Building successful China alliances

Pieter Klaas Jagersma looks at the issues faced by alliances in the burgeoning Chinese market.
The importance of China as a key strategic market has increased rapidly and continues to do so. China is now the second or third largest market in the world for virtually every consumer and commercial product sold. Chinese companies have rapidly become some of the world’s most formidable competitors and continue to gain position in a variety of world markets. Active participation in the Chinese market is the first step to meeting this global challenge.

Participation in the Chinese market is also a requirement for being a viable global competitor. And while an independent effort may at first appear to be the most attractive option, few companies have the necessary resources, skills and capabilities to become viable go-italone competitors in China.

An alliance with a Chinese company encompasses a broad range of potential collaboration from supply or marketing agreements to joint ventures.

Although China alliances are risky and certainly face significant challenges, if properly designed and managed they are the most effective method for building and profiting from a competitive position in one of the world’s toughest and most important markets.

Managing China alliances has to be learned by trial and error. It requires mutual adaptation to each other’s Upfrontbest practice Building successful China alliances Pieter Klaas Jagersma looks at the issues faced by alliances in the burgeoning Chinese market. Business Strategy Review, 2002, Volume 13 Issue 4, pp 3-6 national and business cultures and the need to live with reduced autonomy. Managers involved in China alliances must know how to deal with their foreign counterparts who may come from an entirely different type of decision-making culture.

Foreign companies such as Philips and Unilever have used various forms of China alliances for many years. But many companies have avoided them, viewing such alliances as almost a last resort because of the inherent difficulties in successfully negotiating, managing and exploiting them.

However, the past few years have seen a significant increase in their use by foreign companies to fulfil their strategic objectives and during the last 12 months hardly a day has gone by without an announcement of some significant China alliance.

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