As economic uncertainty continues to plague Europe and the U.S. economy returns to albeit slow and sporadic growth, China has remained a global growth engine for many Western companies even if slower growth than before. Yet, successfully competing in a market as large and complex as China can be challenging without a deep understanding of the market—even to those companies with a long track record of success in China. China’s market is more diverse than most are accustomed to, with customers that range from those with no experience with your product to those as sophisticated as any elsewhere, and including a large number of government-connected organizations. Also, there can be competitors from global companies that operate on a similar business model to local Chinese competitors that may or may not be able to deliver on their promises. Reliance on reliable market analysis has been a critical component to ensuring the success of a company’s strategic growth plan. However, being able to determine what information is truly reliable can be the determining factor for market success or failure.

Blue Canyon’s China practice has heard many stories over the years in which companies in the B2B sphere engaged a local third-party research firm to provide them with critical market insights that fell short on many levels. Some recurring issues we hear are:

• Data quality and reporting that lack insights and meaning – Market researchers that do not understand the client’s business well enough to connect the research being done to the business of the client
• Capabilities fall short – Companies that use a network of thousands of part-time college students, which may be successful in the B2C realm, but use the same business model in B2B where understanding what drives a customer’s success is critical to strategy
• Output is unreliable – Research that relies on a couple of interviews with friends who have some information, but are not centrally involved in the industry and extrapolation of that information to conclusions while falsely claiming a large sample
• Inability to stand behind or explain a research approach – The lack of professionalism in much of the local industry means that results are personal, not the result of a replicable process

The good news is that the China market is becoming easier to research due to the presence of more western companies in the market who have advanced in their understanding. The availability of numerous off-the-shelf reports and wealth of English-language publications on China can be a useful starting point in helping companies to conduct initial research in their industry in general. However, given the complexity of the China market, with such diverse segments, thorough understanding of the market and participant’s drivers of value should precede any final decisions. But, what is the best approach when an outside resource is needed?

In instances where critical business decisions are being made, where answers are unknown or difficult to find, companies are better served by a firm with global experience, proven market expertise, and strong local business relationships. An example of this would be when determining the size and nature of a market opportunity. Local firms that offer quick turnarounds at a low cost will most likely only scratch the surface, rely on information from non-industry leaders, and provide high-level insights that may not provide accurate or reliable data. An experienced firm will build upon initial findings with more detailed information collected via Chinese-language desk research and in-depth interviews with leading industry experts and decision makers that take years to form relationships with. Alternatively, when companies already have a plan that requires market validation, it may be more prudent to engage a local Chinese company to confirm what is already known.

Good market investigation can identify any potential barriers to entry and pinpoint any weaknesses in a company’s product or service offering. A detailed and thorough study executed properly can help prevent poor decision-making and can be a building block towards establishing a clear strategy map for the future. Understanding who to engage and when to bring in the right partner can make all the difference.

To learn more about Blue Canyon & China Associates capabilities, contact David G. Hartman.