Why do major American corporations struggle in China?

This introduction is our first installment of an eight-part series about the importance of cross-cultural design which will examine several attempts by large, well-known American corporations to expand their reach by marketing in mainland China.  As this series will show, many of these attempts have failed to achieve success even though China is the second largest economy in the world.  The key question we hope to answer is why they failed, and to attempt to draw lessons to help future American companies to successfully sell there.

Many American companies are increasingly interested in capturing the absurdly large and ever more technologically advanced market of China. But with the potential of the great financial rewards associated with successfully operating in China comes a large risk of failure. To quote GE’s CEO Jeff Immelt, “China is big, but it is hard.”

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This series of articles examines some attempts by major American companies to enter the Chinese market. Major companies provide the most telling examples because they have the most written about them. Further, they are instructive because, generally speaking, an inability or failure to commit sufficient funding to the attempt is not part of the analysis. Therefore, one can more easily see that disappointment or outright failure in the Chinese market by American companies is the result of one or more factors from four general categories:

  1. A lack of understanding about Chinese society and its realities;
  2. Misunderstanding the needs/desires of the consumer, especially how the population typically uses technology;
  3. Creation of political turmoil – this is mostly applicable to large corporations, especially those with a social media aspect; and
  4. A lack of key partnerships (guanxi) with homegrown Chinese businesses.

In this series, I will explore several large American companies that have experienced a range of outcomes in China, from failure to lackluster success, even though these same companies were and are thriving in America, and sometimes in other large international markets as well. In addition to discussing what each company did wrong, I will suggest what each one could have done or should do in the future to better capitalize on their respective market opportunities.  I will also discuss a couple of companies which have learned enough to do things the right way and have enjoyed success as a result.

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The author is Clayton “CJ” Jacobs, who is currently an Entrepreneur-in-Residence with, and the Head of Cross-Cultural Design at, ReadWrite. An area of focus for him is helping American companies understand and enter the Chinese market through taking a modern user-centric product design approach. You can contact him directly at clayton.michael.jacobs(at)gmail.com or find him on Twitter & LinkedIn.

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