The China market and European companies: Pricing and surviving the local competition

Abstract

Purpose - The purpose of this paper is to illustrate the changing nature of competition in China. China received over $60 billion in foreign direct investment in 2003, and its economy is already the world's second largest in PPP terms. Thus, there is a tremendous need for executives to understand the changing business environment in China. Design/methodology/approach - The methodology is primarily theoretical complemented by applied cases of foreign companies and their experiences in the Chinese business environment. Findings - Multinational companies face intense price pressure competition in China. The primary factor is due to the growing competitiveness of local Chinese competitors. Practical implications - China is a complex market combining a transition economy, deflationary economic conditions and local competitors that learn about global products and services in the shortest possible time. Multinational companies are underestimating the speed at which Chinese companies are becoming globally competitive. Originality/value - Existing business and management research on China has tended to focus either on the transitional nature of the Chinese economy, or on the nature of competition among multinational corporations. This paper illustrates the importance of emphasising China's local companies, that are rapidly becoming multinational corporations.