There are many foreign companies want to enter China market with the fast development of economy in China. However, a foreign firm must choose an appropriate strategy to enter China market.
There are many foreign companies want to enter China market with the fast development of economy in China. However, a foreign firm must choose an appropriate strategy to enter China market.
There are three fundamental strategies that can be used to enter the China market: 1) export via a Hong Kong distributor; 2) export via direct channels in China; and 3) set up a joint venture. Each strategy has advantages and disadvantages.
Market entry via a Hong Kong Distributor is probably the easiest and quickest way to enter China but may be the least desirable in terms of overall market penetration.
Market entry via direct channels in China is probably more difficult and time consuming than entry via a Hong Kong distributor, but in time may be better off for a firm's overall penetration. This option may be a good mid-term strategy.
Market entry via a joint venture of some kind may be more difficult and time-consuming than the other two export strategies just mentioned, but probably yields the best overall penetration of China's market. Utilizing this strategy, both sides (the foreign firms and the Chinese party) could gain the most benefit.
China is a huge, fragmented market. Thus, firms may need to utilize more than one of the above strategies to adequately penetrate the market.
Moreover, there are a number of market entry strategies to pursue in China; each strategy has its own advantages and disadvantages. The specific strategy a firm chooses will depend on how the Chinese "view" the foreign firm’s entering their market, the demand for the firm’s product in China, the rate of growth of demand for that product, a firm’s resources to enter the marketplace, and the time horizon to enter. While the Chinese may never open their markets completely, because many feel that they would lose more than they would gain, it is still possible to penetrate the China market in a significant way.
There are many different regions in China at various levels of sophistication. Similarly, just as there is not only one market entry strategy in China, there is more than one type of buyer in China. Experienced and successful companies know that China is not one market, and they have learned to analyze and segment the various areas. To be successful, companies will need multiple point of entry and may need to combine various market entry strategies to fully penetrate the market.