More comprehensive operations needed
Ten years ago, the right connections helped foreign companies develop in China with fewer difficulties. However, that may not be the case today.
When doing business in China, foreign companies know they must adapt to local circumstances; but with intensifying regulations and tightened supervisory measures, they must also be wary of going too far.
Companies such as Siemens, Alcatel-Lucent, Coca-Cola and Pepsi have all suffered after being caught in bribery scandals, and were punished by the Chinese government beyond their expectations.
Under such conditions, connections can lead foreign companies to top officials, but such meetings may not necessarily produce positive results. Nowadays, foreign companies must also take public opinion into consideration.
Targets to establish research and development centers, assist in building an innovation-oriented society and organizing activities that reflect social responsibility are possible new directions, for example. In this way, officials will be more interested when considering foreign companies.
Localization not easy for global giants
According to a recent report released by the U.S.-China Business Council (USCBC), most American companies are making larger profits in China compared to many other regions in the world. In 2010, more than 40% of the respondents said their revenues had increased by over 20% in China, and that they were optimistic about their operations here in the next five years.
However, among the top ten problems they faced, eight were related to government policy. Many foreign companies have focused on localization strategies, but the process is still not easy.
Gregory Gilligan, managing director of APCO Worldwide's Beijing Office, said that foreign companies are trying to get used to the regulatory approach in China and are learning how they should behave in the country, but this cannot be done by imitating or copying experiences from other countries, reported the Nanfang Weekend.
And while these companies are gaining experience gradually, the Chinese government is also on the road to maturity.
According to Ed Chen, Wal-Mart must get used to China's cities and their cultural diversity and learn from a large number of its competitors. Also, when dealing with government officials, it should hire Chinese staff members to communicate with them directly in order to avoid unnecessary misunderstandings.
