Why Global Companies Failed in China
Do you have what it takes to become a success in China? If this question were asked from the foreign companies, many would bob their heads in the agreement saying “Yes”. SWOT Analysis says otherwise.
You are a happy businessman when your company gets registered, local partners agree once, and your product is available in the market. Yet, the company fails to create its mark in the market. It’s not because the company was incompetent; failure happens because China is the most unpredictable country. The lack of understanding of the legal and cultural environment says a lot about how those companies failed. Companies willing to learn, talk, and adopt the Chinese way of business practice have made things work in the blink of an eye.
How did they do it?
It’s not a big secret. If you have heard the saying; “When in Rome do as the Romans do” then you have your question answered. Localization and translation are the most integrated ways to retain a strong foothold in the Chinese market.
The Main Point to Ponder: Can the Failed Companies Get Back in the Game?
Will western companies be doomed forever in China? Of course not, the problems are not insurmountable but it’s best to understand why the companies failed in the first place:
Culture differences are a huge gap
It’s not about how much effort you put to start your business in China. Business practices matter the most. The common problems with the business practices are
- Censorship
- Control
- Culture differences
These are the three significant drawbacks behind the systemic failure of western businesses. Major western brands like Starbucks, KFC, McDonald’s, Audi, and BMW, etc., manage varying levels of success in China. Even when Uber carefully managed their local Chinese subsidiary (partnered with Baidu) but still wound up retreating from the Chinese market. The competitor, Didi Chuxing, had a more massive cash reserve that monopolized the market.
Likewise, western companies make silly choices that not only affect their sales but also introduce them to the world of localization – the key to survival in China.
Still, it’s hard for western companies to gain a strong foothold in local search engines, contents, and especially social networks. Cultural differences, including language barriers, are hard to uphold.
Winner takes all
The digital world of China is quite different as compared to the western world. Because of the long-term competitiveness of digital firms, it’s hard to overlook the incremental advantages. Usually, in the States, digital agencies aim for inimitable benefits. This strategy works in their favor as it is digital market-friendly. However, in China, they favor the native firms as they have a better understanding of the culture, consumer, and business practices.
Managing relationships with consumers and local partners is second nature to these local companies. They are more adept at accepting market challenges or rise and fall in the trends of various products and services. Therefore, the Chinese digital world revolves around the theory; “winner takes all” which means one or two players have gained the upper hand in the target market and can snowball the ROI too.
An experimental approach is a long battle
The Chinese market is the most developed. Consumers do not remain on a brand for long; if a better substitute arrives in the market, they will switch towards it. Thus the ever-changing market style has led several brands towards the experimental approach with their products. New ideas can quickly become obsolete if you were slow to implement. Frequent change in business strategies and reimbursement of work is required in the Chinese market.
Western companies fail to comprehend the idea of how Chinese market trends change at lightning speed. Innovation is a vital tool that can be accomplished by localizing the products and services and innovating SEO practices as well. Even the strongest foreign companies tend to fail because they are unable to keep up with the technicalities of the Chinese market.
Rackety localized operations
The language barrier is constant for foreign companies. To overcome the language bridge, they hire translation services. But what if the translation agency you hired didn’t do the job in the right way? China is a vast market, tough to conquer especially with a strong retaliation from the local competitors.
Just because a particular brand is successful in the US or Europe doesn’t guarantee success in the Asian market. When companies jump on the Chinese markets, they do so in a hurry, thinking that brand name is enough. They fail to understand that their brand reputation may exist in the western countries, but the reputation “does not exist” among Chinese consumers.
Nokia failed to make its mark in China. Even though it was a global leader in mobile phones, it was unable to grasp the concept of software and kept its sole focus on the hardware. The fear resulted in the “stagnant product”. It not only affects the user experience but failed to impress the future internet generation.
Down Below Are Examples of the Brand That Failed Notoriously in China
Barbie
one of the epic failures in China. The ironic part is, the doll itself was favored instead of the “brand”. When a six-story shop opened in Shanghai, the planning went array. The shop included a restaurant, hair and nail salon, cocktail bar, and even a spa. Poor planning led to a confused target audience, whether the House of Barbie was meant for kids or adults. No one could say for sure.
Home Depot
the DIYs are not a hit among Chinese consumers. Whereas American prowess led to social media influencer’s blogging about DIYs, it was a failure. Chinese consumers belong from a middle class; the culture is different from an American household. The company fully stocked its 12 stores with DIY materials which failed to make any sale at all because of the store format, the idea behind people buying a home is an investment not for improvement and strong local competitors.
A the well-known company got victimized due to politics. With the censorship and poor decisions, and no Gmail, or YouTube, the company didn’t want to keep its servers in China as the legal policies were harsh. Government demands to restrict the data content further made the company edge. Moreover, a breach was traced in 2009 that was said to have stolen corporate secrets.
Amazon
A pioneer as a failure in China. They tried to make things work for 15 years but were unable to exploit the Chinese labor force to produce the much-needed results in China. Competitors used cheaper utilization while they focused on more organized methods of utilizing labor. It was an ultimate doom.
Bottom Line
To capture a piece of a slice from Chinese markets, it is imperative to understand the local market, language, and most importantly, the culture. Keep your focus on how the trends keep on changing and ways to manage it with local partners. There’s always a second chance.
