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  • KITA Analyzed Failure Cases of Foreign Invested Companies in China
    2019-08-16 hit 518

    KITA Analyzed Failure Cases of Foreign Invested Companies in China


    - It is essential to be equipped with the management and marketing strategies that work for the trends - 


    It was argued that in order to enter into the Chinese market, foreign companies should get away from conservative management style and, above all, be careful not to provoke public sentiment. 


    According to the report titled ‘An Analysis of Failure Cases of Foreign-invested Companies in China’, issued by the Shanghai Branch of the Korea International Trade Association (Chairman, Kim Young-Ju) announced on August 16th, the number of foreign-invested companies established in China last year was 60,533, increased by 69.8 percent year-on-year, and the total amount of foreign investment was 134.9 billion dollars. Foreign investment in China is expected to increase as the ‘Foreign Investment Law’ was passed this March in China and the service, manufacturing, mining, and agriculture sectors are being promoted to open.  


    However, the report said, “Global companies seeking to enter into China have failed to settle down due to conservative management style, failure to analyze consumer demand and trends, and stimulation of national sentiment. Therefore, Korean companies need to thoroughly prepare by referring to the related cases 


    The well-known examples are Max & Spencer that adhered to the daily brand-oriented distribution strategy which worked in England, Best Buy that was stuck to pre-purchase and after-sale strategy, Suzuki that failed to respond to the trend toward large vehicles and sports utility vehicles (SUV) and Olympus that failed to create demand due to the rapid spread of smart phones.

     

    In particular, Italian fashion company Dolce & Gabbana (D & G) was dismissed from China's major online stores when boycotts sprang up as the company disturbed the public sentiment with advertisement which made fun of Chinese people and the racist comments about Chinese people. B & Q,, a British building materials department store that once operated 36 stores in 25 cities in China, suffered from huge losses due to corruption such as supplier exploitation, forced sales, and high commissions. Carrefour of France, which entered into the Chinese distribution market in 1995, became the target of the boycott of French products because of the Chinese human rights protests in Paris during the 2008 Beijing Olympic Torch shipment. The company finally sold most of its shares to Chinese distributor Suning after the case of cheating receipts that were calculated by the different price from the price tag happened.  


    Shim Joon-seok, head of Shanghai Branch of the Korea International Trade Association, said, Foreign investment in China is surging as new foreign investment in Shanghai in the first half of this year increased by 49.2 percent compared to the same period of the last year. He stressed, Companies considering entering into China should perform preliminary research on distribution markets and consumer trends and be careful not to provoke the public sentiment in China even after the entry.


     


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