Multinational companies in China face tough competition from local insurgents. Weiwen Han, a partner with Bain’s Strategy practice, explains four tactics global companies can employ when entering a new market in order to stay ahead of local competitors.
Read the transcript below:
WEIWEN HAN: China is one of the few large and untapped markets in the world. Many multinational companies compete in this market against their local peers. While these multinational companies are still figuring out the right way to compete, their local peers are innovating and acting with speed so that they are gaining share from the multinational companies. These large, speedy companies, we call them the scale insurgents.
Within this context, we believe that multinational companies should really do four things. Number one, they should treat China as their second home market, or Engine 2. This is not only because China is an attractive market by itself; it's also a market where they can test a new way of doing business and then take the learning back to the global market.
Second, they need to act at China speed. Think about big players like Alibaba. With their vast scale and whenever they feel like a change, they launch different initiatives and really act with speed.
Thirdly, multinational companies need to think about ecosystems rather than just assets. In a market like China, where ecosystem players like Alibaba and Tencent are so strong, one could not win without partnering with these players and different vendors in the market.
Lastly, talent and culture are the king to win in this market. For both the management teams and the frontline employees, one needs to infuse Founder's Mentality so that the employees can act like owners of the business. So in the era of scale insurgency, multinational players should really treat China not just as one market; they should treat China as a testing ground to learn new skills, new ways of doing business, and then take the learning back to the global markets and win.
Scale vs. Intimacy
The old trade-offs do not cut it in the era of scale insurgency.