Why Chinese companies fail in the USA
Whilst this article is not entirely automobile related, it does highlight some of the issues that Chinese automakers are facing, or will face as they act on their wishes to expand into the USA.
From Forbes, but originally written by Dan Harris of China Law Blog fame.
1. Chinese companies focus on a Chinese consumer, not an American one.
Ms. Sun’s comment: “Chinese companies would like to find out more about their target American consumers, but they mostly rely on personal-level approaches to collect business information, lacking a systematic and scientific market investigation conducted by professional Westerners that understand the market.”
My comment: Very interesting and, I think, accurate observation. Chinese clients have driven me nuts by asking my views on things that I know nothing about, and then completely ignoring my advice when I try to hook them up with real experts. The following are typical conversations:
Chinese client: How much should we pay for that U.S. trademark?
Me: I have absolutely no idea. I just do not know such business well enough to be able to help you at all on this. But, we have worked with a company that does nothing but value IP and I would be happy to give you their name.
Chinese client: But what is your best estimate?
—
Chinese client: Should we start out selling our product just on the West Coast or should we start out nationally?
Me: Good question. Difficult question. It seems to me the answer to this will hinge greatly on the costs involved and on your ability to set up distribution networks. My firm does not handle questions like this (and even if we did, I do not think it would make sense for you to pay law firm rates for this information) but I would be happy to refer you to top notch business consultants who do.
Chinese client: Should we start out in Los Angeles, Chicago or New York?
2. Chinese companies fail to realize that one reputation-damaging mistake in the United States could doom them forever here.
Ms. Sun’s comment: This one is dead-on. And how come they don’t realize this common sense? Because they get by in China and assume it’s the same in the States.
My comment. Exactly.
3. Chinese companies fail to realize it will take time for them to make an impact in the United States and they are unwilling to spend the time and money necessary to do so.
Ms. Sun’s comment: Chinese people take such pride of the fact that industrialization, urbanization and modernization have happened in China in a much shorter period time than in the West that they believe, if you try hard enough, everything can be done fast and well. Why don’t they invest enough money to lay the ground work for the new market? Well, they look at the exchange rate. The same exchange rate that makes the Chinese production cost in yuan seem so low magnifies the marketing cost in dollars in the States.
My comment: Okay. But see number two above. Haste oftentimes makes waste.
4. Chinese companies focus too much on the end result (making money), and by doing so, they sacrifice the professionalism that would allow them to achieve long- term success.
Ms. Sun’s comment: The Chinese would ideally like long -term success. But the drastic social, economic and political upheavals and changes in the past century have paralyzed Chinese people’s long-term thinking. Fill the pocket as full as possible before the next change hits, be it credit policy, industry standards or consumer interest.
My comment: Absolutely true. Why think long term if there may be no long term? This explains the reason for the problem, but it still needs to be resolved.
5. Chinese companies tell users what they want instead of listening to users.
Ms. Sun’s comment: This obnoxious mentality is a hangover of the old Soviet-Union-style “planned economy” (1949-1978). That period of time featured insufficient supply of necessities and one-sided propaganda. Although it’s hard to question about China running a market, capitalistic economy today, the country skipped some vital steps in the development of the Western countries.
My comment: Same as for number four above.
6. Chinese companies focus too much on making money in the short term, rather than on building the quality necessary to sustain themselves in the long term.
Ms. Sun’s comment: What pops up in my mind includes: vicious and endless price wars, a business environment that has deprived consumers their say, and lack of technology and craftsmanship.
My comment. I agree, but what pops into my mind is that companies must be broad-minded enough to recognize that what makes sense in one country may not make sense in another. Indeed, one might even say this of China’s regions and there are certainly plenty of Chinese companies that have managed to succeed in China as a whole by localizing their product or their marketing by region.
7. Chinese companies fail to understand how beauty and design might distinguish their product from that of their competitors.
Ms. Sun’s comment: Traditionally, domestic consumers simply can’t afford beauty and design. Price is the only distinguishing point. Plus, the companies don’t want to invest much on design, because it’s bound to be copied by competitors right away, thanks to the absence of intellectual property protection in China.
My comment: All true, but see my answers to Number four and number seven above.
8. Chinese companies rely too much on phone calls and face-to-face meetings instead of e-mail.
Ms. Sun’s Comment: This is probably part of the Asian culture, underscoring personal communication instead of machine-generated and less interactive e-mail. I don’t think it’s necessarily a disadvantage though. Japanese companies have done well in the U.S. market, despite their preference for in-person meetings and phone calls rather than e-mail.
My comment. When in Rome….. But, I agree this may not be a disadvantage, so long as the Chinese company has the time and the people for it.
9. Chinese companies fail to use “simple and elegant designs.”
Ms. Sun’s comment: Unfortunately, they are trapped in between complicated traditional styles and a blank page of modern Chinese inspiration. Again, they can’t justify investment on design, because it will be copied by competitors overnight.
My comment: See my comment to number seven above.
10. Chinese companies fail to realize their need to hire MBAs and those with local knowledge.
Ms. Sun’s Comment: Call them cheap or arrogant. They don’t trust MBAs or Western veterans unless foreseeable return is guaranteed. They also want everything under their control, not threats and risk brought by language barrier and different business values.
My comment: I don’t know what to call this but I know it is not wise.
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So the first Chinese company that gets these right, will have a prosperous future. The rest will follow soon then.
@ Esprit de Flandre
> So the first Chinese company that gets these right, will have a prosperous future. The rest will follow soon then.
More like the first Chinese company to get it right will be the first one to be driven out of business since it raises their costs up so high they would basically be priced out of China.
Frankly, Chinese companies don’t need to go overseas like their Japanese and Korean peers; Chinese domestic market is the biggest and fastest growing market in the world, so why bother to go overseas and risk losing billions in the process of a futile attempt to establish their own brands in mature, slow growing markets?
As far as consumer products are concerned, Japanese & German are ranked top. Korean occupy the middle and Chinese sink to the bottom. Well if China is going up, who is going to be busted? The answer is very clear. Of course Korea can surpass Japan to reach the top but that will be more difficult than China replacing Korea. No wonder China bashing is the top priority for any nationalist Korean.
IHC, your argument on Chinese products is absurd. American and Chinese markets are similar in size, so China should stay home. What a ill-logical conclusion. If you can find cheap Chinese products in Walmart, why not affordable Geely cars in Volvo dealers?
@ Comment by hk
> As far as consumer products are concerned, Japanese & German are ranked top. Korean occupy the middle and Chinese sink to the bottom.
Maybe you haven’t been to the states where Korean TV and cellphone are priced higher than Sony and Panasonic.
Likewise Hyundai is priced higher than second-tier Japanese brands like Mazda, Suzuki, and Mitsubishi in the US.
> The answer is very clear. Of course Korea can surpass Japan to reach the top
Well, they already did in certain segments. You need to update to the realities of 2010.
So you missed out the recent wave of US auto reviews where Sonata is beating out Camry and Accord in comparison tests.
Well Mr.IHC, I think you are living in your own imagination.
Luckily you are still sensible enough to choose the words carefully like “second-tier Japanese certain segments”. Let me update you to the reality of 2010. Any sensible person will make the right decision in choosing between Lexus LS and Hyundai Genesis if they are priced the same. Don’t exagerate exceptions and extrapolate to make bias comments. Say it again, Japanese products are ranked TOP and Koreans are MIDDLE. Wake up !!!
Toyota Camry XLE $26125
Hyundai Sonata LTD $25295
If Sonata is really stronger than Camry, why you price it so cheap?
@ hk
> Any sensible person will make the right decision in choosing between Lexus LS and Hyundai Genesis if they are priced the same.
Genesis isn’t LS’s competitor; Equus is.
Genesis was meant to compete with GS instead.
> Toyota Camry XLE $26125
Hyundai Sonata LTD $25295
If Sonata is really stronger than Camry, why you price it so cheap?
Thank you for verifying my statement. So the price difference is $830. Does a price difference of $830 actually sway anyone’s new car buying decision? Hell no; Camry and Sonata are priced the same from the car buyer’s perspective.
IHC, care to let us know the sales numbers of Camry and Sonata in both US and China?
The choice of general public is obvious, Sonata is inferior to Camry. Toyota may face drawback by recent recalls but Hyundai won’t smile too long. Recent sales numbers of Toyota clearly show it’s strong recovery. If Hyundai expands it’s production capacity blindly, I can assure you that tragedy will result.
@ hk
> IHC, care to let us know the sales numbers of Camry and Sonata in both US and China?
In the US, Camry sells 30K a month while Sonata sells 20K a month. Hyundai is actually moving Santa Fe production to Kia’s factory in Georgia because of supply pressures.
Anyhow, here is some shocker for Chinese posters living in an alternate reality.
http://content.usatoday.com/communities/driveon/post/2010/08/hyundai-squashes-nissan-among-top-5-brands-for-buyers/1
Top 5 auto brands in the US
- Ford , 29%
- Toyota, 22%
- Chevrolet, 21%
- Honda, 20%
- Hyundai, 13%
For Chinese dreaming of catching Koreans in automobiles, forget it.
“For Chinese dreaming of catching Koreans in automobiles, forget it.”
We all know this is the mesage you Koreans want to send out on the first day you pests appear on this CCT. You pests are not here to contribute anything but to derail topics and prop up Korean cars, yes we know that. OK now can the people of the vassal state please leave this site in peace ?.
IHC, your sales numbers of Camry and Sonata are for the US only. In the biggest and fastest growing Chinese market, Camry and Accord are either in first or second place. Where is Sonata? Lost somewhere I couldn’t find out. Even in Beijing the home town of Hyundai, Sonata is not selling well. You got to figure out how to fix it.
@ hk
> your sales numbers of Camry and Sonata are for the US only.
US being the most competitive auto market in the world.
> In the biggest and fastest growing Chinese market, Camry and Accord are either in first or second place.
In mid-size segment. Not in overall.
> You got to figure out how to fix it.
The guys who just knocked Nissan out of top 5 car brand in the US can figure it out.
“OK now can the people of the vassal state please leave this site in peace ?.”
LOL still living in the past huh?
IHC, your top 5 car brands in the US clearly shows Hyundai far fall behind Toyota & Honda. No wonder you are here to advertise Korean cars. I know you have lot of documentations to support your claims but such kind of comments can be bought through favourable columnlists. Go ask the Jews, they are the expert !!!
http://www.usatoday.com/money/autos/2010-01-05-auto-sales_N.htm
This puts Hyundai 7th and Kia 8th.
Another thread hijacked by the trolls for their own horn blowing…..
“Anyhow, here is some shocker for Chinese posters living in an alternate reality.” @ IHC
Yes, it is really SHOCKING as the so-called –top 5 car brands in the US– is just a survey cooked up by some organization. The actual sales market share is way way far behind. Toyota (17%) vs Hyundai (4.2%). Thanks yellow-beer, you dig out the lie.