Strategic planning for a China market entry or expansion strategy must be a comprehensive, multi-faceted and structured process conducted cautiously and in detail, for the investment amount is usually big. Don’t be impressed by big numbers, for most things about China are big, including losses and failures.

One, the motivation or strategic intent to enter China should consider such an entry simultaneously as a lower-cost sourcing, local market capture and re-export strategy. Scenarios must incorporate these motivations as they affect the economic feasibility. At least two of out these three motivations should be favourable.


Two, executives cannot use or analyse data from a particular customer segment or region to develop generalisations for another region of China. The larger and more attractive coastal data may not be applicable for smaller tier-two or tier-three cities, even with the ‘go west’ inland shift. The hinterland will still take a longer time to develop strong growth.

Three, the strategic planning process is multi-faceted, analysing non-market (customer) factors beyond favourable market size potential, branding, customer demographics or research feedback. I highlight three important non-market factors.

The first factor is macro-environment analysis. China’s economic growth depends significantly on its government support. China’s economy in 2008 grew 15.7% as it was accelerated by a massive 2009 stimulus package. The programme then focused on government infrastructure spending, combined with increases in transfers, consumer subsidies and tax cuts. Hence, government policies should be closely monitored for emphasis areas.

The second factor is distribution. Increasingly, for large countries such as China, India and Indonesia, a market entry strategy must also analyse distribution and logistics factors as these directly affect the strategy implementation. Such business-to-business support services face a derived demand, largely following consumer demand patterns. China’s level of automated material handling is currently low, estimated to be implemented in only 5% to 10% of the country's warehouses. The logistics industry is also very fragmented. Fortunately, China’s Regional Development Policy (11th Five Year Plan from 2006 – 2010) called for three mega clusters to form what I call the ‘three manufacturing magnets’ with potentially 20 logistics hotspots. To support these three clusters’ development and the trend to move facilities inland, the Chinese government has established more bonded logistics parks and bonded warehouses. Distribution centres are one key to improved efficiency and cost effectiveness in distribution. China News has reported that Procter & Gamble formally initiated the construction of a distribution centre in Guangzhou in September. The centre will cost more than $100m and will become the company's largest such facility in Asia and its second largest in the world.

Another related distribution factor is the identification, evaluation and selection of an optimal distributor partner. China has a few hundred thousand companies. Take for example, Guangdong province (which includes Guangzhou). It had about 52,574 companies at the end of 2008. A good solution is to get a local expert to perform a partner search with a three-stage methodology: broadlisting, shortlisting (screening by some criteria list) and arranging company meetings. In the shortlisting stage, your expert should assess the ability, suitability and interest of the prospects before recommending them. That way, you can prevent meetings from being cold calls with little concrete trade interest. This stage is very tedious but necessary. 

The third factor is focus. Work on one small area successfully first before expansion and try to avoid a multiple-entry-points strategy across several provinces simultaneously.

With China being such a big and diverse country, it pays to be patient to grow your business gradually.

Lawrence Yeo is CEO and principal consultant of AsiaBiz Strategy, a Singapore-based strategy and public sector consultancy. Email: