By Nathan Strum
When entrepreneurs think ahead on where they would like to expand their company to, China is usually at the top of the list. Competing successfully in China is a large goal to many, but staying above water is a much larger concern to those with this vision. The Wall Street Journal surveyed dozens of Western companies who operate in china. This is what they found. They state, “We determined that while various hurdles await any foreign firms trying to establish or expand a business in China, there are three critical—and perhaps unexpected—competitive issues they need to master in order to prosper.” The three major factors they found were fluidity and the WTO fallout. Techinasia.com also weighed in on the topic noting that government and different policies make it virtually impossible to enter your business in China.
Things change, people change. That saying applies to business as well. If you think about it, foreign companies in China face a business environment that is regularly shifting and changing. There is no getting too comfortable with the market or the environment. Denis F. Simon and Leonard M. Fuld state, “Executives can never become too comfortable or complacent about their firm’s position in the market. This fluidity stems from several factors: Enforcement of rules and regulations in China can vary widely by location and change without warning; partners routinely abandon contracts for better offers; and new competitors can emerge and become major threats almost overnight. And because information doesn’t flow freely, anticipating the direction and thrust of change can be problematic, even for the most seasoned of managers with years of experience working in China.”
Restricted content is a hot topic. That is to say, almost no foreign investor can enter the internet industry without a partnership. Techninasia.com, weighs in, Henry shared that especially for the Internet industry, almost no sole foreign investor – without a joint-venture (JV) partner; more on that later – is able to obtain the mandatory Internet Content Provider (ICP) license. These tend to be restricted so as to prevent Chinese citizens viewing some ‘sensitive’ material from foreign websites.”
Denis F. Simon and Leonard M. Fuld state, “China’s accession to the World Trade Organization actually has made competing in China more difficult for foreign companies. That may seem counterintuitive, considering that the main goal of membership was to further normalize the business environment and create a more level playing field between foreign and Chinese companies. But the truth is, not only did WTO membership open the door for more foreign competitors to enter China, it also forced Chinese companies to step up their performance in order to survive.”
These are just a few areas to consider when spreading your business to China is on your mind.