Foreign companies in China: staying in China is the key to winning the future

The Wall Street Journal article on November 30th, original title: China used to be a cash cow for Western companies, but now it has become a testing ground. For Western companies in China, a new reality has emerged: the era of easy money making is gone forever, and competition will only become more intense. In recent years, the rise of strong local competitors has intensified market competition and significantly compressed profit margins. International brands are becoming increasingly pragmatic. The relevant strategies vary by company and industry, but mainly include adjusting products according to the taste of Chinese consumers, accelerating product development speed, and adopting different marketing methods. Many companies cannot ignore this country, which has a population of over 1.4 billion and is the world's second-largest consumer market. Even though some companies have temporarily poor sales performance in China, they still regard China as an important innovation center and hope to learn from it.

Over the years, with the rapid growth of the Chinese economy, millions of people have entered the ranks of the middle and wealthy classes, making China a "cash cow" for multinational companies such as LVMH, Starbucks, Nike, Apple, and Tesla. Nowadays, Chinese domestic competitors have surpassed Western brands in many industries. A recent survey by the American Chamber of Commerce in Shanghai showed that 63% of respondents listed domestic competition in China as their top challenge. Respondents indicated that local competitors are often able to seize market opportunities faster. In China, success depends on the speed at which you turn the steering wheel, "said Han Lin, Director of Asia Group, a consulting firm." But for many multinational companies, the steering wheel is in the United States

Intense competition may be most evident in the Chinese automotive industry, as local companies seize market share from foreign car brands that have long dominated the market. Volkswagen is vigorously promoting the "in China, for China" strategy, which involves developing and manufacturing products for Chinese consumers in China. This German automaker has announced that it is developing chips for advanced driving assistance systems and autonomous driving through joint ventures with Chinese companies. It has also showcased new models designed specifically for Chinese consumers at a lower cost, with a research and development speed about 30% faster than previous models. This is one of the measures taken to regain market share from local competitors. Volkswagen CEO Oliver Bloom said, "We have invested heavily in engineering and technological capabilities, especially in China, because China is the most innovative center driving the development of the automotive industry

For many foreign car manufacturers, operating in China means being close to the market and supply chain. Guo Shan, a partner at independent consulting firm Hutong Research, said, "Foreign car companies have a sense of urgency and are eager to figure out how to compete with Chinese companies in the international market. Currently, for them, the answer is that they must stay in China in order to keep up with the pace of innovation. If they don't compete in China, they will ultimately have to compete with them (Chinese companies) overseas

According to Saint Genie, CEO of Guerlain, after decades of rapid growth, Guerlain is now facing challenges from local competitors in the Chinese market. "The situation has changed, and consumers' demands are higher... Product quality must match price. Swedish furniture manufacturer IKEA plans to launch over 1600 new products for Chinese consumers. IKEA's representative in China, Avril Zhang, said, "Actually, currently we mainly see the Chinese market as a testing ground for innovation

Procter&Gamble recently announced significant progress in its business in China after adjusting its strategy to focus on innovative products for local consumers. The head of Procter&Gamble's Greater China Oral Care Division said, "This is a fiercely competitive market, but competition makes everyone better." A US conglomerate recently launched a new product in China in just 10 months to better keep up with Chinese manufacturers who purchase its products. (Author Hannah Miao, translated by Xin Bin)