Chinese Style Entrepreneurial Marketing – Some Lessons to be Learned…

By Moti Blau *

 On their way to success, entrepreneurs, regardless of their origin, share the fact that they operate in an uncertain business environment, and lack many of the critical resources needed. As such, marketing done by entrepreneurs is very different from marketing of established firms. Established firms have accumulated market knowledge, managerial experience and financial resources, thus having the luxury to choose from a range of possible marketing strategies, and the ability to execute a variety of marketing plans. On the other hand, entrepreneurial firms, mostly young and small in nature, are short of these capabilities and resources, therefore resort to a different, less formal or methodical, marketing approach and techniques.

Set on the above background, Chinese entrepreneurial firms stand out with some unique marketing approach, which entails both advantages and disadvantages. Chinese entrepreneurs utilize their personal social network (known as Guanxi), and leverage on it quite significantly along their marketing processes.

At one end of the marketing process, this network is used to collect market information and to learn about new opportunities, such as unmet customers’ needs, which may lead to new product ideas and additional revenues. At the other end, these trust based relationships can be used cleverly to identify potential customers, as well as channel partners (distributors, agents etc.), reducing both risk and time to market. Clearly, doing business with someone you know is much easier than with someone you never met.

This leads to better responsiveness of the firm, reacting to market changes and finally may very well create a competitive advantage over entrepreneurs that lack such a network. Unlike other resources, such a network cannot be easily imitated or transferred.

Still, there are few distinct downsides to this entrepreneurial marketing approach of reliance on personal relationship network. Firstly, it takes quite some time and efforts to develop. Many of the Chinese entrepreneurs are young and their network is not very well developed, especially on the international front. Most Chinese firms have been starting to engage in international business only in recent years. Local relationships will not provide much advantage for firms wishing to export their products.

Therefore, a not surprising fact (and well documents) is that Chinese entrepreneurs are utilizing their connection network, of Chinese family and friends living abroad, in order to have access into foreign markets. Interestingly enough, one can find a similar approach with Israeli business people, who are seeking and utilizing the Israeli / Jewish connection. A distinct difference with Israelis is that they are building trust rather quickly with other Israeli or Jewish people. This might be explained by the fact that the overall Israeli / Jewish population is of fractional size of that of the Chinese, so ‘points of similarly’ might be recognized quicker.

The most notable disadvantage of this approach is that entrepreneurs stick too much to their existing network, and do not do enough to explore alternatives. They apparently ‘feel better’ at the comfort zone of their existing network. This means that possibly some better opportunities, attractive target markets, efficient routes to market or a more sustainable competitive position could be missed out. This may lead to potential lost revenues, lower profits or smaller market share.

Until few years back this might not seem to be such of a problem to Chinese entrepreneurs as they were very much sales oriented, focusing on having price advantages by lowering costs and increasing production efficiencies. They were basically reacting to western customers seeking for cheaper manufacturing outsourcing. This, however, changes gradually (or rapidly, depends on who is being asked) but surely. China is further opening up to foreign, in many cases very professional, firms and at the same time costs within China are rising.

Therefore cost leadership strategy may not be sustainable anymore for Chinese entrepreneur, so they must seek out more sophisticated marketing strategies. This is true for both entrepreneurial firms that operate within mainland China, as well as those that operated internationally, where competition has always been fierce. Based on its plans, the Chinese government is aware of these trends, and is putting much emphasis on fostering innovation as a source of competitiveness, rather than on low cost production.

In order to better response to these environmental changes and better compete, Chinese entrepreneurs need to embrace a more strategic and methodical approach to marketing. This means that choices should be evaluated more thoroughly and a longer term view of the market is to be taken (branding for example).

Analysing the market more objectively, having better defined marketing objectives, and formulating a more sophisticated targeting and differentiation are few areas of possible improvement for Chinese entrepreneurs. This does not necessarily mean that greater financial resources are required, on the contrary. Smaller firms that enjoy inherent flexibility are able to respond quicker to market opportunities, and do much more with much less. 

Better strategy means better utilization of existing resources, including social networks. Chinese entrepreneurs may need to try and explore new markets and marketing channels which are beyond their personal reach, as these may better fit their newly formed strategy. Trust can be expanded beyond the existing network by having professional processes in place and by improving quality of service for example. At the same time Chinese entrepreneurs can expand their network in a way which is synergetic to their strategy. This can be done by cooperating with seasoned, better connected entrepreneurs or managers which relate stronger to the relevant target market.

Raising awareness and increasing marketing knowledge base, among Chinese entrepreneurs, learning about new marketing methodologies and techniques, combined with strong networking capabilities, will definitely pose a serious challenge to western firms either in China or abroad. 

Moti Blau 鲍慕磾 (MBA, MCIM). An entrepreneur and international marketer, is the Managing Director of Proxy Marketing Solutions Ltd. Engaged since 20 years with international marketing and business development with the technology industries. As part of his activities Moti lectures on international SME marketing.

motib@proxy-ms.co.il ,www.proxy-ms.co.il

©  2011. All rights reserved to Proxy Marketing Solutions Ltd.

Moscow-> Haifa-> Beijing-> Shanghai-> Taipei

“No talk, all action!”

A world with “No talk, All action” must be a wishful thinking for some of us but in this context it’s a slogan of a Global event – The Start-up weekend.  Startup Weekends are 54-hour events where developers, designers, marketers, product managers and startup enthusiasts come together to share ideas, form teams, build products, and launch startups! (Start-up weekend website).

The purpose of these weekends is mainly to allow Entrepreneurs (from both Technical & Business backgrounds) to find out if their startup ideas are viable. In 54 hours, Entrepreneurs (developers) have to pitch their idea with open mic, design and develop business plans while constantly streamlining their startup vision. Later they are expected to demo their prototypes, listen to judges’ feedback and in some cities, win prizes.

While start-up weekend website has the full list of cities hosting the event, we naturally chose to highlight only the following 5 events: Moscow will host “start-up weekend” on June 17-19.  Haifa, Israel’s Northern Port City, the home of the Technion Institute of Technology and the University of Haifa, as well as Intel’s development lab and the IBM and Microsoft R&D facility , would be hosting start-up weekend on June 22-24 (might be postponeג). Beijing will have a “start-up weekend” on June 24 – 26. Shanghai July 22. Taipei would be hosting it’s first ever “start-up weekend” on August 12-14 at the National Cheng-chi University.

MultiReach Facilitates investments between Israel, China & Taiwan, so if you are entrepreneur looking for business opportunities in these markets, leave us a comment and we’ll be happy to assist you in turning your Dream into a Successful Business!

Good Luck!

Israel, Taiwan and World Competitiveness 2010

The world’s most renowned and comprehensive annual report on the competitiveness of nations- The Swiss Institute for Management Development (IMD) yearbook, ranks and analyzes how a nation’s environment creates and sustains the competitiveness of enterprises. The IMD competitiveness survey ranks 58 economies according to 328 different criteria that measure how favorable a country is to business.

According to the latest rankings of the World Competitiveness Yearbook, Taiwan’s rating surged from No. 23 in 2009 to No. 8 in 2010. Israel’s rating surged from No. 24 last year to No. 17, placed it after Germany and before China.

Israel’s economy is No. 1 in the world in terms of:

  • Economy’s resilience to crises
  • Expenditure in research and development as a percentage of gross domestic product
  • Innovative capacity of firms to generate new products, processes and services

In the business-efficiency category, Israel scored very high in availability of skilled labor, finance skills, entrepreneurship of managers and venture capital.