China has become the most important player in the world economy. It is considered to be the third greatest economy based on its purchasing power parity. “Some forecasts suggests that by 2020, China will pass Japan in GDP in purchasing power parity, and that by 2050 China will be the leading economy of the world followed by the US and India” (Hawksworth, 2006). Such economic rebirth has made entering this market crucial for survival and prosperity for many companies. Thus, in order to achieve success in the cooperation with such country as China, foreign companies should be aware of all possible entry modes. It is of vital importance for any firm conducting its business in the foreign market.
Therefore, possible modes of entry into China should be analyzed. To start with, an entry mode is a serious step for a firm, when it enters a new market, because it restricts its marketing strategy. Furthermore, it influences how the company stands up to the challenge of new skills to sell its product successfully. There are the following Chinese market entry modes: home production (indirect and direct exporting), contractual market entry strategy, and foreign production.
Home production (export strategy) refers to the transportation of different products from one country to another. Re-import falls under this category as well. A great number of western products in China are re-imported. Export can be divided into indirect and direct. The former means that the firm sells products through an independent corporate body, which is situated in the export’s home country, while the latter means selling through the same body outside it.
Contractual market entry strategy includes licensing and franchising. The former concerns the model, where one country, which has intangible property, gives a foreign country rights to exploit this during a certain period of time. The intangible property may be copyrights, trademarks, or patents. Franchising is a form of licensing, when one country gives another the intangible property and help for a specific period of time in return for the compensation of fees.
Foreign productionconsists of a strategic alliance, joint venture (JV), and wholly-owned foreign enterprises (WOFEs). The first exists between a company and suppliers. It means that there are two businesses, which cooperate in order to achieve a strategic target. A joint venture is a strategy, where partners form an independent and jointly-owned separate company in order to achieve a specific target. WOFEs are objects totally owned and controlled by a parent company through foreign investments. As it is seen, all these entry modes are very essential for those countries, who want to cooperate with China. Companies should carefully learn all of them in order not to fail.
Entry modes are not the most important issues in the cooperation between two countries. Entry timing and openness are the leading factors for success in entering the Chinese market. The former plays a critical role for appearing markets. Some scientists believe that early entry into international markets can have a great variety of benefits. Firstly, early entrants can block access to the main resources: suppliers and distribution channels. Secondly, they have a great opportunity to place the structure of consumer preferences. Moreover, the ones can take advantage of being the first, who can use incentives provided by governments to attract those (Johnson & Tellis, 2005). Speaking about openness, it can be observed as a factor, which lacks different barriers to entry for a foreign firm. It can increase entry success due to the following factors:
- It propels demand by increasing the diversity of products offered in the market.
- The competition on quality is too high and increases the level of the latter.
- The competition increases, and as a result, prices are lowered causing a rise in demand.
Thus, openness makes entry easier and more available.
Besides entry timing and openness, foreign companies should find out for themselves important factors, which will make their cooperation in the Chinese market successful. A firm should consider the following five:
- Finding out the business etiquette of the Chinese market.
- Learning the historical data on the Chinese currency value fluctuation.
- Being an expert at the Chinese law system.
- Create a special group for testing the situation in the prospective international market.
- Finding out what rivals have done in this country.
These points are suitable for any international company, which is eager to achieve success in cooperation with the Chinese market.
Nowadays, China has rapid economic growth and is known as a huge potential market. Thus, a large number of people around the world are attracted by this rapid development and want to cooperate with this country. However, those who want to conduct business activities in China are sometimes confused, because they do not understand how to deal with the Chinese business at all. Guanxi is supposed to be a compound notion of the connection between people. Moreover, it is understood as a clear element of the Chinese business. “Guanxi can assist transnational companies to obtain sources of information which mainly includes business opportunities and government policy” (Fang, 2011). Guanxi plays a considerable role in acquiring business opportunities in China and other countries. Moreover, it is extremely impossible to build a lasting relationship without it. However, it remains an advanced opening-up and reform policy.
To sum up, China is the largest economic country, which is developing day-after-day and intends to be on the top of economies of the world in the next years. Thus, international companies hurry to enter this country. However, entering modes into China are actually challenging for those firms, who do not have appropriate knowledge. In order to achieve success in the cooperation with this country, companies should learn carefully all possible sides of the marketing system of China.
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