Making it in China’s Middle Market

Tuesday, September 8, 2009 2:08

China Middle Market

Entering the Chinese mid-market segment: key to long-term success?, by Heiko Gebauer, Thomas Fischer and Elgar Fleisch, is an academic report that I found interesting lately while studying a 2nd tier market plan, and as a followup to a recent conversation about firms moving into the 2nd/ 3rd tier looking for growth.

As part of their report, the professors highlight 5 major missteps groups take when trying to assess or enter China’s middle market:

1. Managers use their existing customer segmentation and transfer it to the Chinese market.
2. Managers fail to continually update their understanding of the Chinese mid-market
3. Managers assume that because mid-market consumers can’t afford top quality merchandise therefore they will accept products and service that aren’t customized
4. Managers overestimate the willingness of mid-market customers to pay a premium for international brands over locally made equivalents.
5. Managers assume that mid-market growth is concentrated in the first and second tier cities such as Beijing, Shanghai and Xian and that the third and fourth tier cities are restricted to the low-end market and do not experience accelerated market growth

Key factors for formulating the product strategy appear to be up-to-date market analysis, early market entry and moderate prices.

  • Setting up separate organizational units targeting the mid-market is the key factor for implementing the product strategy.
  • Localizing research and development, and adjusting manufacturing processes seem to present both major challenges and the key to success for the separate organizational unit.
  • Only if domestic companies have already achieved reliable and constant product and service quality should they undertake the adventure towards the mid-market segment.
  • A market entry that is too early and too ambitious can put the company at risk.

The report, while brief (email me for a copy), highlights some critical factors that firms should certainly consider ( there are certainly others that are firm/ industry/ product specific), but on a larger level where I liked this study/ report was that it had the potential to open smart dialogue.

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9 Responses to “Making it in China’s Middle Market”

  1. Tarik says:

    September 9th, 2009 at 8:26 pm

    I am really interested in this topic and would like to have a copy of the report in case thats possible. Currently, I am doing some research myself on this. Thanks,

    Tarik

  2. Sven says:

    September 22nd, 2009 at 4:17 pm

    Does sound really interesting, my master thesis is about corporate strategies in China so could you send me a copy of the report, too?

    Thanks in advance!

  3. Sophiazou says:

    September 25th, 2009 at 7:10 pm

    It seems will help for my project, as i am doing reserach on middle-class marketing in China. It would great if you can send me a copy of the report. Hope to hear you soon.

    Thanks in advance.

    Sophia

  4. Clo says:

    November 10th, 2009 at 2:18 am

    Really interesting!
    Could you please email me thecopy of the report as soon as possible! (I need it urgently…)
    Thanks a lot!

    Clo

  5. James says:

    September 8th, 2010 at 2:02 am

    Can mail me a copy too? I am doing research on chinese consumer market and it will really helps.Thanks inadvance! 🙂

  6. Thomas Dehli says:

    June 9th, 2011 at 4:28 am

    I am really interested in this topic and would like to have a copy of the report in case thats possible. Currently, I am doing some research myself on this. Thanks, Thomas

  7. Thomas says:

    May 1st, 2012 at 10:01 pm

    please could you send me a copy of the report. Thank you in advance

  8. Jay says:

    June 19th, 2012 at 6:31 am

    Can I get a copy? Thanks!

  9. Mikael Eriksson says:

    October 9th, 2012 at 10:06 am

    Dear Richard, I’m a PhD student in Uppsala University on my last year (on the 5th). I am doing research on a western MNC’s entry into the mid end segment in China for mining equipment. Your research sounds very interesting and I would really appreciate a full version of your report.
    Best regards, Mikael Eriksson