2011-02-21

Understanding China's market

When a free market takes hold, the market that emerges will be an expression of that native culture and religion. This goes for strange ice cream and potato chip flavors to entire business models. Here are three news stories I read today that illustrate this well.

Microsoft likens China market to 'Wild West
Zhang said many areas of business on the mainland were "unclear" making it hard for overseas companies to adapt to the market. "This lack of clarity exists in many aspects, from the competitive model and capricious customers to China's policies and regulations," he said.

Zhang compared market conditions on the mainland to "the Wild West". He said there were no rules as long as companies achieved the ultimate goal: making a profit.

He said he believed it would take a long time for overseas companies to acclimatise. "Now many companies have noticed the problem but it will take years to conquer the maladjustment," he said.

Despite this, he said China was Microsoft's most important market apart from the US. "China is our significant strategic centre. It is not just a market centre - we are not here just to sell."
Microsoft gets it. Best Buy didn't.

Best Buy to Close China Stores
The Richfield, Minn., retailer announced Monday evening that it was shuttering its nine Best Buy branded locations in China, which have struggled to perform as well as similar big-box stores in the U.S., and was also exiting the Turkey market, where it recently began retail operations.

Instead Best Buy said it would focus on growing in China under another retail format called Five Star that has proven more successful; it disclosed plans to open 40 to 50 additional Five Star stores in 2012.
The imported business model failed, but the organic one survives.

Finally, here's a market in branded eggs.

Egg revolution hatching down on the farm
One Sichuan egg farm claims its hens are raised in bigger cages so that they can get more exercise and produce better quality eggs, while a Shanghai firm says its hens are given only vegetarian food and their eggs can be eaten raw, thanks to certain technology introduced from Japan.

Although the prices of these eggs are usually twice that of ordinary eggs, the sales gimmicks they use are often effective in attracting health-conscious buyers.

"I only buy branded eggs," said Zhang Fengxia, a Beijing mother of a two-year-old girl. She is a loyal customer of "tu eggs" or, literally, "earth eggs", whose producers say their hens are raised cage-free and fed worms.

"I know it's hard to verify whether what the producers say is true or not," Zhang said. "But I generally believe something with a brand rather than those coming from somewhere unknown."

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