on contextualizing the market and your business in China, breaking down the drivers and consumer related trends impacting its evolution. We will then conduct an assessment on the environment’s evolution, and provide an overall “picture” of the competition landscape.
This first step of the research will especially aim at evaluating the potential volume of the the targeted distribution channels, with a likely focus on online operation, the structure of the market and its most promising segments.
In the end, this will provide you with an overall understanding of your market’s size, potential for growth, and opportunities for products or services.
What are the insights and metrics we will usually focus on to map the market and its opportunities though?
- Market drivers, trends and restraints: collection of macro- and micro-data on the market volume (indicators) and structure
- Macro trends: large-scale, sustained shift in market environment (Social, Technological, Economic, Environmental, Political and organizational drivers)
- Micro trends: tendency rather pervasive within a given sphere of influence, typically consumer-driven.
- Meso trends: evolution driven by long term force of changes in behaviors, technological disruption, retail environment changes
- Sales and conversion metrics on distribution channels, with a focus on online data
- Evolution of consumer interest and search for information related to the market over time
2. Benchmark analysis with business cases of successful market entrants
The purpose of benchmarking analysis is to gain a collection of insights and metrics regarding competitors and their marketing strategy to extrapolate on potential road to success and best practices for the market entry of your brand.
This analysis will especially be interesting to proceed on a consumer segment basis, to understand how for each strategic segment, the product launch can gain market share and compete with the existing competition. Competitor benchmarking provides insight into what competitors are doing, what works, what doesn’t work, and ultimately what you can use to your own advantage – either through adopting successful practices or avoiding ineffective ones. Daxue Consulting will proceed through the benchmark with the objectives to:
- Identify successful strategies and set up in any part of the marketing mix
- Extract best practices for client acquisition and promotion
- Collect metrics (conversion, promotion ROI, digital engagement, etc) to be leveraged when designing the revenue generation model (step 5)
- Direct the whole research into the most influential forces of change in the market today
- Define hypothesis regarding the consumer perception and expectation by analyzing the marketing choices of competitors
3. Concept and Consumer Experience Testing
In the concept and consumer experience testing nexus, Daxue will collect hard data and first hand insights from both end-consumers and local professionals (brand managers, retailers, importers, traders, etc). The objective will be to validate the concept you are bringing to China, and the value proposition you offer to Chinese consumers. In output, this will allow your business to solidify its offer. Moreover, these interactions with end-consumers, often through focus groups, will allow you to gain knowledge on the preferred purchase channels, information sources as well as the acceptance of marketing messages.
4. Consumer Segmentation
Your consumers in China do not fit into a single and unique profile. Each will look for specific products, will leverage its own information sources, and will develop unique perception toward the category and the various brands. It is then crucial to identify its key segments of consumer and to quantify the potential of market share to be captured by a new comer.
In this section, Daxue will provide a segmentation and breakdown of the total demand per key criteria (attitude and consumption habits, demographic distribution, digital behavior, need-based profiling). Thus, Daxue will help identify your market’s key segments of consumers and to quantify the potential of market share to be captured by a new comer in their market entry.
When these key segments will be identified, Daxue Consulting team suggests to generate “marketing personae” to represent the different consumer types that might be targeted by new comers in China. These personae’s building will of course be data-driven, each exhibiting key behaviors defining your key audience. Daxue Consulting then recommends 1 data collection process per persona, guided by how well it meets “their” needs. Products features, distribution models and branding choices can also be prioritized based on how well they address the needs and expectations of one or more personas.
5. Allocation of investment and implementation design
The final step will materialize the market entry plan by combining and correlating the findings from the research. Our objective is then to design an actionable road-map for your first 2 to 3 years in China, including:
- Initial and yearly investment to be considered according to various scenario (conservative, market-alignment, aggressive)
- Portfolio of marketing actions to undertake with key milestones to target and related costs
- Initial “Day 1” focus of consumer targeting and step-by-step scaling up operations
- Partnership and network building
- Financial statements and revenue generation models
How to match the key requirements for a successful market entry in China?
Rising incomes, rapidly changing demographics, increasing consumer spending and an improving business environment have all helped make the Chinese market an attractive target for many foreign companies and brands. Understanding the opportunities and challenges within the Chinese industry is necessary to make informed market entry decisions. Daxue Consulting provides you with the step-by-step approach previously discussed, but also assess the feasibility and the alignment of your project within the Chinese context. Our approach triangulates our knowledge of the Chinese market, our know-how in the regulatory landscape, and with our experience in strategic consulting.
- Market knowledge:
Entering and growing in the China market can be a daunting task for managers of foreign invested enterprises. Due to the size and diversity of China and the lack of reliable centralized/official information databases, it is difficult to obtain information on certain industries, ripe markets, or companies. Thus, market knowledge must be obtained “on the ground.” This is where Daxue can help, as it requires an investment of time and effort to acquire reliable market knowledge on which to base sound business decisions.
- Regulatory environment:
There are situations when regulations may be difficult to understand or are inconsistently enforced. This is often due to loosely interpreted regulations or the continued involvement of multiple authorities in oversight. Companies must ensure that they fully understand the regulatory environment before entering the China market.
- Strategic consulting:
Here, Daxue Consulting provides strategic insight into the local company advantage within the Chinese competitive landscape as it is important for foreign companies to gain market knowledge and insights into its competitors. Also, in some cases, foreign entrants may need to work with local partners in capacity. Therefore, we assist your market entry with a design of a strategic and marketing road-map, a definition of business plan, and via a thorough screening of partners and competitors.
How to better integrate the existing value and supply chains when entering the Chinese market?
Through this strategy, multinational players have been able to leverage their acquired local resources to strongly capture share in lower-tier cities without impacting the branding of their own premium brands. They also took advantage of the existing distribution network and created various entry-points for their product in the value chain. Finally, they have been able to optimize their product development strategy by owning brands already matching the specific taste and consumption habits of Chinese consumers.
To assist you in your China market entry, Daxue uses various methodologies
Daxue Consulting’s team is involved and work closely with your staff in every step of your China market entry. We help you to identify your market, we drive you to choose the most suitable location, we conduct valuable market research, we support you to hire a great staff and we provide you knowledge and expertise on due diligence. To optimize each of these steps, Daxue may use various methodologies:
- Qualitative interviews with market experts: consultants, professors, experts
- Quantitative surveys through any methods: online survey, phone questionnaire, in store interview
- Diagnosis, analysis of competitors, competing for media plans through desk research
- Interviews with competitors through various approaches
- Synthesis of internal documents, etc.
Daxue Consulting approach is practical and oriented to key drivers of growth
Our team aims to assist you in the development of strategies customized to your specific market in China, thanks to a strong understanding of this market. Still, as we think that a China market entry is not just about opening a door, we also support you in the execution of your strategy in China and we keep providing information about a trend and further opportunities for development in China.
We strongly believe that Consulting is about mutual investment and share of idea and expertise, we work closely with your staff to leverage your company’s competitive advantage in the most adapted way in China. Your expertise of your own activity and our knowledge on every aspect of China market, including local customer tastes, local competition, and regulation, ensure great results.
As China market Entry is also about cross-cultural adaptation, we are happy and proud to work with a great international team. Therefore, our services are multi-language and multi-cultural. We also provide proven business training for you and your staff to adapt to a new and complex market in an easy and faster way.
Invest in China with the relevant investment vehicle
In these years, the WFOE has been the most popular vehicle for Western investors to operate in China and the second tier cities like Guangzhou, Shenzhen, Tianjin, etc.
One of the main advantages of this investment vehicle in China is that it takes less time to establish than a Joint Venture. Indeed, the foreign company that wants to enter the Chinese market does not need to select a local partner or negotiate a Joint Venture contract. Also, the WFOE structure gives Western companies more control over their operations, as no local partner is involved in the process. Most foreign investors find it much easier to recruit and train employees when the Western investor is in the total control of the employer side of the relationship.
The growing popularity of WFOEs in China does not eliminate the need to work with Chinese partners. Hiring local managers is crucial to the company’s success in the Chinese market because their compensation requirements are considered to be lower than their foreign counterparts, and they are more familiar with local market conditions. WFOEs should also interact with local companies to get access to distribution channels and customer relationships.