Companies should consider their resources, previous export experience, and long-term business strategy before entering the PRC market. Some steps U.S. companies can take in implementing a market-entry strategy include:
Consider a Regional Approach
- Given the enormous size of the PRC marketplace, U.S. companies should consider breaking down markets in the PRC into several geographic segments and search for business partners, agents, or distributors to cover specific geographies.
- First-tier cities of Beijing, Shanghai, and Guangzhou are often the best locations to start when seeking new business opportunities because those cities contain the most experienced businesspeople who deal with foreign companies. For more experienced exporters, China’s second and third-tier cities may hold pent-up market demand for American products and services, as well as less competition.
- A strategy that focuses on a niche or a specific region can often be the best initial approach for smaller companies.
- The consumer market is divided by geography, income levels, and age. Given the size of the country, even niche markets can be highly profitable.
Evaluate Partners Carefully
- A Chinese agent, distributor, or partner who can provide essential local knowledge and contacts is often critical for success; however, finding the right partner requires preparation, patience, and hard work.
- Potential business partners that concentrate on specific industry segments are also essential to consider, as it is common for them to have links to large state-owned enterprises (SOEs) and private companies.
- Since agents and distributors within China often specialize in one region or one end-user, success in expanding into another region is not guaranteed.
Understand Local Regulations
- Government officials play an essential role in the Chinese economy. Firms should actively seek to understand how their product or service is regulated and by which agencies.
Protect Your Intellectual Property Rights
- Firms and companies should take proactive steps to protect their intellectual property rights (IPR) under PRC law before entering the Chinese market. There are a variety of IPR resources are available, including the U.S. Patent and Trademark Office and its intellectual property counselors located in China and around the globe. It’s important to consult with specialized lawyers that are knowledgeable in this area, and to conduct thorough due diligence on potential partners or buyers before entering any transaction.