Getting a Grip on China? Make sure you’re seeing the Oasis, Not the Mirage

By 2001, when I had been living and working in China for over 15 years, Shanghai had begun to reveal its true nature as a once and future world capital. The city boasted an impressive highway system, a few high-rise districts, a couple of Starbucks, a handful of big-name luxury goods shops, and a growing number of international restaurants. I’d been there for almost ten years, but had also done time in the 2nd tier city of Xi’an (my first home in China) and in Hong Kong, the Cantonese-speaking capital of “Greater China”. Since 1985 I’d had a degree in Chinese history, a husband from Xi’an, and a growing conviction that China was so vast, complex and surprising as to be almost impossible to understand, let alone summarize.
At about this time, my clients from overseas began to amaze me with the predictability of their reactions to China. Here is what they said, typically within the first few hours after arrival in Shanghai or Beijing: “This place is so Westernized, it looks just like home. This project is going to be much easier that I thought.” As at 2008, the last time I met a first-timer at a Chinese airport, it took less than 30 minutes before I heard the declaration that China looked like it wasn’t going to be so different after all.
Describing China as familiar territory is not only a great way to close rather than open a conversation with anyone who does businesses, day in and day out, on the ground in China, and therefore knows better, it’s a mirage mindset that leads to wasted money, time, and opportunities. Some diagnostics for the mirage mentality:

Mirage #1. “Westernized” customers: A few key Chinese values, directly opposite to Western values: group not individual culture; focused on overall context, not individual events or items; deeply cynical rather than trusting; largely atheist vs. theistic; mastery-based “depth” education, not problem-solving “lateral” thinking.

Rising disposable income and an economy with a growing middle class do not equate to a massive shift in values. The concept of a Chinese cultural identity has evolved over thousands of years, becoming so resonant and powerful that people from numerous kingdoms and ethnicities have come over time to identify themselves as Chinese. Even outside China the Chinese ethnic identity doesn’t fade easily: despite emigrating to melting pots like San Francisco, Manila, and Johannesburg several centuries ago, how is it that the ethnic Chinese in these places still maintain distinct patterns, sending their children to Chinese school, speaking Chinese at home, paying cash, investing in real estate etc. etc.

To those who see Starbucks and think “western”, consider that a willingness to enjoy coffee is not an abandonment of Chinese values. It’s a demonstration of something to which China has equal claim as the West: sophistication and open-mindedness. Suzhou and Hangzhou in the 10th century Song, Chang’An in the 8th Century Tang, Quanzhou in the 13th century Ming all had cultures that were at least as international and open as any place in the western world, while Shanghai in the 1920’s was rightly seen as a melting pot and an international capital.

Medicine: “Sophisticated” and “Modern” are not synonyms for Western. The fact that the Chinese are try new things, use a lot of personal electronics, appreciate the independence that a car brings, does not mean that a) they want to see themselves and the larger world as we do, or that they want to be “western” more than they want to be “Chinese.” Don’t underestimate Chinese identity or nationalism, or buy into the idea that presenting anything as Western will create a positive response.

Mirage #2: We Can Go Into China in a Big Way: The classic career killer is a business plan that underestimates the difficulty of creating demand in a market where standards are still being formed, or of taking significant share in a fragmented space.

A realistic plan takes into consideration that distribution, not consumer demand, is king, and that distribution in China is shaped by two forces: 1) An anything-goes entrepreneur class that breeds fragmentation, chaos, low margins, instability, and an invariably local power base; and 2) government involvement and regulation, which breeds opacity, unpredictability, and an invariably local power base. National brand and presence — in the cases where it exists — has been achieved through grass roots efforts with numerous local and regional distributors, painstakingly negotiated over years as well as a big media spend. The airwaves and the Internet can help build awareness and demand, and ad campaigns can be created by a small team based in one or two major cities, but distribution networks can be built or maintained only by a sizeable team of trained people, in each of your key markets, with a powerful incentive to sell your product.

Further, China is probably the most competitive place in the world. In addition to the same competitors we face in the home market, we’re likely to find in China about twice as many Japanese brands, a lot of French and Italian and Finnish companies, Israelis and South Africans, Taiwanese, and somewhere between three dozen and three thousand domestic Chinese businesses in our space.

Medicine: Realize that it’s possible to spend money advertising where product and services are not in distribution. Learn the competitive and distribution environments as well as the demographics of any city you’re thinking of targeting. If there’s a geography that seems attractive, make sure your China team has the capability, and a plan, for finding and training local talent in that city. Finally, consumer-facing campaigns alone rarely drive sales in China. Work together with PR, with marketing, sales, and government relations to see how advertising spend can help support goals in government, distribution, and trade and retail outreach. In many ways, advertising in China is at least as important for its effect on partner and trade relations, than it is for its reach to consumers.

Mirage #3: We’ve Got The Best Partners In fairness to anyone in China who works with international clients, it’s hard work to bridge the gap between expectations shaped by “World Headquarters”, and the practical realities of implementing on the ground. People willing and able to handle the challenge are understandably relatively expensive. Yet, in a spirit of disclosure to any international company in the market for a partner, until an organization has a decade of history in China, it’s on the learning curve and paying steep tuition.
Bottom line, relative newcomers are very poorly equipped to calibrate potential China partners. Though it’s possible to ascertain that they know more than we do, it’s impossible to judge the extent and value of what they do know. For example, people who speak no English may be virtually invisible to us. By scanning the individuals rather than the group context, we tend to overlook the peer leaders, and to fall at the mercy of those who promote themselves. As Westerners we reward people with a bias for action, while our Chinese colleagues, whose respect we need, see that bias as a mark of immaturity or foolishness.

Medicine: Acknowledge that partner choices will be colored by significant blind spots and biases, and that, with the benefit of a team on the ground in China, you’ll be at a higher level of knowledge every 12-18 months. Don’t commit mentally – or legally – to anyone who you haven’t known long, or hasn’t delivered consistently over time. Roll with the rhythm of ongoing change and be flexible enough to accommodate constant learning.
In budgeting for China support, acknowledge that fees paid to an international firm are remuneration for local expertise, but also for the convenience of a familiar language, and the security provided by a known brand. To access real, China-relevant insight as well as manage costs, work towards a management team who can handle purely Chinese vendors and localize relationships. An international firm may be able to play a continuing role in strategy, communications, analysis and vendor management; even so, push them to identify and work with local providers as much as they are willing to.

Mirage #4: We Manage China Out of our Offshore Office It’s possible to run budget and planning from offshore. It’s almost unheard of for that to generate any real traction. Always-changing China presents enough executional complexity for people on the ground every day; not only in competitive landscape and tactics, but in people management. How can a remote office possibly be effective?

Medicine: Realize that any projects that drive China from anywhere besides China — and let us be clear, Hong Kong is its own realm — fall under the category of “dabbling”, and do not constitute a commitment to winning in China. No way around it — you’ll need people in China to implement in China.

In Closing:
At the highest level of effectiveness in China, it’s critical to adopt a mindset based in reality, not some mirage of how brand-building in China is going to be a familiar or easy exercise. Yet, while that mindset takes hold, grab onto a few simple descriptors of China’s advertising market in 2008. Here they are:
» Outdoor and out-of-home media are very well developed and relatively high ROI;
» Gaming and mobile-based media are widespread;
» Celebrity endorsements are very common, but quite pricy and tricky — so get a wide range of opinions and keep on top of perceptions;
» Internet users map closely to China’s most attractive demographics, so make full use of online marketing including Search Engine Marketing (SEM) and Internet Word of Mouth (IWOM) to develop a presence on blogs as well as online media;
» The Chinese cultural identity is intensely bound to the language, but at the same time, China’s educational system turns out engineers, not writers. Ultimately, a local creative genius has equal or greater potential to connect with local audiences than an international genius. Don’t give up on the search for copy writers and creatives.

Janet Carmosky is CEO of China Business Network, the leading aggregator of China-competent professionals who provide
services for companies doing business in China. A career China business specialist, fluent in both Mandarin and Cantonese, she has resided in Xi'an, Hong Kong, Shanghai from 1985 to 2003, and has managed import-export, sourcing, and buying agency programs. Her positions in China have included Director of Burson-Marsteller, Director of Operations for chinadotcom, General Manager of Richina Fashion Retail, and Senior Manager of Coopers & Lybrand Strategy Consulting. Her past and current clients for China strategy and implementation include: Office Depot, Wella AG, Bacardi, Marriott, Continental Airlines, Wal*Mart, Corning, Waste Management, Sony, Citroen, Alcatel, Unilever, and Givenchy. She has been published in the Harvard Business Review (Chinese edition) as well in various Economist publications.
CONTACT: janet@chinaprospects.com