China - Market Entry StrategyChina-Market-Entry-Strategy
As always, companies should consider their own resources, previous export or business experience abroad, and long-term business strategy before entering the China market. Representation in China by a Chinese agent, distributor, or partner who can provide essential local knowledge and contacts is often critical for success, but finding the right Chinese agent or partner requires preparation, patience and hard work.
Given the enormous size of the China market, U.S. companies should view it in geographic segments and search for business partners, agents, or distributors that can cover specific geographical areas or industry sectors. It is best to start in first-tier cites, such as Beijing, Shanghai and Guangzhou, where businesspeople have more experience in dealing with foreign companies. While the first-tier markets may be more saturated, they offer an easier entrée into China through which U.S. companies can then expand into second and third tier cities, often working with their existing business partners or even identifying new partners. Moreover, potential business partners that specialize in specific industry segments are also important to consider as they make have connections to the large state-owned and private enterprises often representing the most likely end-users.
The following are some important considerations for U.S. companies to consider when exploring business opportunities in China.
- Agents and distributors tend often specialize in one region or one end-user, so the agent who ably represents a product in Shanghai, may fail in Guangzhou. A firm that sells testing and monitoring equipment to China’s vast state-owned petrochemical industry may not have good channels into the municipal wastewater treatment sector.
- China’s consumer market is fragmenting by geography, income levels and age. Even niche markets – older people in third and fourth tier cities, for example – can be profitable.
- A strategy the focuses on a niche or a specific region can often be the best initial approach for smaller companies. First-tier cities are the most logical place to start when entering the China market for the first time.
- Government officials play an oversized role in the economy. Firms should seek to understand how their product or service is regulated and by which agency.
Intellectual property rights holders should understand how to protect their IP under Chinese law before entering the China market and should conduct thorough due diligence on potential partners or buyers before entering into any transaction. All companies and IP rights holders should consult closely with lawyers who have extensive experience with the China market.
The U.S. Department of Commerce’s United States and Foreign Commercial Service (USFCS) offers customized solutions to help U.S. companies, including small- and medium-sized enterprises, succeed in the China market. USFCS stands ready to help U.S. companies develop comprehensive market-entry or expansion plans, learn about export- and customs-related requirements, obtain export financing, and identify potential partners, agents, and distributors through business matchmaking programs, trade shows, and trade missions led by senior U.S. government officials. As starting point, Commercial Service China offer the Initial Market Check (IMC) that delivers an assessment for a product or service’s market potential in specific city or region in China.
The U.S. Department of Agriculture’s Foreign Agricultural Service (FAS) provides equivalent-level trade services at no cost for U.S. companies interested in exporting agricultural, fishery, and forestry products through their Agricultural Trade Offices. FAS maintains offices in Beijing, Chengdu, Guangzhou, Shanghai, and Shenyang. FAS works with USDA agencies and other U.S. food safety-related agencies (the United States Food and Drug Administration) to coordinate the U.S. response to newly arising sanitary, phytosanitary, and technical barriers to trade, such as identifying and resolving challenges posed by new procedures introduced at port or acquiring, translating, and coordinating the U.S. response to draft regulations that could affect U.S. exports.
China Trade Development and Promotion