China is an economy that presents one of the most attractive and profitable destinations in terms of investment for foreign retailers (Feng et al., 2015). This is because there is a presence of rising incomes as well as expanding market size. For a foreign department store chain, there are various strategies that can be employed in order to succeed in the complex Chinese retail market that is characterized by cultural differences as well as its situation as an emerging economy.
Firstly, a foreign department store chain should ensure that it has partnered with local business set ups that are related with the field of operation, which is dealing with high-end products (Feng et al., 2015). The reason behind this is that local companies that are in a similar level with such a franchise are capable of ensuring that there are valuable resources available for the foreign setup. Such resources include the provision of business networks, government relations as well as a vast wealth of knowledge on the local market conditions (Feng et al., 2015). The franchise will be able to benefit from the government relations through incentive policies. In the long run, the department store chain might be offered a government partnership thus ensuring that they have curbed the overheated competition that would result from the large entry number of foreign businesses into the Chinese Retail market.
Another strategy that can be employed in this case is ensuring that the foreign store has offered third-party services to their Chinese counterparts. The reason for this is that just like in any other developing economy like China, the retailers are in need of strong support from efficient and competitive business partners. The support includes offering third party logistics, wholesale services, distribution as well as the supply of supply chain management solutions (Feng et al., 2015). Another reason that makes offering third party services a popular strategy is that many service sectors in China are still struggling in their developmental stages, and this makes them appreciate any help that comes from multinational outfits that want to set up shop in China. This also leads the government to get attracted into partnerships with such outfits, and this leads to the foreign departmental stores keeping off competition that might exist in the market.
There is yet another strategy that can be used in order to prevail in the Chinese retail market, which is, working with local business partners. It is a very wise entry strategy that is advantageous to a company that is new to the Chinese market. Local companies are capable for providing valuable resources to the entrant that will be informational and useful in business operations (Feng et al., 2015). For instance, the local companies can offer a valuable network for the business as well as enhance better government relations with the new entrant. There will also be information that will be provided regarding the knowledge of local market conditions. With such information and knowledge, the foreign investor will be in a position to succeed in the complex Chinese retail market.
Finally, a combination of the above-mentioned strategies can also be used to ensure that there has been a success in prevailing in the Chinese retail market (Feng et al., 2015). This is because the Chinese market is driven by cultural differences and also the fact that China is a developing economy. A foreign department store can thus take advantage of these conditions in order to ensure that they have succeeded.
Feng, H., Pan, X., Tang, Y., & Xu, L. (2015). The Efficiency of China’s Retail Companies and
the Implications in the Stock Market. International Business Research, 8(4), p83.