22nd July 2011:

Cross border expansion - a perspective on China

The Economist, a leading weekly magazine, recently published an analysis of Chinese consumer habits, focussing on market growth and the emerging middle class in China, noting ‘small wonder that Western firms are piling in.’  The article entitled ‘The mystery of the Chinese consumer’ focused initially on demand for consumer goods, before concluding with insights on expansion into China.

The article notes several factors that are essential for cross border growth into China, many of which support findings from the BDO Ambition Survey: Global Ambition.  The author, correctly in my view, highlighted the importance of establishing an ‘efficient distribution network early on’.  This reflects a key discovery from the BDO Ambition Survey that finding trustworthy local partners and suppliers is vital to expansion.

The significance of understanding the local market was also raised.  The author drew upon the experiences of a US DIY chain that is downsizing its Chinese operation, as few people undertake home renovations.  This is a lesson that is applicable across all industries and our survey too noted that researching and understanding the Chinese market is crucial for cross border growth.

Thirdly, the feature noted challenges associated with the recruitment and retention of talented staff.  This again, mirrors our global survey with identifying the right people on the ground recognised as the single biggest challenge for successful international expansion.

Due to China’s vast economic growth, many organisations are rightly thinking about expanding into this market.  Whilst, expansion provides its own unique challenges across myriad business functions, none should be considered insurmountable.  Indeed, from our own experience and drawing upon insights from the BDO Ambition Survey: Global Ambition, it is clear that thorough research, cultural understanding of China, trusted local networks and identifying the right people is the key to expanding successfully into China.  I have been pleased to see an increasing number of BDO’s clients seeking to take advantage of the opportunities presented by China but rightly ensuring that they follow this advice.

I look forward to this year’s survey with interest.

 International Business  0 Comments July 22nd, 2011