China is a paradox in the eyes of many external observers. On the one hand it appears completely intransparent, whilst at the same time offering a plethora of opportunities to those who understand how to develop the best market entry strategy for China. Of course, you also need a great strategy going forward too, and Alberto Antinucci is one of Europe’s foremost experts on how to arrive at that.
Table of Contents
Introduction of Alberto
Alberto Antinucci is a China Business Specialist, serial entrepreneur, digital strategist, business coach, global public speaker, and mentor.
He moved to Taiwan at the age of 19 following his dream to start a business activity in international trade and project development by establishing international distribution channels between Asia and the rest of the world.
He lived and worked in Taipei, Hong Kong, Shenzhen, Shanghai, the USA, and across Europe for 30 years, consolidating his experience in R&D, production, marketing, and sales becoming a specialist in business coaching and start-up mentoring.
Since the mid-’90s, he developed Internet and e-commerce projects registering several patents.
Today, he focuses on his business activity in China, making his knowledge of Chinese business and cultural dynamics available to western brands supporting the market penetration in the territory, thanks also to important partnerships built up over the decades.
His passion for digital innovation continues to grow with NFT, Blockchain, AI, and Metaverse projects for which he speaks at public events.
The voice of experience
Alberto’s initial experiences in Asia arose out of a need to source products for his company. On a trip to Taiwan, he realised that he could obtain almost everything that he was looking for there and that this was a great location for him to be based.
From today’s perspective that may sound a little odd, but back in the 80’s it was a decision reached by logical progression. The technical development was moving fast however none of the systems we’re so familiar with today (eg Microsoft Office) were available, only clunky mainframe systems like AS400. When Alberto flew to Taipei in the hope of being able to find suppliers for various computer parts, he was taken aback to be greeted at the airport by hordes of people waving product catalogues at him. He was literally able to select what he needed at the airport!
At that time though electronic communication wasn’t like now and therefore being based in Taipei made perfect sense. Faxes and phone calls were horribly expensive between Europe and Asia, and obviously post took weeks.
Fast forward a couple of years & Alberto experienced first hand together with Taiwanese companies, how the Chinese government were pushing what became the economic wonder of Shenzhen. Moving to Shenzhen, Alberto was able to experience this exciting period first hand & expand his knowledge of the region.
Sometimes you only learn from failures
Alberto himself had projects within China which failed. Even a guy with so much experience in the country made mistakes that he’d warned countless others against. He set up a factory and assumed that his years of experience would enable him to navigate the mindset and mentality issues, but in the end didn’t make money. Then again, it’s often hard to see our own mistakes as we’re too close to the problem.
It’s important to REALLY understand the business & not “just do it”
That’s perhaps a rather enigmatic statement, but for being successful in the Middle Kingdom then you need to have a fundamental openness for learning what works and for experiencing a completely different mindset. Developing with the best market entry strategy for China means you need to accept that you don’t know what you don’t know and being open to learning a completely different way of thinking. Of course (depending on your category) you can start working and experience some small success, but that may only be short lived without an understanding of the mindset.
It will be a huge problem for your business in China if you go in believing that you know everything better, especially when it comes to your own business. So many brands accept that their business partner knows China better than they do, but refuse to accept that their way of doing business may need to be different. Just because something works in Serbia or Vietnam, doesn’t mean that it will automatically work in China.
China is a different place, with a different environment, with a different infrastructure (especially digitally) and of course a different mindset.
Don’t expect the roads to be paved with gold
There are good opportunities in China BUT they have to be earned, and it isn’t a market for getting rich quick (that urban myth is persistent, but not true). It certainly isn’t an easy market but there are always opportunities to be found if you know how to develop the with the best market entry strategy for China in order to take advantage of them.
The market isn’t for the faint of heart because you need to be in it for the long term. The budgets required (both in terms of finance as well as human capital) are high – there are certainly no shortcuts.
Do your homework
Where do you stand compared to the market? Does China know that you even exist?
Are your products ready for China? Whilst around 80% of products could be suitable for China, chances are that they need to be adapted in order to have a chance of succeeding. It may be the formulation or design that you need to change, it might be the packaging, the sales channels or the marketing messaging. However in order to find that out you probably need to carry out some very specific market research.
You have to be ready to adapt and change to take advantage of niche opportunities, but in order to recognise those opportunities you have to do the research up front.
The basic process is the same whether your product is machinery, fashion or food & beverages – you need to:
- research the consumer opportunity
- protect your IP – this is great advice for any market that you are looking to enter, but especially so for China
- register your products (after carrying out the necessary adjustments)
- prepare your communication strategy
Ideally the designated China team will be trained to THINK differently. They don’t only need the ambition to succeed in China, but also to fight for what the project needs against the naysayers within the company.
They need to realise and experience how Chinese companies deal with all the different aspects: time, budgets, ethics not to mention business prejudices and preconceptions. (There are plenty of those on both sides usually).
Team members need to be prepared to hear “no” from the Chinese side if they believe that something won’t work. If this happens, they should carefully consider what is behind the statement. The Chinese have a different approach to us than we do to them.
Remember that you can’t do “just a bit of China” – it’s a market that requires focus if you are to have a chance of succeeding.
Before taking any final decisions, you need to do intensive research on your category in China. Who are your competitors and which products are they present with? (Remember what we said above about the need to adapt).
How should you be positioning your products? What changes do you need to make?
Working backwards from what the consumers require is a great approach for China. You have to make sure that you give your clients the answer they are looking for rather than solving a problem you assume they have.
Understanding China and adapting your products and strategy to the market increases your chance of being accepted by consumers. In many cases, creating a kind of scarcity around supply (it implies exclusivity) can also be beneficial for sales, so you shouldn’t pump huge quantities of product into the market when starting out.
Make sure you protect your IP and patents. I can’t say this often enough! China is a first to file market, so if you wait until you’re ready to start selling, you could potentially experience a nasty surprise & someone else could have already registered your brand name and logo.
You don’t just need to protect your regular name, but also to prepare a Chinese name for your products or brand, that should also be protected.
Once you have those parts in place, you need to reserve the appropriate social media accounts.
A cautionary tale
Many companies have similar problems with starting out in China. About 50% of companies who made sample deliveries to a distributor who came to them with an enquiry, never receive follow up orders. This isn’t because their product or brand isn’t suitable for the market, but simply that they misunderstood the nature of the opportunity.
In such cases, the importing company was probably scoping out the potential for an own production line, using an imported item to test the market and gain good quality samples.
If it’s merely a problem of having made a small delivery that wasn’t followed up then that is not too bad, however often the brand owner relied on the importer for the IP protection and brand rights, only to discover that they’ve given too much away too soon.
Of course you could sue, but do you really want to go to court in China? Realistically the option you have is to go back to the drawing board and to start to build a strategy from scratch as you should have done in the beginning. As mentioned further above, there are no shortcuts to success in China.
Do you know how to talk to the locals, and persuade them to select your products ahead of the thousands of others available on the market?
It’s essential that you LISTEN to what your partners in China are telling you, and learn to hear it. Probably what you understand is not what they actually meant, so it needs an experienced advisor to help you decode this depending on what and how it was said.
If you ask a Chinese person their opinion about any topic to do with your business, you will probably always be surprised by the answer. It will most likely be a contradiction of what you think you know!
The only constant is change
China is constantly evolving at a pace which is rare in other markets, and the last 2 years have been no exception to that.
China has changed drastically in that time. You may have heard the term “dual circulation” policy mentioned in the news – that was initially a reaction to the US sanctions imposed by the Trump government. It refers to a much stronger focus on being self sufficient and serving the domestic market, a trend that became even stronger during the last 2 years. Of course, in the long term, this will be at a cost to the rate of growth if nothing changes, but for the last years it has been a survival strategy.
During that time, companies became even more customer centric. As a new brand in the market of course you need to study what that means for your product, and then going forward to look around that core business to consider how you can best WOW your clients.
Remember that just because China is a one party state, it doesn’t mean there are no turbulences due to internal politics (even if those are often not immediately obvious to outsiders). The government is sure to be doing everything in their power to reattain zero covid prior to the Party Congress and Presidential election in autumn.
Right now (April 2022) the strict lockdown in Shanghai has shaken the belief of many Chinese in the government’s ability to handle the consequences of their pandemic policy. Complaining doesn’t come naturally in a Confucian society, but the conditions in Shanghai in the first half of April resulted in a tsunami of complaints on social media. That doesn’t mean that the Chinese are questioning the system of government, but that they are not happy with the way the Shanghai lockdown has been handled, and that is likely to have political consequences.
Use the time for analysis
Whilst now isn’t feasible to visit China for market entry trips, it’s a good time to study the new situation that’s being created. Accept that the market has changed and consider how you can position your products to take advantage of that.
Key Learnings and Takeaways for developing the best market entry Strategy for China
Companies often focus on the wrong challenges when they are looking to enter the Chinese market. Frequently, they focus on operative questions such as how to set up the relevant social media accounts when actually they are completely unknown within China. If you are starting from 0 (as a nobody) then you need to take the right approach to improve your chances of success.
- make sure that you protect your assets and IP upfront as this can be very expensive and time consuming otherwise
- don’t get fixated on your operational approach before you did the research to put your strategy into place
- ask yourself if you can afford to enter the market (you know that saying “small kids, small problems; bigger kids, bigger problems”? Well, you can apply it to markets and budgets too.)
- be cognisant that you don’t know what you don’t know, and get a qualified person to help you.
- be humble – don’t assume that Chinese companies are just waiting to be able to work with you
- accept that you will need to adapt & learn (& that at high speed) so leave your ego at home
- understanding the mindset and culture are the two most important foundational elements
The market evolves fast, so whatever is the best market entry strategy for China (or business model) now, will probably need to be reworked and adapted at least every 3-5 years if you are to stay ahead of the curve.
You can find my full interview with Alberto here:
You can get in touch with Alberto via LinkedIn.
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