WHAT STARBUCKS DID RIGHT WHILE ENTERING CHINA?
China is not a homogenous market where a single marketing and operations strategy will work across the country. There are differences in tastes and cultures of people living in different regions of China. Starbucks noticed this complexity while entering the Chinese market in the year 1999 and partnered with three regional partners in China, with different capabilities. Those three partners were Beijing Mei Da Coffee Company, Taiwan-based Uni-president, and Hong Kong-based Maxim’s Caterers. These partners’ years of experience and knowledge of the local customer’s tastes and preferences helped Starbucks to cater to the Chinese customers in the right manner. However, in the year 2017, Starbucks acquired full ownership over its outlets in China, when it got the adequate experience of operating in China.
Summer Atlantic Capital knows that it is not the availability of local partners, but the availability of suitable business partners that makes the difference. Based on our technical evaluation of your technology and our initial market evaluation process, we develop the optimal partnership requirements for our clients. Understanding the parameters of the right partnership is critical.
STRATEGIC PARTNERSHIP BETWEEN UBER AND BAIDU
In the year 2014, Uber, the $100 billion market cap cab-hailing service provider, and Baidu, China’s largest search engine company entered into a strategic partnership. This partnership allowed Uber to integrate their car-booking service with Baidu maps, which is the Chinese internet giant’s very own navigation service. Also, Baidu’s mobile search application was configured to display the Uber cab suggestions whenever users make travel or venue-related queries. Another reason that Uber entered into this deal was that it wanted to take advantage of Baidu’s app distribution services, including “91 Wireless” which runs some of the largest app stores in China. This helped Uber to understand the Chinese market better and pushed its services very aggressively in the Chinese market.
This partnership was critical for Uber’s traction in China. Summer Atlantic Capital has all the expertise that can help you in executing such strategic partnership deals, which are intended to push a potential entrant’s services aggressively by tapping the network of an already established local business.
KFC: THE MOST POPULAR US-BASED FAST FOOD CHAIN IN CHINA
KFC was the first US-based fast-food chain that entered China in the year 1987 by opening its first outlet in Beijing. Today, it is the most popular fast-food chain in China, running through more than 6600 outlets in the country. KFC entered the Chinese market through a joint venture with Beijing Tourist Bureau and Beijing Food Production. The company had already experienced failures in Hong Kong and Taiwan, and this time it did not want any mistakes. This was the reason why KFC partnered with strong local businesses to understand the regional tastes better and develop an operational framework tailored for the Chinese market. Also, instead of hiring managers from the US, KFC hired them from Taiwan. Today, KFC operates in more than 1200 cities in China, holding major market share in the fast-food sector in China.
This shows how partnering with local Chinese partners can help you cater to the Chinese target market in a more nuanced manner. Whether such partnership is in the form of Joint Venture, Licensing, or Distributorship arrangement, Summer Atlantic Capital has the expertise to guide you through them all.
LESSON FROM GROUPON’S INTERNATIONAL EXPANSION
If anyone wants to learn about the mistakes that western companies should avoid while entering the Chinese market, then Groupon’s expansion in the Chinese market is one of the best examples. Groupon is a very popular e-commerce market player in the US. The Company entered the Chinese market in February 2011, by entering into a joint venture named “GaoPeng” with Tencent, a huge technology conglomerate in China. During the initial seven months of its operations, Groupon accumulated $46.4M in net losses with a paltry $2.1M in revenue. There were two major reasons for failure: The Company rushed its entry into China and it also failed to adapt itself to the local culture. Groupon’s team in China was majorly American and couldn’t even speak Chinese. It established itself as an American company in the Chinese market, which made it difficult for the Company to connect with local customers.
According to experts, Groupon lacked guidance on how to be adaptable to the local market. However, if you are someone who is looking to enter the Chinese market, Summer Atlantic Capital can guide you on various aspects, including recruitment of the right team and onboarding genuine vendor-partners.
SALESFORCE’S PARTNERSHIP WITH ALIBABA TO EXPAND IN THE CHINESE MARKET
Salesforce, the San Francisco-based SaaS giant entered into a partnership with Alibaba Group in 2019, to expand its presence in the Chinese market. As per the partnership, Alibaba will be the exclusive provider of Salesforce software to business customers in Taiwan, Hong Kong, Macau, and mainland China. However, Salesforce needs to comply strictly with the Chinese data security laws according to which all companies, especially foreign businesses conducting business activities in China, are required to store their data inside Chinese borders only.
Thus, Alibaba will act as the official distributor of Salesforce’s cloud-based business solutions in China. This is one of the best examples on how western tech companies can make things easy for themselves while entering a market like China. Salesforce gets local domain expertise and a massive distribution funnel in one smart move. However, it is not easy to expand in complex markets like China without a local expert. Summer Atlantic Capital can become that one-stop guide for you if you are planning to enter China. We use our decades of experience and vast network of local businesses in China, to help you in each step of your Chinese market expansion process.
SWIFT’S JOINT VENTURE IN CHINA
SWIFT, the Belgium-based global leader in cross-border payments and financial messaging services, set up a joint venture in Beijing, at the beginning of the year 2021. SWIFT’s partners in this joint venture are China’s National Clearing Centre, the Payment & Clearing Association of China, and China's Cross-border Interbank Payment System (CIPS). The new venture named “Finance Gateway Information Services Co.” is established to provide services including information system integration, data processing, and technological consultancy. The venture is under the process of obtaining the necessary licenses for beginning its operations locally, which may take some time. However, partnering with some of China’s biggest business entities in the sector will help SWIFT in near future.
It is never easy to find a suitable joint venture partner in the target market, that too when the target market is as complex as China. Summer Atlantic Capital ensures that the market expansion journey of its clients, who are planning to enter the Chinese market, becomes easier by leveraging our vast network of local manufacturers, distributors, and service-providers.
COSTCO’S SUCCESS IN CHINA
Costco, the US-based grocery retail giant opened its first store in Shanghai in the year 2019, after obtaining five years of experience running a flagship store in China through Tmall Group. The company’s initial experience helped it to identify the regions from where they were generating major revenue. This helped the Company in deciding the location of their first brick and mortar store. Things went better than expectations. On the very first day, Costco sold 139,000 memberships to customers at the Shanghai store and the authorities had to close the store because of overcrowding. Major elements that worked for Costco were well-framed discount offers and perfect market timing.
However, as an organization, it can difficult to have all the local input or even the vantage point to structure a successful operations or launch plan. This is where professional expertise is needed. Summer Atlantic Capital has a massive authenticated network of local business partners, whose experience can be employed to make your market expansion agile yet well-rounded.