Corporate reputation: Pricing and competing in Chinese markets – strategies for multinationals

Corporate reputation: Pricing and competing in Chinese markets – strategies for multinationals This article examines weaknesses of multinational corporations in China. Many multinationals target high price and high‐end segments when entering the country. This creates several problems. First, this market position makes them less sensitive to the growth opportunities in mid to low‐end segments. Second, the high price strategy provides local firms with opportunities to grow their businesses and to consolidate and increase market size in mid‐ to low‐end segments. Furthermore, the low cost strategy also helps local Chinese firms increase exports. After gaining competitive strengths, many local competitors upgrade their products and technologies to attack upper‐middle to high‐end segments, the core markets of many multinationals. This competitive dynamic suggests that multinationals should be aggressive and preemptive in monitoring local competitors in mid‐ to low‐end segments. When local firms are weak, using competitive prices is more urgent than bringing cutting edge products to the Chinese market. However, when local firms become strong competitors, though competitive prices remain important, multinationals should leverage their advanced products and technologies to compete in China. We discuss several factors contributing to the high costs of doing business in China and other factors contributing to success or failure of multinationals, such as establishing distribution channels, not ignoring the less affluent non‐central city markets, and educating the Chinese customers to create differentiated products and services. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Strategy Emerald Publishing

Corporate reputation: Pricing and competing in Chinese markets – strategies for multinationals

Journal of Business Strategy, Volume 25 (6): 6 – Dec 1, 2004

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Publisher
Emerald Publishing
Copyright
Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
ISSN
0275-6668
DOI
10.1108/02756660410569184
Publisher site
See Article on Publisher Site

Abstract

This article examines weaknesses of multinational corporations in China. Many multinationals target high price and high‐end segments when entering the country. This creates several problems. First, this market position makes them less sensitive to the growth opportunities in mid to low‐end segments. Second, the high price strategy provides local firms with opportunities to grow their businesses and to consolidate and increase market size in mid‐ to low‐end segments. Furthermore, the low cost strategy also helps local Chinese firms increase exports. After gaining competitive strengths, many local competitors upgrade their products and technologies to attack upper‐middle to high‐end segments, the core markets of many multinationals. This competitive dynamic suggests that multinationals should be aggressive and preemptive in monitoring local competitors in mid‐ to low‐end segments. When local firms are weak, using competitive prices is more urgent than bringing cutting edge products to the Chinese market. However, when local firms become strong competitors, though competitive prices remain important, multinationals should leverage their advanced products and technologies to compete in China. We discuss several factors contributing to the high costs of doing business in China and other factors contributing to success or failure of multinationals, such as establishing distribution channels, not ignoring the less affluent non‐central city markets, and educating the Chinese customers to create differentiated products and services.

Journal

Journal of Business StrategyEmerald Publishing

Published: Dec 1, 2004

Keywords: Competitive strategy; China; Multinational companies; Electrical goods

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