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Western firms should do as the Chinese do for success in China

Western firms in china, chinese market

Even with its economic "slowdown," the Chinese economy will grow at least twice as fast as America's this year. By 2030, an estimated 326 million Chinese will enter the middle class. That's more than the entire population of the United States. And it's the key reason U.S. companies are rushing to crack the Chinese market.


But success in China has proven elusive for even the shrewdest Western firms. Only by responding to the unique demands of Chinese consumers and availing the knowledge, insights and authority of local partners can Western businesses avoid the failure of their predecessors — and gain a secure foothold in the world's second-largest economy.


Home Depot learned the danger of ignoring the tastes of China's consumers the hard way. The firm opened 12 American-style warehouse stores in 2006. But it overestimated China's willingness to embrace the "do-it-yourself" culture that underpins demand for home-improvement products. Lackluster sales forced Home Depot to close its Chinese warehouses in 2012 and redirect its efforts towards specialty stores tailored to local tastes. The failed expansion cost the company $160 million.


Apple, by contrast, has enjoyed stunning success in China. That's thanks largely to booming sales of the large-screen iPhone 6 Plus. Catering to Chinese consumers has paid off for Apple. The iPhone 6 Plus version accounts for nearly half of new iPhone 6 models sold in China — compared to just a quarter of those sold in the United States.

相比之下,苹果公司在中国获得了惊人的成功。这主要归功于大屏幕的iPhone 6 Plus手机的销售激增。迎合中国消费者让苹果公司得到了回报。iPhone 6 Plus几乎占了iPhone 6在中国销量的一半,而在美国仅占四分之一。

Adapting to cultural norms often requires trusting local partners with important decisions. Starbucks has heeded that lesson well. China is one of the company's fastest-growing markets, with some 1,500 stores in 90 cities. To adapt to each of China's regions, Starbucks joined forces with a number of local firms. Starbucks trusted its partners' first-hand knowledge of China's different regional cultures, and introduced diversified menu choices accordingly.


Groupon, by contrast, stands out as an example of what not to do. The online-deal website failed to take advantage of its Chinese e-commerce partner Tencent's pre-existing user base, knowledge of local consumer habits, and experienced staff. Groupon instead ran its Chinese business like an American offshoot. After three years of high employee dissatisfaction and little success gaining market share, Groupon pulled out of China in 2014.


As China's middle class continues to swell, its market will become ever-more attractive to American businesses. U.S. firms can succeed in China, but not without understanding Chinese consumers and investing authentically in local partners.



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