Conquistadores in China - Three Spanish Multinationals Enter the World's Fastest Growing Market

Professor of International Political Economy Jonathan Story looks at the recent experiences of three Spanish multinationals in the Chinese market. The varied experiences of these totally different corporations provide interesting lessons about doing business in China, and underscore the differences in business cultures across Chinese regions. One company has suffered from the very unpredictable changes in taste among China's urban elite, but still saw great growth potential. Another saw its first joint venture fail, but still felt confident enough to begin producing locally.

by Jonathan Story
Last Updated: 23 Jul 2013

Foreign multinationals operating in China now have two decades worth of stories of staggering successes, calamitous blunders, brain-addling bureaucratic tie-ups, cultural conundrums and exponentially expanding opportunities to draw from when trying to decide in which directions to move next.

Professor of International Political Economy Jonathan Story looks at the recent experiences of three Spanish multinationals in the China market, FirstBI, a distributor of business intelligence software; Spain's confectionary giant, Chupa Chups, and the Bodegas Félix Solís wineries. The varied experiences of these totally different corporations provide interesting lessons about doing business in China, and underscore the differences in business cultures across Chinese regions.

Chupa Chups, one of the first Western candy producers to enter China, saw its initial JV fail, but still eventually decided to start manufacturing near Shanghai. While stiff local competition and blatant counterfeiting remain serious issues, the company has had enough confidence to enter into another joint venture, this time with a Taiwan-based partner.

Of the three corporations the author covers, Bodegas Félix Solís is the most inherently exposed to the types of totally unpredictable, often rumour-driven swings in taste that can blindside foreign multinationals in markets such as China. (French winemakers still haven't recovered from Chinese media warnings in the mid-90s about Mad Cow Disease risks after traces of blood were found in a few bottles, despite this being commonly used in Europe as a clarifying agent.) Excessive and unexpected tariffs and chaotic distribution systems gave rise to black marketers during the same period. And vast differences in everyday consumer habits between European and Chinese markets - such as drinking wine with meals - place a premium on learning. Despite all this, Félix Solís chose to enter the Chinese market at the height of the crisis for foreign importers, so huge was the craze for wines, especially among younger, more affluent consumers, at the time.

The author also provides an overview of China's economic reforms and World Trade Organisation negotiations since the launch of the Open Door Policy in 1978, together with details of all major Sino-American and Sino-European market access agreements that have been proposed or agreed upon in recent years.

INSEAD 2004

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