Our experience is based on extensive analysis of the trade barriers. Research underlines the most common non-tariff barriers existent in the Chinese market and combining them with the findings obtained from interviewing information managers in the companies. Results based on Interviews not only from successful venture cases as well as unsuccessful projects exploring the main reasons behind the failure. Our experience illustrates a new image of how trade is being conducted nowadays in the Chinese market, whether you are in the expansion process to China or your company has already been present on the market for several years. We offer important insight for companies considering expanding to China or even for the ones who already have expanded in order to assess whether the strategy they have used was the best one or whether using a different approach would have brought them faster, more noticeable success.
As companies grow and begin their expansion adventures they quickly realise the major rewards of entering rapidly, increasingly developing countries like China, India, and Vietnam etc. Especially China has showed a light onto the world, battling to become the number one economy in the world, with an economic growth rate of 11% in 2010, and is predicted by coming years to have a larger economy than USA. Western companies are hastily judging China as a paradise for production and expansion of sales. This is however somewhat true viewed in the light of the increasing middleclass of Chinese people expected to buy European products, and adding the low-cost labour pool present in China supporting the production at improved cost-structures and the availability of several governmental and local authorities’ incentives and tax deductions to build factories in certain areas. Additionally China sits on massive amounts of raw materials including steel, aluminium and rubber providing low prices and costs of obtaining such materials (Hemerling and Lee, 2007).
With all these clear-cut advantages for cheap labour and more sale opportunities, why do not all companies move their production or sale offices to China? The answer is barriers in their quest, resulting in some companies having hard times after moving in and losing a lot of money in the attempt. This is happened because of taking wrong decisions on the right place by not considering some very important demographics and other factors involved (Niu et. al. 2011). One important notion is the differences, which are important to be aware of when dealing with Chinese businesses. Given the vast Chinese cultural background and economic system substantially influencing Chinese firms, their executives and employees, the decision-making processes of the Chinese executives vary a lot from what the European counterpart normally experience.
Dealing with several many cases, researches and experiences, makes us right choice for your business. We can answer effectively all related questions coming into your mind
- How can Danish companies effectively manage barriers encountered when expanding to China?
- Why should Danish companies enter the Chinese market?
- How does Guanxi fit in the business environment, is it still relevant?
- Are there differences between regions in China, and how do they manifest?
- Is Europe so different from China, and to what extent?
- What are the most common non-tariff trade barriers encountered in China?
- Are there any other important factors related?
International business research finds the liability of “foreignness” to be a barrier to market entry. The liability of foreignness is defined as all additional costs a firm incurs when operating in an overseas market that a local firm would not incur. These costs can arise from, among other things, the foreign firm's unfamiliarity of the local environmental, cultural, political and economic differences and the exchange risk of operating in a foreign market, and the need for coordination across geographic locations. While foreignness is a liability and an important entry barrier for international firms in most western countries, it can be an advantage in China because the Chinese government has been implementing special policies for foreign firms, such as reduced taxation, in an effort to attract foreign investment and boost China's economy.
We assist companies who want to expand in china to overcome these barriers and facilitate them with our experts’ opinion. Among other barriers included in the product differentiation of incumbent factor, “advertising effects” and “possession of channel members” are rated the top two most important barriers, which are higher in importance than the ranking of such items in western countries. When an incumbent firm has a considerably longer history in a Chinese market, Chinese customers tend to perceive that long history as a signal of superior product quality and performance, and, as a result, will place more trust in the firm's brand. This will likewise result in more stable relationships with distributors, as longer history in a market creates more trust. An elaboration of the Chinese market conditions is available in the China section.
Our main expertise include assisting companies in areas like
- Technical barriers to trade
- Market Entry Modes
- Joint Ventures/Intermediate
- Wholly-owned ventures