How not to succeed in China

No one said it was going to be easy. China is going to make and break many companies – internationally and internally. Following on from my entry a few days ago (Why you shouldn’t be too worried about India and China), here’s a story from BusinessWeek on how not to do China (GM and VW: How not to succeed in China).

GM and VW are losing out to competitors such as Hyundai, Kia and Chery. A few reasons why:

China’s emerging middle class are demanding cheaper cars, and more modest ones too. GM and VW have been slow to respond.

Both GM and VW entered the market a long time ago – back when high tariffs kept out imports and allowed them to milk the market for immense profits, and and help them to keep lean and mean and cut costs.

Of course, know that much cheaper cars are available, consumers can express the historic disapproval of being ripped off by shifting allegiances.

GM and VW also had to deal with a lot of of government meddling, including restrictions on what kind of cars that could make – something new entrants don’t have to worry about.

Newcomers have also done a better job of actually finding out what the Chinese consumer really wants. For example, strengthened chassis and wider tyres to ensure smoother ride on the average Chinese rough road.

So what’s the secret for success? Nissan CE, Carlos Ghosn, says, “Being late or in advance doesn’t matter. Make a good product and have good service, and you’ll be successful.” That may be true in the near future, but long-term this market will be like any other, where the difference between competitors is less about what they sell and more about who they are and how they sell. This is especially tricky when working across cultures.

“China used to be an easy game. Not any more.”