Academic journal article Multinational Business Review

Launching A Consumer Product in China

Academic journal article Multinational Business Review

Launching A Consumer Product in China

Article excerpt

ABSTRACT:

This article is an edited verion of a presentation by Roger Marks at the 2005 U.S. China Business Forum sponsored by the World Trade Center Chicago and the U.S. and Chicago Chambers of Commerce. The high turnout by individuals from private industry and various government agencies reflected thekeen interest on exporting to China. This article addresses key business and legal considerations and an overall strategic approach to successfully launching a U.S. brand into China.

INTRODUCTION

This article is intended to share the story of how the author took a purely domestic cosmetics consumer brand and turned it into an international brand, with the company's most substantial international presence in China. In a five year period, this particular U.S. manufacturer and retailer, H2O Plus, Inc., (referred to as "H2O" for purposes of this article) expanded to over 350 outlets overseas and had experienced an annual growth rate approximating 20%. In China alone, H2O had over 100 outlets with 20 outlets under franchise by its China distributor. This article addresses some of the challenges and opportunities of doing business in China and some of the learning lessons along the way which resulted in H2O achieving this success.

The author would like to preface his remarks on doing business in China with one poignant observation. Before ever doing business in China on behalf of H2O, the author had the opportunity on several different occasions to personally travel throughout China, visiting the famous ancient Sunday market in Kashkar along the Silk Road, visiting various minority tribes in the rainforests of Yunan Province, visiting Tibetan monasteries and the terraced rice fields along the Yangste River and, of course, visiting the more popular sites in Beijing famous for the Forbidden City, its many temples and the nearby Great Wall, visiting Xian famous for the terra cotta warriors and visiting Guilin famous for its majestic scenery along the river. Based on these travel experiences, it is easy to think of China as if it was many separate countries wrapped into one with people of very different ethnic backgrounds, customs and religions with different foods, different dress or costumes. China is a vast country geographically encompassing many diverse cultural and physical landscapes. These excursions provided a deep appreciation for Chinese culture and its rich history and set the foundation to form personal connections and friendships in a business context. The point in noting these personal travels is that if you have the opportunity to explore a particular country before engaging in business there, you will not only acquire a much better understanding of the business culture, but you will often gain the respect of those with whom you do business because your personal interest and curiosity for the culture or natural sites in a country demonstrate a prior genuine interest in that country that transcends a simple business motivation.

Challenges of Global Trade

It seems that every day you read headlines about China: a manufacturing firm's CEO blames China for eating up its market share; employees lament losing jobs to China's cheap labor market; or an economist rails about the valuation of the yuan. In fact there is a general perception by many U.S. companies that they can't compete with global trade. In some cases there is a view that Americans can't compete with low cost labor in countries such as China and India; in other cases, there is a view that Americans can't compete with countries that don't have an OSHA or EPA. In fact, Europeans have higher labor costs than in the U.S., tighter environmental regulations and higher taxes. Yet they export competitively all over the world. The biggest difference between Europe and the U.S. is that Europeans always had to export since their internal markets have always been too small for long-term growth.

Americans also tend to focus on the huge inequality in trade between the two countries. …

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