Business location - China

China: Seven Tips for solving the China-Challenge

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Tip 3 – Provide marketable products: The core of every China strategy is an appropriate product portfolio in addition to the segment positioning. Often, it is not promising to attempt to offer the machines that are supposedly best for the European market to the Chinese customers too. Modularly designed machines with upgrade options and solid mid-segment machines adapted to the customer requirements are received well by Chinese buyers. For a systematic product adaptation the value systems of the Chinese customers must be taken as a basis. Another option to optimize the marketability is to analyze the most successful products of the local supplier, ideally with the help of your Chinese employee.

Tip 4 – Adjust your organization in China to your positioning: After you have defined the segment positioning and the products, the requirements for your organisation in China follow from it. The correct distribution structure for example depends on which customer groups you want to target and how many resources are available. For niche providers with high availability of resources a technically sound distribution with more than 80 % direct distribution share is desirable. On the other hand generalists with less resources of their own should consider an external partnership.

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Even the procedure for localization is derived from the product and marketing strategy. Based on the located price range and considering the cost-cutting from the product adjustments, the target degree of localization is determined backwards along the value chain. From experience, an increase of the degree of localization for new products by about 15 percent points p.a. is realistic. For localized products it is always desirable to achieve a localization degree of more than 70 % to compensate the lost price premium for “100 % Import machines” through savings.

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