China’s Marketing EnvironmentChina’s Marketing Environment

Discussion questionsDiscussion questions

1) How would you assess the development of the 1) How would you assess the development of the marketing environment in China and how different marketing environment in China and how different is it from that in Hong Kong and other countries?is it from that in Hong Kong and other countries?

2) Are concepts and practices developed in the 2) Are concepts and practices developed in the West applicable to China? Do they need to be West applicable to China? Do they need to be adapted to the Chinese environment?adapted to the Chinese environment?

3) What are the challenges for marketing 3) What are the challenges for marketing professionals, say, those working for Hong Kong professionals, say, those working for Hong Kong and foreign firms in China?and foreign firms in China?

4) Are there good examples of successful 4) Are there good examples of successful marketers among HK and foreign firms in China, marketers among HK and foreign firms in China, and what are their unique strengths and and what are their unique strengths and characteristics?characteristics?

Features of China Marketing Features of China Marketing DevelopmentDevelopment

中国营销进程的二大特征中国营销进程的二大特征 Feature One: The development is dramatic Feature One: The development is dramatic

and fast, and it is a compressively and fast, and it is a compressively accelerating process.accelerating process. 特征一，变化大而快，特征一，变化大而快，是一个压缩式的加速进程是一个压缩式的加速进程

Feature Two: The development of China Feature Two: The development of China marketing occurs in a special marketing occurs in a special environment, an environment of transition.environment, an environment of transition. 特征二，中国营销的进程发生在特殊的环境特征二，中国营销的进程发生在特殊的环境————转型环境中转型环境中

1) How would you assess the development of 1) How would you assess the development of the marketing environment in China and how the marketing environment in China and how

different is it from that in Hong Kong and different is it from that in Hong Kong and other countries?other countries?

Two driving forces of the improvement of Two driving forces of the improvement of the competitive power of Chinese firms. the competitive power of Chinese firms.

First, the floating of international First, the floating of international corporations and global knowledge.corporations and global knowledge. 第一，第一，跨国公司和国际知识流动 跨国公司和国际知识流动

Second, the spirit of continuous studying Second, the spirit of continuous studying and innovations of the Chinese and innovations of the Chinese entrepreneurs, marketers, and entrepreneurs, marketers, and researchers.researchers. 第二，中国企业家，营销人和研究第二，中国企业家，营销人和研究者结合本土环境不断学习和创新的精神 者结合本土环境不断学习和创新的精神

Demand & Supply of Consumer product Demand & Supply of Consumer product

– – Shortage or Surplus?Shortage or Surplus? Marketplace Marketplace

-- Planned or Free? -- Planned or Free?

-- Production-oriented or Customer-oriented?-- Production-oriented or Customer-oriented? Communication networkCommunication network Technology standardsTechnology standards Business practices and cultural norms Business practices and cultural norms Legal frameworkLegal framework Political riskPolitical risk

China is in a unique situation:China is in a unique situation:from marketplace of consumer product from marketplace of consumer product shortages to surplusshortages to surplus

Selling-intensive marketplaceSelling-intensive marketplacequality and sophistication are quality and sophistication are increasing, but prices are decliningincreasing, but prices are declining

The focus changed from production The focus changed from production to sales:to sales:production-oriented firms became production-oriented firms became customer-focusedcustomer-focused

Communication:Communication:from a few telephone lines to cellular from a few telephone lines to cellular mobile, with satellites and digital mobile, with satellites and digital transmission technology – even more transmission technology – even more advanced than the USAadvanced than the USA

Many manufacturing firms are Many manufacturing firms are operating in production mode:operating in production mode:move to marketing-focused systemmove to marketing-focused system

Hyper-competitive marketHyper-competitive market Competitors: domestic, foreign, JVsCompetitors: domestic, foreign, JVs

Car IndustryCar Industry Joint venturesJoint ventures

Shanghai Automobile with VW and General Shanghai Automobile with VW and General MotorsMotors

First Automobile with VW and Toyota First Automobile with VW and Toyota DongFeng with Peugeot and Citron DongFeng with Peugeot and Citron

In addition to the three large groups of In addition to the three large groups of Shanghai, First Auto and DongFengShanghai, First Auto and DongFeng

Guangzhou HondaGuangzhou Honda Chongqing ChangAnChongqing ChangAn AnHui GiRuiAnHui GiRui ShenYang HuaChenShenYang HuaChen Nangjing FiatNangjing Fiat Zhejiang JieliZhejiang Jieli

2) Are concepts and practices 2) Are concepts and practices developed in the West applicable to developed in the West applicable to

China? Do they need to be adapted to China? Do they need to be adapted to the Chinese environment?the Chinese environment?

In theory, yesIn theory, yes Concepts and Practices:Concepts and Practices:

Market research, Market research, Global marketing, Global marketing, Internet marketing, Internet marketing, and Customer relationship and Customer relationship management. management.

In reality, they need to be adaptedIn reality, they need to be adapted Language, culture, practicesLanguage, culture, practices

Standardization vs. Standardization vs. LocalizationLocalization

Standardization: Standardization: uniform, efficient, low-cost, easy to rememberuniform, efficient, low-cost, easy to remember neglect local conditions, may not be effective, neglect local conditions, may not be effective, Language and cultural barriersLanguage and cultural barriers Sometimes more costlySometimes more costly

LocalizationLocalization Closer to the local knowledgeCloser to the local knowledge Consumers and market more responsiveConsumers and market more responsive More effective, More effective, Lower costLower cost

Applicable!Applicable! China has implemented 85 years of Western China has implemented 85 years of Western

marketing thoughts in less than 20 years. marketing thoughts in less than 20 years. From the Article From the Article

China may leapfrog the West in MarketingChina may leapfrog the West in Marketing, it is said , it is said that China is “leapfrogging” traditional Western that China is “leapfrogging” traditional Western cycles, i.e. a big jump.cycles, i.e. a big jump.

Absorbing anything from the west in order to grow!Absorbing anything from the west in order to grow! With the aid of technology development:With the aid of technology development: e.g. China went straight from having few e.g. China went straight from having few

telephone lines to millions of mobile phone users.telephone lines to millions of mobile phone users.

Adaptation is necessaryAdaptation is necessary For example, the Brand LoyaltyFor example, the Brand Loyalty: : Fact 1 : Chinese people Fact 1 : Chinese people

frequently switch brands.frequently switch brands.

- Intense marketing for a parent - Intense marketing for a parent company rather than products is company rather than products is more suitable. more suitable.

- Trust needs to be gained by the - Trust needs to be gained by the company as a whole for higher company as a whole for higher retention of products.retention of products.

Fact 2: The Chinese are more Fact 2: The Chinese are more focused on brands focused on brands

And they Believe: Luxury goods represent And they Believe: Luxury goods represent success (Businessweek.com). success (Businessweek.com).

Whatever brand is fashionable at the Whatever brand is fashionable at the moment is more important than price moment is more important than price competition. competition.

Marketing needs to focus on the high class Marketing needs to focus on the high class and and QualityQuality of the product instead of a Discounted of the product instead of a Discounted PricePrice. .

Thus, Brand Management needs to adapt to Thus, Brand Management needs to adapt to the Local Preference!the Local Preference!

Challenges for Marketing Challenges for Marketing ProfessionalsProfessionals

Size of TerritorySize of Territory Marketing Practices –Accessible or not?Marketing Practices –Accessible or not?

CompetitionCompetition

Price & non-PricePrice & non-Price

Fair or Unfair?Fair or Unfair? Intellectual Property RightIntellectual Property Right Information released from the Information released from the

GovernmentGovernmentTrustworthy? Trustworthy?

Challenges for Marketing Challenges for Marketing ProfessionalsProfessionals

Vast TerritoryVast Territory Difficulty in distributionDifficulty in distribution

Keen CompetitionKeen Competition Price Competition Price Competition Product and service competitionProduct and service competition Concept competitionConcept competition

Fake ProductFake Product Fake and Unreliable Statistics Fake and Unreliable Statistics Unfair CompetitionUnfair Competition

3) What are the challenges for 3) What are the challenges for marketing professionals, say, those marketing professionals, say, those working for Hong Kong and foreign working for Hong Kong and foreign

firms in China?firms in China? Size of TerritorySize of Territory

Marketing Practices –Accessible or not?Marketing Practices –Accessible or not? CompetitionCompetition

Price & non-PricePrice & non-Price

Fair or Unfair?Fair or Unfair? Intellectual Property RightIntellectual Property Right Information released from the GovernmentInformation released from the Government

Trustworthy?Trustworthy?

Vast TerritoryVast Territory

Difficulty in distributionDifficulty in distribution Keen CompetitionKeen Competition

Price Competition Price Competition

Product and service competitionProduct and service competition

Concept competitionConcept competition Fake ProductFake Product Fake and Unreliable Statistics Fake and Unreliable Statistics Unfair CompetitionUnfair Competition

4) Are there good examples of successful 4) Are there good examples of successful marketers among HK and foreign firms in marketers among HK and foreign firms in

China, and what are their unique strengths China, and what are their unique strengths and characteristics?and characteristics?

1)1) FocusedFocusedknow your strengths and weaknessesknow your strengths and weaknesses

2) 2) Upholding PrinciplesUpholding Principles““Quality is first. Technology comes second, then the Quality is first. Technology comes second, then the production cost.”production cost.”

3) 3) Far-sightedFar-sightedEverything takes time.Everything takes time. Understanding Quality should Understanding Quality should come first in order to maintain long-term relationshipcome first in order to maintain long-term relationship

4) Seeking for Cooperation, not Competition4) Seeking for Cooperation, not Competition Other home manufacturers such as Chery and the First Other home manufacturers such as Chery and the First

AutomobileAutomobile Group joined together to develop Car Manufacturing Group joined together to develop Car Manufacturing

TechnologyTechnology

ExamplesExamples

Volkswagon: early entry, good Volkswagon: early entry, good government relationshipgovernment relationship

GM Buick: superior technologyGM Buick: superior technology Chow Tat-fook: low profile, focus on Chow Tat-fook: low profile, focus on

qualityquality Lacoste: brand power, persistenceLacoste: brand power, persistence McDonalds, etc., etc., etc.,McDonalds, etc., etc., etc.,