China market
research and China market entry -
FAQ
Here are
some common questions in respect to China market research and
China market
entry:
1. How to
determine that there is a market for our product in China?
2. Do you need a
China market entry strategy?
3. Where do we
start in a country this size?
4. How do
we find a potential partner? How do we know how good that partner really is?
5. What
types of difficulties have foreign companies encountered in Chinese market
entry?
6.
What are some of the current particular obstacles?
7. Which is better - an agent or a distributor
as means of China market entry?
8. Can I give an agent exclusive rights to a
particular territory in China?
9. How much
control do I have over what my agent does?
10. How
can I protect my intellectual property and confidential information?
Q1: How to determine that there is a market for
our product in China?
The one word
answer is: Research. As China's economy develops, different markets are
emerging - even different economies within the market. For example, Shanghai
bears little resemblance to the poor areas of the northwest. Each potential
market needs to be carefully researched upon which China market entry
strategies can be developed. A comprehensive is your foundation for a
flourishing business in China and reduce your risks substantially in China
market entry.
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Q2: Do you need a
China market entry strategy?
Forward-thinking companies recognize that success rests on the need for a cohesive
market entry strategy. This requires a proper understanding of China's particular
business culture and practices through
China market research. China, of course, is not one big market but
a myriad of diverse and expanding markets. Each sector has its own
particular attributes. Each business is different. Many companies who are
interested in China market entry have experienced frustration and bureaucratic
delay, frequently resulting from ineffective communications, inappropriate
relationships and a general failure to comprehend what motivates the Chinese
marketplace. Companies that have yet to gain a foothold in the country face
a number of issue and challenges.
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Q3: Where do we start in a country of this size?
Indeed,
China's population size of 1.3 billion is overwhelming. Further
investigation reveals that there are approximately 200 million comfortable,
middle class Chinese consumers. Beijing, Shanghai and Guangzhou are the
three leading Chinese cities which may be considered as first priority in
China market entry, however there are many additional high
population cities with substantial middle income populations.
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Q4: How do we find a potential partner? How do we
know how good that partner really is?
Finding an
ideal partner is your first step to be successful in China market entry,
however, it might be the most difficult stage. Starmass has extensive
experience and network in partner matching as our systematic approach aims
at sourcing and identifying the most suitable Chinese dealers/agent
/distributors for your company who have capability to market your products.
This will reduce your risk in the selection of Chinese partners and save
your valuable time and effort.
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Q5: What types of difficulties have foreign
companies encountered in China market entry?
Language and cultural issues are the obvious difficulties.
China's size is daunting, especially when coupled with difficult
travel and communications. The second difficulty may be bureaucracy.
The split between central planning market and the free market
produces inconsistency resulting in referrals from one department to
another in the search of finding the right person to contact and the
right procedure.
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Q6: What are some of the current particular
obstacles?
Non-tariff measures frustrate foreigners trying to do business in
China. Quotas, some of them not even published, are slapped on many
imports. Quality inspection is tougher for foreign-made goods. Even
if the goods are allowed into the country, they are at the mercy of
state-run-distributors. The complexity and difficulty of the
situation is highly fluid. It requires continual monitoring in order
to have the most appropriate connection to neutralize the negative
impact of bureaucratic action or inaction. These obstacles in China
market entry are one of main issues to be addressed in our China
market research.
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Q7: Which is better - an agent or a distributor
as means of China market entry?
It depends on the circumstances and what you are trying to achieve.
Considerations include:
* Who are the agents with access to your target customers?
* What are your existing operations and how can the new
intermediary fit with them? For example, if you want to keep an
existing sales operation, you will need an intermediary who is happy
to work alongside with that.
* What rights and responsibilities do you want to be included in
your agreement with the intermediary?
* How closely do you want to be involved in the sales process? It
can be easier to have more control over how an agent handles sales.
* What type of relationship do you want to have with the end
user? Using a distributor may distance you from the ultimate
customer.
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Q8: Can I give an agent exclusive rights to a
particular territory in China?
Yes. An agent
may well want to negotiate exclusive rights to the territory. If you also
wish to be able to sell through other channels such as through you website
or via mail order, you will need to ensure that your agreement with the
agent allows this.
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Q9: How much control do I have over what my
agent does?
The degree of control you have will depend on what has been agreed. For
example, you can agree what products can be offered, what contract terms
will be offered to customers and so on. You can also agree how the agent
should approach customers and so on. However, if you exert too much control
in this way, you may find that you inadvertently create an employment
relationship with the agent.
Your agreement
should clearly spell out the extent of the authority the agent has to act on
your behalf. Be aware, however, that if the agent exceeds that authority,
and you go along with it, you may well have effectively given the agent
authority to act in that way in future. For example, if the agent arranges a
sale without authority, and you then agree to fulfill the sale contract.
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Q10: How can I protect my intellectual property
and confidential information?
Your agreement
should spell out what use the distributor is allowed to make of your
trademarks and other intellectual property. For example, the agreement may
include that the distributor is prohibited from altering your product
packaging. Unless your agreement is carefully drafted, there can be
unintended consequences - for example, the distributor may become entitled
to some of the value of the intellectual property. Confidential information
can be protected with suitable terms in the agreement. These will need to be
included in the agreement on how confidential information will be protected
after the distribution relationship is terminated.
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