The global environment of today is constantly changing, with the emergence of new markets and appearance of worldwide trends. Countries that were not considered to be optimal for business development just a few years prior are quickly growing in all of their industries, providing companies with ample opportunity for future growth and expansion. One prime example of this movement is China. The region that was once regarded as irrelevant has quickly become one of the biggest, fastest-growing avenues for corporate expansion. The shift was fueled primarily by the development in tech, business, and manufacturing, allowing the country to rival its other competitors such is the US. Coming in from the UK, a delivery and online grocery service FreshDirect seeks to set its sights on the new opportunity.
However, it is important to understand that entering a foreign market is a process in and of itself complicated, requiring evaluation and research on the topic. In particular, it is important to consider both the cultural and marketing aspects of the new market, possible ways of overcoming them, and existing examples of businesses that have adapted to the target environment. This work will focus primarily on discussing the aforementioned considerations, starting with the potential problems when entering the Chinese market, moving onto the process of the entry itself, and the marketing mix decisions involved.
Issues with Entering the Market
Culture is an inseparable part of a country, and, by extension, its market. Culture develops in tandem with history, fueled by traditions, beliefs of the people and a combination of both internal and external factors. To properly conduct business in a particular market, it is necessary for companies that enter it to act in accordance with the norms of the market culture (Nicoletti, 2019). In some countries, this consideration can have a small impact, while in others, it is tremendous. In the case of China, the country’s cultural heritage shapes its people’s daily considerations to a high degree, meaning that any new business seeking to find a place there must be prepared. It is also important to note, that, compared to western countries such as the UK and the US, the Asian sector has a substantially different value system and historic background, requiring more effort and time to adjust to (DeGennaro, 2019).
As a country, China has a socialist market economy, where the means of production are owned both by private individuals and the government alike. This means that the market can freely grow and develop, much like in the UK, but the influence of state powers is still much more prominent. Many cultural, economic, and social considerations of the People’s Republic of China are dictated by the ruling party, which has its own forces in a large number of industries (Froese et al., 2019). Considerations of government involvement must be taken into account when setting up business in this region, as the CCP regularly monitors the competition and imposes regulations upon specific fields (Froese et al., 2019). Additionally, the business culture of the country can be seen as different from the western front in the way they produce specific types of value.
In accordance with Quinn’s theory of culture, 4 possible types exist, namely adhocracy, market, hierarchy, and clan. Current research states that most Chinese businesses adhere to the hierarchy type, exhibiting strong internal control and leadership (Jaeger et al., 2017). A company starting their business in the country will require to take this fact into consideration. The regular Chinese people are also very much in touch with their country’s history, valuing products that cater to their unique needs and desires (DeGennaro, 2019). This means that any company starting work in this territory must adjust its approaches to satisfy a new demographic.
Marketing is another prime issue to discuss when talking about the emergent Chinese market. Cultural sensitivity is a key aspect in this consideration, concerning the ability of the new company to work within the boundaries of an unfamiliar culture. Many foreign companies working within this market have faced difficulty in advertising their goods in a productive manner or adapting to the regulations set upon by the Chinese party (Doyon, 2021). Similar mistakes and poorly directed efforts have been covered widely in the news and on social media, discussing the failures of businesses in coming to terms with China (“5 Western brands that failed to crack China, and the lessons you can learn from them,” 2018). Furthermore, the marketing focus that a company should strive for is vastly different from the euro-centric image that can be understood as the default, leading to the need to formulate different approaches. For example, the status of women in society is quite different from the one in the UK, with China being considered far more reserved and conservative in this regard. Traditionally, women are seen much more as caretakers, and their power in society has only recently been on the increase (Ebrey, n.d.).
This means that marketing focused on self-empowerment and independence is more effective in reaching this segment of the population. Similar considerations have to be made in regards to men, children, and the elderly, as each of these groups has a distinct sense of cultural and social identity. Furthermore, businesses coming from foreign markets need to adjust to the change in the online environment, both in operation and advertisement. This issue is much more prominent in the case of internet-based companies, such as FreshDirect. For successful operation, for the servers running on the Chinese territory the usage of CN online domains and servers is necessary (“Chinese business culture and market entry,” 2021). The online sphere of China is highly sophisticated, with the majority of people spending time online or on social media (Wang, 2021).
However, instead of Twitter, Instagram, or Facebook, Chinese-exclusive platforms are much more preferred. Weibo, WeChat, TikTok, and others are among the most prominent, occupying the largest percentage of the market and hosting their particular range of services (Meredith, 2019). In addition, the marketing strategies and approaches in this part of the world need to be tailored to the expectations and needs of the Chinese population. Research has shown that a large part of the population places trust in social media influencers and other types of media figures (Yang, 2021). This fact means that any business desiring to create an effective marketing strategy in China will likely be tasked with interacting with social media celebrities, using their status and public recognition as a tool of marketing.
Justification for the Target Market
The Chinese economy has quickly become the largest in the world, growing and developing at an unprecedented rate compared to its competitors. While many European countries experience an economic decline, the Asian market is steadily coming into prominence, due to its ability to grow and use its resources in a productive manner. Serving as the world’s largest producer and manufacturer, it presents a myriad of possible opportunities for a business (“Why you should be doing business in China”, 2018). Be it a company coming to expand its reach, or a completely new enterprise trying to set the foundations, the Chinese economy has an abundance of potential and the labor force to back itself up (Lapitsky, 2018). The large cities are quickly developing, with more and more people moving from provinces to improve their lives.
This increased traffic creates a demand for jobs, goods, and services, becoming the driving force for any company in the country. China has also had the ability to effectively utilize the online sphere, with the prominence of social media platforms and tech being very noticeable (Chiu et al., 2018). The usage of the online sphere and smart technology is beneficial for businesses that specialize in such fields, or utilize the world wide web as the primary way of reaching their client base (Asialink Business, n.d.). For an online-based grocery service such as FreshDirect, the Chinese market might be one of the most advantageous and promising positions, as the demand for easily accessible, healthy, and quick food grows exponentially (Textor, 2021). A business primarily based on a digital platform, deriving profit from an industry that is likely to stay relevant for prolonged periods of time has good prospects for expanding to China.
Target Entry Method
There are a number of possible strategies for penetrating the Chinese market, all involving their own risks and benefits. Export of goods or services, joint ventures, and franchising can all be viable options depending on the nature of a business and its set goals. Franchising in particular can be seen as the method will less risks and substantial profits. However, in the case of China in particular, another possible method of market entry appears to be more effective and mainstream. The practice of WFOE, or Wholly Foreign-Owned Enterprise, is one exclusive to China, and one of the main ways for an overseas company to take root there (“WFOE organization: Wholly foreign owned ENTERPRISE (WFOE),” n.d.). This method refers to foreign companies establishing and fully owning their offices in the country. The enterprise created this way is managed by the parent company but has to abide by specific regulations of the Chinese government to function and be considered legitimate (“WFOE organization,” n.d.).
The framework can be used for a variety of companies, involved in manufacturing, consulting or trading. This method has several advantages to it, including high independence to use the strategies of its parent company, an ability to carry out business as a part of the whole, and not an affiliated representative, and increased work efficiency (“WFOE organization,” n.d.). This method of setting up a business has been proven to be effective in maintaining the brand image and integrity of foreign companies, while also allowing them the capacity to become part of the Chinese market. Such brands of McDonald’s, Coca-Cola, Microsoft, Honda, Samsung, and many others can be seen as an effective example of this (“List of 20 WFOES in China – GEI company set up in China”, 2020). The use of WFOE presents organizations such as FreshDirect with an ability to retain control and maintain flexibility on the new territory.
Marketing Mix Decisions
The online grocery service sphere and food delivery services have been rising to prominence in recent years. With the introduction of the online sphere, the possibilities for ordering food from the comfort of one’s home have become more encompassing than ever. While the popularity of such services rises, it is still important to define a core demographic that FoodDirect potentially caters to. As shown by contemporary research, the most demand for delivery services and online grocery shopping comes from people from 18 to 40 years old, mostly men (Rajamanickam, 2021). More than half of this group are below 35 years. The research indicates that younger people are more susceptible to using online services, which is either connected with the busy nature of their lives or the amount of time they spend online.
The lack of time and a push for convenience, in general, is the primary driving force behind the popularity of online grocery shopping (Bradbury, 2020). With the interconnected world of today, many people are too preoccupied with their daily routine to buy products, leading to compromises between health and productivity. The food selling and delivery services seek to address this discrepancy and fill an existing niche by saving people time and energy. In the Chinese market, such considerations can be increased tenfold, and the popularity of online shopping increases with each passing year (Ma, 2021). With the largest population in the world, most young individuals are preoccupied with their careers and education, needing the accessibility and quickness online-based storefronts can provide.
By exploring this need, a company can secure a strong position on the market. Additionally, one can also add the considerations brought upon by the Covid-19 pandemic into the spotlight. As the country is severely affected by the disease, the use and need for social distancing is widely recognized in China. Grocery shopping, as a practice closely involved with interpersonal interactions, therefore, can be considered dangerous. All of the vulnerable demographics affected by the pandemic, including the elderly and the immunocompromised can become a viable part of the target audience.
What Needs to be Adapted
As discussed above, culture is likely the biggest consideration and hurdle a business must overcome in order to become established in the Chinese market. It is necessary to construct a composite brand identity, one that will combine the values and image of the organization while incorporating traditional aspects of Chinese culture and tradition. The process is partially accomplished through the use of Mandarin Chinese as the primary language on the country’s territory, including the name of the brand itself and its products. It is also necessary to incorporate traditional imagery and sentiment into advertisement campaigns, sales, and all other public aspects of corporate relations. As shown by the cosmetics company Maybelline, the use of Chinese cultural iconography and recognizable items can be highly effective and profitable (Zheng et al., 2019).
The company has presented its new line of lipstick during the Lunar New Year and fashioned it to be a mah-jong set. This effort shows an understanding of Chinese values, creativity, and a distinct brand identity that can be used as a recognizable feature of the brand. Similarly, FreshDirect can use its resources to offer people traditional Chinese food, discounts and themed events centered on the country’s culture and heritage, which would show the people of China that the company understands them.
What can be Standardized
Other aspects of operation, on the other hand, can be standardized or be left the same way as they currently are. For example, the management and leadership structure at the FreshDirect WFOE can be the same as in its main headquarters, due to the freedom of managing a business that comes with this entry strategy. Employment policies and regulations, as well as the company’s ability to build its internal structure, can also remain the same. Processes of transportation, logistics, tech and communication can also be standardized, with some adjustments made in accordance with Chinese online platforms and servers.
In conclusion, it can be noted that the process of business integration and entering a foreign market is difficult, requiring the company to develop specific pathways to achieve its goals. During the course of this work, some of the issues connected with the marketing and culture of China were discussed, including problems that need to be addressed to successfully integrate into the foreign market. The overview focused on some of the most pressing issues and outlined a possible method of entry that is based on research and previous experience. It is expected that with an adjustment to cultural norms and considerations, a business should be able to successfully develop in China.
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