101 Things About China – #1 – The Importance of Understanding

I woke up yesterday and followed the same routine I always do – 1) Check blackberry, 2) Check sports news. It’s a tried and trusted routine that sees me get ready just in time to watch World Sport on CNN before leaving the apartment and psyching myself up for the 30-minute bus ride to the office. I knew I had a long list of things to do, including writing this blog post, so I was glad to see not much new to worry about at work. However, the sports headlines on the BBC and Yahoo! were dominated by comments made by a prominent snooker player while playing in a tournament in China (Disclaimer: I’m British and I like snooker). He clearly wasn’t impressed with conditions at the World Open currently underway in Haikou, the capital and most populated city of Hainan Island.

Now, this story isn’t the reason for my post, but it did get me thinking of something else I read recently while studying a module on global marketing as part of my master’s degree, and it highlights what I see as one of the biggest issues facing businesses looking to be successful in China: a lack of understanding.

There are a number of reasons why a business can fail in China and it doesn’t matter how big your brand is in your home market (just ask Best Buy or Outback Steakhouse), but if you fail to understand the Chinese consumer and the Chinese market, you’re most definitely setting yourself up for a fall. And, one of the key stumbling blocks in your path to understanding is something called “self-reference criterion”.

“What is self-reference criterion?” I hear you ask…

Self-reference criterion is the unconscious reference to the cultural values that have been embedded in you, and many marketing experts believe this to be the root of many business failures in international markets, and from my experience here in China, I would agree.

But, let’s look at this from the other side and flip it around and ask “Why do Chinese companies fail in America?” I bet any worthwhile Top 10 list stating reasons Chinese companies fail in America includes at least two or three that relate to the Chinese company looking at Americans as though they were Chinese, not understanding the local environment, not hiring the right local experts and not localizing products effectively enough.

So let’s now flip this baby back around and ask “Why do American companies fail in China?” Any guesses?

• American companies look at Chinese consumers as though they want the same things as American consumers.
• American companies fail to understand and appreciate the complexities of working AND living in China.
• The business is too closely managed from people 11,000 kilometers away and fails to take advantage of local resources and local expertise.

Notice the similarities? It really shouldn’t be that surprising, but companies continue to make the same mistakes. How to defeat the self-reference criterion? Czinkota & Ronkainen in their book titled “International Marketing” offer the following tips:

1. Define the problem or goal in terms of domestic cultural traits, habits, or norms.
2. Define the problem or goal in terms of foreign cultural traits, habits, or norms. Make no value judgments.
3. Isolate the self-reference criterion influence in the problem and examine it carefully to see how it complicates the problem.
4. Redefine the problem without the self-reference criterion influence and solve for the optimal goal situation.

Of course, this isn’t just specific to China, but perhaps the Chinese are more unforgiving than many. If you come here thinking you are the best and that you know better, you’re unlikely to succeed. The Chinese do not like to be preached to and they will band together very quickly if they feel they are being told how they should live their lives and how they need to accept western ideologies. Ethnocentricism will get you nowhere in China, and my advice would be to accept this fact, adjust your thinking to accommodate it, and ultimately ensure all business decisions thereafter have taken this into consideration.

Anyway, I don’t want to drag out the post anymore than I need to, but if you are looking to do business in China, take the time to think about this. It’s vitally important to do the right type of research and to understand the market. Only then can you make the appropriate choices. China is a great place that offers a wealth of opportunity and I’m extremely fortunate to be part of a business that got it right.

Good Luck!