By Marika Miner

 

Many American companies have realized the potential of the $400 billion China market. While some have failed to expand their businesses into China, others have succeeded and reaped the significant rewards that China’s consumer base offers, which has grown to over 300 million according to the Oxford Economics study on US jobs and trade with China. Airbnb and Yum Brands, the parent company of KFC, have successfully adopted measures to align their business practices with Chinese markets. Analyzing their methods can identify some best practices for American businesses seeking to enter the China market.

  1.       Understand demands and concerns

Consumers in different countries have different preferences and concerns that are often rooted in cultural or economic factors, which should be heeded when creating a strategy for that market.

  • Airbnb launched its China services as Aibiying, which means “to welcome each other with love.” This change was followed by the company’s new Trips feature, which facilitates more in-depth personal travel experiences, aimed at attracting young Chinese consumers to use Airbnb. Additionally, Airbnb tailored its services to meet the demands of Chinese consumers by incorporating local services such as Alipay and Wechat through partnerships with Alibaba and Tencent, which greatly increased the ease of access for Chinese consumers.
  • Yum Brands adjusted its menus to the Chinese palate by including many rice-based dishes such as congee. Yum Brands also localized its menus, adjusting to the preferences across China such as spiciness levels in different regions. Additionally, while KFCs in the United States are primarily designed for takeout, KFCs in China were made larger so families and large groups could dine at the location together.
  1.       Create a local strategy

Navigating Chinese business norms can be difficult for American companies, and the repercussions on their success can be immense. Teaming up with local companies or officials can help American companies maneuver the ins and outs of the local market.

  • Airbnb worked with a number of Chinese city governments to pursue common goals, such as increasing tourism and training local businesses, which has resulted in the signing of Memorandums of Understanding between Airbnb officials and mayors of Guangzhou, Shanghai, Chongqing, and Shenzhen.
  • Yum Brands entered the China market before there were reliable third-party service providers, so it set up its own distribution and logistics network. This allowed Yum Brands to use local suppliers and maintain strict control over the quality and quantity of its supplies.
  1.       Work with the government to ensure compliance

The Chinese government has different policies that dictate its relationships with businesses in China. Noncompliance with these policies can spell disaster for American companies in China.

  • Airbnb created a subsidiary, Aibiying. As a separate entity, it can comply more closely with Chinese laws without affecting the policies adopted by the parent company. According to Airbnb’s Chief Financial Officer, Laurence Tosi, Airbnb China’s strategy is to “work closely with regulators and build through on-the-ground partners.” This can be seen in Aibiying’s preemptive compliance to a Chinese law set to take effect this June 1, which restricts cross-border data flow.
  • Yum Brands’ KFC stores faced financial difficulties in 2012 following criticisms from CCTV on KFC’s use of antibiotics in its meats. This resulted in a large drop in its sales. In response, Yum Brands publicly announced a plan to work closely with the Chinese government to investigate these claims. Since then, Yum Brands has worked to gain the trust of the Chinese consumers by ensuring the quality and safety of its food and working with the Chinese government to create policies regarding food safety.

 

About the author: Marika Miner is currently a student at George Washington University pursuing a Master’s degree in Asian Studies. She is a communications intern at the US-China Business Council.

Posted by Marika Miner