Corporate reputation: Pricing and competing in Chinese markets – strategies for multinationals

Roger (Rongxin) Chen (Roger Chen is an Associate Professor at the School of Business and Management of the University of San Francisco, CA, USA. He is involved in business consulting and his clients include Fortune 500 and high tech firms. He has taught executive training programs in the US, China and Korea. Professor Chen is active in research and has published more than 20 articles and proceedings (chenr@usfca.edu).)

Journal of Business Strategy

ISSN: 0275-6668

Publication date: 1 December 2004

Abstract

This article examines weaknesses of multinational corporations in China. Many multinationals target high price and high‐end segments when entering the country. This creates several problems. First, this market position makes them less sensitive to the growth opportunities in mid to low‐end segments. Second, the high price strategy provides local firms with opportunities to grow their businesses and to consolidate and increase market size in mid‐ to low‐end segments. Furthermore, the low cost strategy also helps local Chinese firms increase exports. After gaining competitive strengths, many local competitors upgrade their products and technologies to attack upper‐middle to high‐end segments, the core markets of many multinationals. This competitive dynamic suggests that multinationals should be aggressive and preemptive in monitoring local competitors in mid‐ to low‐end segments. When local firms are weak, using competitive prices is more urgent than bringing cutting edge products to the Chinese market. However, when local firms become strong competitors, though competitive prices remain important, multinationals should leverage their advanced products and technologies to compete in China. We discuss several factors contributing to the high costs of doing business in China and other factors contributing to success or failure of multinationals, such as establishing distribution channels, not ignoring the less affluent non‐central city markets, and educating the Chinese customers to create differentiated products and services.

Keywords

Citation

Chen, R. (2004), "Corporate reputation: Pricing and competing in Chinese markets – strategies for multinationals", Journal of Business Strategy, Vol. 25 No. 6, pp. 45-50. https://doi.org/10.1108/02756660410569184

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Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited

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