With stagnant markets and shrinking sales at home, companies around the world have turned to selling their products overseas, particularly in emerging markets such as China and India. Nearly everyday we hear of Western corporations and their businesses in these countries. In business today having an emerging market strategy has become a necessity.
Our last blog post touched on P&G’s activities in India and today we take a look at China. Be sure to check back for more posts and reflections on business in emerging markets.
Western companies have been in the Chinese market for decades, and for many, China is now one of their most important markets. However, over the last several years there has been increasing pressure from the Chinese government and growing hostility toward multinational corporations (i.e. Google, Rio Tinto, etc.). Doing business in China has become more difficult for US and European companies with increasing restrictions, limits on imports and exports, and protectionist policies and “buy Chinese” measures. The growing friction presents problems not only for foreign businesses, but also foreign governments and the Chinese themselves. The Chinese obviously have their own point of view on this topic and it is important for us to understand it. (When conducting business in another country it is essential to understand the local point of view and ideas, even those that are difficult or different.) Global marketing today has moved beyond a simple chess-like strategy. Today, it is about pursuing each other’s profits and each country’s own elements have been mixed into a hybrid. This means that understanding and respecting each other is of the utmost importance.
Setbacks and problems aside, China still remains a huge market (and the world’s second largest economy) with massive opportunities. But simply going overseas and selling your product doesn’t necessarily mean success.
P&G in China
One company that has been successful in China is US consumer goods giant, Proctor & Gamble. P&G has a 20% market share in China and is top in most of the categories in which it competes. An interesting example is P&G’s disposable diaper business. P&G failed when they first tried to launch disposable diapers in China over a decade ago because there was simply no market for the product. Not only did P&G have to convince Chinese mothers that their product was the best, but they also had to persuade them that diapers (and disposable ones) were even necessary. Simply selling a lower-quality, cheaper version of the Western product didn’t work. (Side note: apparently due to China’s one-child policy, parents have a strong love for their only children, which translates into a strong desire to provide them with the best, including the best products.)
How was P&G successful? A huge key to the company’s success was creating a solid understanding of the Chinese consumer’s habits by conducting thorough R&D and fieldwork to learn about the culture and mothers and their babies. After coming up with a product that fit the market, P&G launched the diapers with a huge marketing campaign in 2007. Today, P&G’s Pampers is the top selling brand in a category that barely existed before P&G’s launch in China.
P&G is well-known for its research and ability to understand markets. They don’t simply localize their famous Western brands, but rather take a product and understand the culture in which they will sell that product. In some cases, they work to change consumer behavior to create a market for the product, as they did with diapers.
Another interesting example is P&G’s focus on the countryside/rural Chinese market, which is a huge opportunity, but can be extremely complicated as it is made up of mostly first-time buyers with low incomes. Rural areas in China are also incredibly diverse and most customers buy products only from tiny mom and pop stores. In order to understand these potential buyers, P&G sent researchers into villages and stayed with families to really understand the cultures, buying habits and traditions. While price is obviously important, developing products that match with the culture and tradition is the key. (Example: Urban Chinese consumers purchase more expensive and exotic flavored toothpaste, but rural Chinese prefer the cheaper, Crest Salt White version because traditionally they believe that salt whitens teeth.) P&G’s thorough research and development means more profits and often more brand loyalty, as well as increased choice for customers.
Today there is more competition from both foreign and domestic brands in China. In order for foreign companies like P&G to remain competitive and successful, it is vital to focus beyond simply the language or numbers and data and to look at how consumers really live and how a product or service fits into the daily lives and culture.