Marketing Research in China
Complex systems and indigenous challengers
A study of China’s market potential indicators reveals the political, economic, and socio-cultural realities that will be faced by local and foreign investors and also by MNEs. Government bureaucracy can be seen to stifle innovation while competition seems to favor indigenous challengers. Knowledge of local language and culture as well as local economic and political structures allows indigenous challengers to perform better than foreign entrants to China’s market. Caution should be exercised at all levels, particularly in choosing specific target locations, as China has the unique market structure of having multiple different economies.
Foreign Market Research companies operating outside of China face complex issues as not meeting their needs and concerns due to language and culture barriers, not sure about the appropriate research methodology to be used due to the complexity of China’s market condition, and not sure how to position quality control procedures to ensure the reliability of data collected. These are some of the reasons why foreign Market Research agencies seek the assistance of trusted local research agencies as a way to do fieldwork on their behalf.
Challenges of varied cultural practices and beliefs
Studies reveal that conduct of business should not be applied in an identical fashion across cultures. Deferring historical and geographic boundaries in China contribute to uniqueness in culture and tradition. Identification of cultural practices and beliefs are strategic approaches that channel resources in profitable media and protect business interests. To do this, extensive Market Research in China supplies the much needed information to ensure viability of business ventures and prepare suitable business models to chosen locations. A look at the differences in culture between the Eastern and Western hemisphere will provide an initial impression on how China’s socio-cultural dimensions work. China has a long tradition of establishing business relationships on a basis of trust and confidence. In contrast, Western practices favor documentation of business communications through legal instruments. This contrasting nature in the handling of business relationships makes it hard for foreign investors and traders from the West to anchor business interests in China. Other investors and traders from Asian countries will not be in that same difficult situation because of the linear cultural inclination shared with China. On the other hand, expression of logic among Chinese people is spiral as compared to the linear and more causal judgment by Western culture. With these facts, there is a great need to study and understand cultural practices and local beliefs for use in decision-making. In sum, Market Research in China would define boundaries and fuel the exhibition of desirable business approaches by investors.
Geographical challenges
China’s geographic position encompasses great land mass covering approximately 9.6 million square kilometers while coastal boundaries extend only to some eastern cities and provinces. China’s traditional mode of goods distribution follow State’s plan and controlled to three-tier system. To simplify:
- Tier 1 distributors were allowed to position themselves in major cities like Shanghai, Beijing, and Guangzhou.
- Tier 2 distributors were allowed in provincial capital areas and stretching to medium-sized cities in the internal regions of China.
- Tier 3 distributors take the smaller cities for their operations.
All production capacities then were controlled by the central planners of the State. With the passage of time and the repositioning of trade and investment policies of China, new approaches gave rise to a more efficient system of distribution mechanics. Opening of distribution rights became a product of China’s accession to the WTO in 2001. Foreign firms can now engage in logistics and distribution systems to support major supply chains giving fast and efficient access to regional and international commerce and trade. Added with the accessibility of some inner cities and territories through the Yangtze River, transportation and commerce in the rest of China are now more convenient than before. Current distribution system facilitates exchanges through on the use of efficient modern harbor, airport, landway facilities, and other modern infrastructures. Growth in China’s economy has made possible the modernization of transportation and logistics capability by both the government and private enterprises.
Overview of Cities in China
- Total number of cities in China is 657, classified into tiers on the basis of size and GDP.
- China has tier classifications of cities. First tier cities have the highest GDP rates.
- Total population of China is approximately 1.355 billion as of July 2014 as per CIA World Factbook publication.
Tier classification of China
- Tier 1 includes major cities like Beijing, Shanghai, Guangzhou, and Shenzhen known as the “Big 4” and also cities like Chongqing and Tianjin. Cities classified under this category reflect China’s first class markets.
- Tier 2 includes the coastal cities Chengdu, Xiamen, Changchun, Changsha, Dalian, Fuzhou, Guiyang, Wuhan and other cities of similar development status including capital cities of provinces in China.
- Tier 3 includes cities having ongoing significant developments like Guilin Beihai, Jiaxing, Huizhou, etc.