In recent years, most established foreignmultinational companies (MNCs) haveenjoyed strong revenue growth and profit-ability by riding on the back of China’sspectacular economic growth. China alreadycontributes on average nearly 10 percent ofthe global revenues of the 180 MNCs in our2006 survey. At the same time, in 2006 theAmerican Chamber of Commerce in Shanghaireported 64 percent of its member companieswere profitable and 65 percent had profitlevels in China equal to or higher than in othercountries.
But in China’s rapidly changing environment,recent success is no guarantee for the future.Industrial and consumer products companiesalike will have to reevaluate their businessmodels and operations to sustain rapidrevenue growth and profits.In industries ranging from automobiles toelectronics, lower-end product segmentsoften account for the largest portion of thetotal market and these segments are typicallygrowing the fastest. MNCs counting on Chinafor strong revenue and profit growth – or simplyhoping to maintain market share – will neednew approaches to win in price-sensitive massmarkets while preserving their market leader-ship in higher-margin, premium-end marketsegments.How can companies capture the China massmarket opportunity profitably? What are thebusiness model implications and how willchanges impact their China and global opera-tions?
Foreign companies must alter their business models and operations to tap China’s rapidly growing mass markets where scale matters and price is king. Prosperity outside o major coastal cities, an evolving middle class and ierce competition will drive more companies to develop innovative,low-cost business models to reach new markets and customers across diverse regions o China. Companies will need to transorm key areas o their businesses – including sales channels, distribution, R&D,procurement and human resources – to capture this historic opportunity.
Winning in China’s mass markets
Winning in China's mass markets
New business models, new operations for profitable growth
By Alan Beebe