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China has experienced tremendous economic growth over the years. A certain amount of Chinese commercial organisations are exploring Western markets, but what are the challenges they face in trying to go West? Invited by The Huffington Post, Karsten Fischer, CEO at PDD, investigates and analyses different routes of how they can successfully break into these markets. Click here to view Karsten’s blog posts on The Huffington Post.

Without doubt, as a highly competent manufacturer of electronic devices, household items and more, China’s economy has experienced tremendous growth in the past 30-40 years.
But how can those Chinese manufacturers develop from a low-cost development and production base for Western customers and the Chinese domestic market, to a global force in their own right? What challenges do China’s commercial organisations face in trying to go West? And how can they overcome them?

Korea’s advice
One starting point for companies in China might be the successes achieved by their counterparts in South Korea. My professional experience with organisations such as LG and Samsung suggests that these companies have become household names in the West thanks to being:
1) Open for business
Many companies in South Korea have been open to working with US and European academics, consultancies and enterprises on a range of research programmes and commercial ventures. This enlightened approach has encouraged intellectual and creative exchanges that cross cultures and disciplines, ultimately generating new insights and ideas that lead to successful product innovation.
My colleagues and I have been engaged on a number of these ‘discovery projects’. Using our knowledge of existing markets (e.g. TVs, smartphones) and skills in trends research, we’ve helped clients determine the best areas for new product development and investment. This design-led, human-centred approach to identifying opportunities bridged a knowledge gap for our clients in South Korea – as it does for many companies in the West, too.
Similarly, enterprises in China stockpiling masses of consumer data for their target markets may be unable to translate this information into meaningful design, manufacturing and marketing insights. However, by being as open to collaboration as our clients in South Korea, companies in China will increase their chances of success overseas.
Interestingly, using data, qualitative studies and trends analysis to underpin insights and recommendations helped our clients in South Korea to overcome another cultural barrier: an aversion to risk-taking. However, armed with the traceable data that our methodologies provide, project leaders could more easily sell the new product development ideas to subsequent layers of the internal hierarchy.
2) Open to cultural change
Although profit-making organisations around the world share certain capitalist credentials, some distinctively national characteristics always manage to permeate corporate culture. In China and South Korea, for example, the multi-layered managerial hierarchy existing within larger organisations reflects the social structures of the nations themselves.
By contrast, many Western companies adopt a flatter management structure, with decision-making devolved more widely among employees. When there’s collaboration between East and West, both parties need to understand these differences. This is especially relevant when it comes to the Western participants appreciating that the speed of response within deeply hierarchal organisations may be slower, and the review period before decisions are made may be longer than they’re perhaps used to.
That said, our own experiences in South Korea indicate that local companies not only understand the cultural differences involved, but also accommodate and take advantage of them. Indeed, they draw upon another homegrown trait – the willingness to work long hours, consistently, over several weeks and months – to meet project milestones.
Selling Huawei in Hawaii
The majority of companies in China can also learn lessons from some local enterprises already blazing a trail internationally. Organisations such as Lenovo (PCs and consumer electronics) and Huawei (telecommunications and networking) have risen above the main barrier facing Chinese firms wanting to export the ‘Made in China’ syndrome.
The manufacturing stamp that became synonymous with the country’s early forays into Western markets also helped turn positive perceptions into negative ones. This was because, over time, consumers associated the sheer volume of mass-produced items from China with labels such as ‘cheapness’ and ‘disposability’ rather than ‘affordability’ and ‘utility’.
The companies doing well overseas have turned opinions around, ensuring that people in the West now acknowledge China’s ability to create useful, durable products that add value and are still within the budgets of most people. Huawei managed to change perceptions by developing partnerships with established global players in mobile technology and networking solutions (e.g. Siemens, Motorola and Symantec). Lenovo followed a similar pattern by working alongside IBM initially, before later taking over its PC business.
Both Chinese firms increased sales abroad by aligning themselves with well-respected western companies, and trading off their brand heritage and reputation. Other cash-rich organisations in China may follow this route, provided they can identify firms with similar product portfolios and – where a take-over is on the agenda – much poorer bank balances.
Another avenue for Chinese companies to pursue involves dedicating their efforts to a niche market segment – where, ideally, competitors in the West are relatively weak or simply non-existent. Capitalising on China’s traditional manufacturing skills and low cost-base, companies following this model can gain a competitive advantage in the more mature markets. Haier is a good example, with its focus on compact refrigerators and electric wine cellars leading to notable success in the USA.
Chinese corporations aiming for growth overseas can seek inspiration in two ways. On the one hand, they can try and emulate the successful export strategies of their regional neighbours in South Korea. On the other, they can learn from exporting companies much closer to home.
Either route should help them to break successfully into Western markets.

‘What is Design for China?‘ is a series of three blogs where we will be taking a look at design targeted at the mainland Chinese market. In our first instalment in the series we focus on how some Western brands are creating designs specifically for this increasingly discerning market.

An interesting story occurred when the PDD Hong Kong team, a mixture of German, American and Chinese designers, created a series of water bottle concepts for the China market. PDD designers were invited to create new packaging that incorporated elements of ‘Western style’ into a new bottle design. The drawings created by Western teammates focused on the more ‘outward’ view of Chinese culture, such as dragon and ethnic patterns, derived from historical references. During validation studies of these patterns almost none of the mainland Chinese participants selected the designs by our Western designers. But why

The dragon image has become an overused expression in Chinese design over the years. Very few products can carry a contemporary appearance featuring a dragon image. Chinese users often associate ‘cheap’ quality when traditional elements, such as a dragon, are used without another layer of depth. Even the most traditional type of products we use these days, such as moon cake packaging and New Year cakes, required careful consideration of colour and material design in order to stand out in the crowded market place.

Above image credit: Lamborghini veneno. Featured image: PDD

Let’s take Ferrari as an example, with the 458 Italia China Limited Edition launched on April 2012. While the application of the new ‘Marco Polo Red’ colour complimented the curves and overall form of the body, the black and gold dragon stripe running down the centre of the bonnet missed some of the subtle nuances that come with a deeper rooted understanding of the Chinese culture. Subsequently, the aesthetic of this limited edition was criticised in the media as “Ferrari Dresses up 458 Italia in a Chinese Costume”.

Business success requires comprehensive understanding of culture and behavior. Some Western brands trying to share a ‘piece-of-the-pie’ in the Chinese market, seem to have better success by adopting the local culture as best as they can. For example, the fast food chain, Kentucky Fried Chicken (KFC), has done a miraculous job compare to some other Western fast food chains in mainland China. The figures below indicate the profit growth for KFC from ’08-’12 (despite the bird flu incident in 2012 which led to a drop in sales).

Image credit: The Wall Street Journal

KFC wisely didn’t try to take the exact look and feel of its U.S. restaurants and menu to China; instead they serve squid, fish sticks, rice and even congee during breakfast hours. In 2011, 50% of operating profit came from China, compared with 32% from the U.S. (Source: Slow Cooking China’s Still Good for Yum, Tom Orlik, The Wall Street Journal, June 2012). We believe that KFC’s success in China was based on attention to cultural insights.

Squid on a skewer from KFC in Shenzhen. Image credit: M.I.C Gadget

Chinese Congee (basic Chinese breakfast) served in KFC China. Image credit: Wandering China

Design and business are closely connected. Adapting to local preferences is the key to business success; in the case of KFC, their success was the ability to adapt to the local food tastes of their customers. We understand the importance of immersing ourselves in Chinese culture past and present when designing for the China market; combining our global skills with in depth regional knowledge and the nuances of client, culture and consumer.