A staggering 48% of foreign businesses, including leading multinational corporations, fail and withdraw from the China market within two years of establishing operations there, Weber Shandwick Australia’s Senior Advisor for Public Affairs, Alistair Nicholas, told an Australian business audience yesterday.
Alistair, who lived and worked in China for more than 12 years, including seven years running his own successful public affairs company, was speaking at the Australia China Business Week forum in Melbourne.
Alistair listed a number of possible reasons for failure, including:
1. Employee pilfering and theft, including theft of critical intellectual property (IP);
2. Failure to localize and customize products and services to suit the domestic market;
3. Failure to seek or to heed local advice;
4. Poor senior management appointments;
5. Underestimating local competition;
6. Insufficient or improper market research;
7. Inability to communicate with the local market in culturally appropriate and sensitive ways; and
8. Underestimating the important role the government plays at every level of society including commerce.
His presentation was peppered with high profile examples of foreign companies “getting China wrong”, as well as experiences drawn from the mistakes of clients he worked with and “personal lessons learned the hard way” as a senior manager of three foreign companies in China.
Alistair said Australian businesses looking to succeed in China should ensure they understand the market there by undertaking comprehensive research before committing to it; adapting their products and services to meet local conditions and demands based on that research; and seeking quality in-market advice and then heeding that advice.
He also said that Australian businesses needed to engage with both traditional and social media to reach their target audiences. And he advised companies venturing into China to “stay lean and stay clean.” He said “keep your business small and focused, and avoid graft and corruption – people telling you to play dirty are the wrong advisors and should not be listened to; the risk is not worth it and it is not necessary for success in China”.
A copy of Alistair’s presentation slides can be obtained by emailing him at firstname.lastname@example.org.