China’s 1.3 billion consumers are at a crossroads. They are embracing new economic ideas and habits, and devouring goods that have long been unavailable, unaffordable or forbidden. At the same time, they are part of a culture and an economic system that remain quite different from those of developed countries. In this special report, experts from Wharton and Boston Consulting Group offer insights on how Chinese consumers are evolving as the market develops; what companies need to know about navigating China’s convoluted sales and distribution systems; and the advantages emerging Chinese companies have over Western competitors, even as these firms face their own difficulties in entering the global marketplace. Also, Deepak Advani, chief marketing officer of Lenovo, and Hal Sirkin, senior vice president of BCG and leader of the firm’s Global Operations Practice, discuss the advantages of tailoring products and messages to local markets in China.
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Despite rapid urbanization and the emergence of a strong, status-conscious middle class, experts from Boston Consulting Group and Wharton point out that China is still “a country of extremes,” where it pays to understand the differing habits and mindsets of the rich and poor, as well as the subtleties of consumer rationales for trading up and down when making purchases.
Experts from Wharton and Boston Consulting Group say that firms should not underestimate the skills they will need to navigate the labyrinthine networks of state-owned distribution companies and small, private wholesalers in China — particularly as they try to expand outside the country’s largest 30 or 40 cities into its 500-plus other large markets.
Despite the hurdles they face in entering the global market, companies emerging from the highly fragmented and competitive domestic market in China will have distinct advantages that many Western competitors are unprepared to deal with, according to experts from Wharton and Boston Consulting Group. Among them: steep cost savings in wages and safety requirements, and a widespread lack of concern or clear regulation regarding intellectual property protection.
Because it is so difficult to generalize about Chinese consumers, multinational companies using global “one-size-fits-all” marketing strategies seem destined to fail in China. Knowledge at Wharton spoke with Deepak Advani, senior vice president and chief marketing officer of computer manufacturer Lenovo, and Hal Sirkin, senior vice president of BCG and leader of the firm’s Global Operations Practice, about strategies for selling to Chinese consumers. The key, they point out, is to tailor products and messages to local markets.