American manufacturers have been having difficulty competing with its Chinese counterparts within that country. This is greatly in part due assistance from government officials, and due to issues of innovation.
China is now competing directly with American companies that used to dominate the market. Many American companies doing business in China have seen market share drops in recent years. This is in part because U.S. companies have underestimated the abilities of the local companies to innovate.
Estimates show that sales in China in the past year were conservatively around $180 billion. This figure likely underreports sales as some companies don’t specifically report on what sales take place in China.
Attempts to regain a competitive edge
Obviously, trade disputes between China and the U.S. are impacting companies from both nations. Issues continue to escalate over perceived trade imbalances and forced technology transfers.
Perhaps most importantly, there has been a significant rise in small domestic companies who are growing quickly enough to compete with American companies. This competition is impacting European companies attempting to do business in China as well.
We have seen significantly greater growth of local Chinese companies in various industries as compared to foreign competitors. On the other hand, some American companies that saw declines between 2012 and 2016 are now beginning to make up that lost ground.
The importance of strategic planning
Chinese government promotion of certain industries has made a difference for local companies. China is pushing a “made in China” marketing strategy. However, lack of understanding of local culture on the part of foreign firms also helped Chinese companies gain a competitive edge.
The trade war will not last forever. Part of any strategy for a U.S company doing business in China is to remain patient and persevere. The financial rewards of doing business in the world’s most populous nation make such patience worthwhile. Strategic business planning and understanding the laws and culture in China will these rewards possible.