Going West - The Challenges Facing Corporate China

Going West - The Challenges Facing Corporate China

Without doubt, as a highly competent manufacturer of electronic devices, household items and more, China's economy has experienced tremendous growth in the past 30-40 years.

But how can those Chinese manufacturers develop from a low-cost development and production base for Western customers and the Chinese domestic market, to a global force in their own right? What challenges do China's commercial organisations face in trying to go West? And how can they overcome them?

Korea's advice

One starting point for companies in China might be the successes achieved by their counterparts in South Korea. My professional experience with organisations such as LG and Samsung suggests that these companies have become household names in the West thanks to being:

1)Open for business

Many companies in South Korea have been open to working with US and European academics, consultancies and enterprises on a range of research programmes and commercial ventures. This enlightened approach has encouraged intellectual and creative exchanges that cross cultures and disciplines, ultimately generating new insights and ideas that lead to successful product innovation.

My colleagues and I have been engaged on a number of these 'discovery projects'. Using our knowledge of existing markets (e.g. TVs, smartphones) and skills in trends research, we've helped clients determine the best areas for new product development and investment. This design-led, human-centred approach to identifying opportunities bridged a knowledge gap for our clients in South Korea - as it does for many companies in the West, too.

Similarly, enterprises in China stockpiling masses of consumer data for their target markets may be unable to translate this information into meaningful design, manufacturing and marketing insights. However, by being as open to collaboration as our clients in South Korea, companies in China will increase their chances of success overseas.

Interestingly, using data, qualitative studies and trends analysis to underpin insights and recommendations helped our clients in South Korea to overcome another cultural barrier: an aversion to risk-taking. However, armed with the traceable data that our methodologies provide, project leaders could more easily sell the new product development ideas to subsequent layers of the internal hierarchy.

2)Open to cultural change

Although profit-making organisations around the world share certain capitalist credentials, some distinctively national characteristics always manage to permeate corporate culture. In China and South Korea, for example, the multi-layered managerial hierarchy existing within larger organisations reflects the social structures of the nations themselves.

By contrast, many Western companies adopt a flatter management structure, with decision-making devolved more widely among employees. When there's collaboration between East and West, both parties need to understand these differences. This is especially relevant when it comes to the Western participants appreciating that the speed of response within deeply hierarchal organisations may be slower, and the review period before decisions are made may be longer than they're perhaps used to.

That said, our own experiences in South Korea indicate that local companies not only understand the cultural differences involved, but also accommodate and take advantage of them. Indeed, they draw upon another homegrown trait - the willingness to work long hours, consistently, over several weeks and months - to meet project milestones.

Selling Huawei in Hawaii

The majority of companies in China can also learn lessons from some local enterprises already blazing a trail internationally. Organisations such as Lenovo (PCs and consumer electronics) and Huawei (telecommunications and networking) have risen above the main barrier facing Chinese firms wanting to export the 'Made in China' syndrome.

The manufacturing stamp that became synonymous with the country's early forays into Western markets also helped turn positive perceptions into negative ones. This was because, over time, consumers associated the sheer volume of mass-produced items from China with labels such as 'cheapness' and 'disposability' rather than 'affordability' and 'utility'.

The companies doing well overseas have turned opinions around, ensuring that people in the West now acknowledge China's ability to create useful, durable products that add value and are still within the budgets of most people. Huawei managed to change perceptions by developing partnerships with established global players in mobile technology and networking solutions (e.g. Siemens, Motorola and Symantec). Lenovo followed a similar pattern by working alongside IBM initially, before later taking over its PC business.

Both Chinese firms increased sales abroad by aligning themselves with well-respected western companies, and trading off their brand heritage and reputation. Other cash-rich organisations in China may follow this route, provided they can identify firms with similar product portfolios and - where a take-over is on the agenda - much poorer bank balances.

Another avenue for Chinese companies to pursue involves dedicating their efforts to a niche market segment - where, ideally, competitors in the West are relatively weak or simply non-existent. Capitalising on China's traditional manufacturing skills and low cost-base, companies following this model can gain a competitive advantage in the more mature markets. Haier is a good example, with its focus on compact refrigerators and electric wine cellars leading to notable success in the USA.

Chinese corporations aiming for growth overseas can seek inspiration in two ways. On the one hand, they can try and emulate the successful export strategies of their regional neighbours in South Korea. On the other, they can learn from exporting companies much closer to home.

Either route should help them to break successfully into Western markets.


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