China is the world’s largest markets, but it’s also one of the hardest to crack. Here’s a sobering stat: 3 out of 4 western companies fail their China entry.

Entering China is one of the most critical decisions your company will make. Get it right and you can unlock growth, revenue and competitive advantage. But a poorly executed market entry can set your business back years.

So, before diving headfirst into the Chinese market, take a step back. Pause and assess your current approach. Are you making decisions based on assumptions or real insights?

Key takeaways

Balance resources and control: Choose a go-to-market model that matches your available resources and desired level of control.

Match product and distribution complexity: Ensure that your distribution channel can support the complexity of your product.

Think strategically: Consider how your decision fits into your overall business objectives and the market landscape.

Most entry modes involve a partnership: Consider how you identify and build a long term relationship with a local partner.

The harsh reality when you get it wrong?

Most companies that fail make the same mistakes:

• Going it alone: Trying to navigate China’s complex regulatory and cultural landscape without local expertise
• Relying on assumptions: Using strategies that worked in other markets but don’t translate to China
• Choosing the wrong partners: Working with distributors or intermediaries who lack real connections or credibility.

Choosing the right market entry mode is a delicate balance of time, resources, control and risk. Here’s what’s you could easily experience: Your product registration will be rejected multiple times before you get it right; half of the distributors reaching out to you are not even real companies; and your pricing strategy could easily be all wrong. And that’s just the beginning. A wrong market entry can lead to significant, measurable consequences:

• Mismatched distribution channels: If your distribution channel can’t support your product’s complexity, your risk customer experience confusion or dissatisfaction due to inadequate support or service.
• Loss of control with low-risk models: Opting for low-risk entry models like licensing or franchising often means sacrificing control, whereby you risk reputational damage, inconsistent customer experiences, etc.
• Cultural misalignment: By underestimating cultural differences you risk marketing campaigns that fail to resonate or, worse, offend the target audience.
• Damaged relationships: Partners, distributors, or customers may lose trust in your brand.
• Lost momentum: Recovering from a failed entry can take years, delaying your growth trajectory.

A framework for entry mode selection

Getting your market entry right the first time costs 40% less and gets you to market in 6–8 months. To get your market entry right, focus on two key balances: Resource / control and product / distribution complexity:

1. Understand the resource / control trade-off

Every market entry model comes with a trade-off between the resources required and the level of control you’ll have. For example:

• Exporting is low-resource but offers limited control.
• Joint ventures require more resources but give you greater influence.
• Wholly-owned subsidiaries demand significant investment but provide full control.

Action step: Map your options against your available resources and desired level of control. Be honest about what you can afford—both financially and operationally.

2. Match product complexity with distribution complexity

Your product’s complexity should align with your distribution model. For instance:

• A highly complex product (e.g., advanced tech) needs a distribution channel with expertise and support capabilities.
• A simple product (e.g., basic consumer goods) can thrive with a more straightforward distribution model.

Action step: Evaluate your product’s complexity and ensure your distribution channel can deliver the necessary value and support.

The road ahead for market entry success

The companies winning in China have one thing in common: boots on the ground. They work with local partners who speak the language (literally and figuratively); know how to navigate the regulatory maze; and have the connections to open doors and close deals.

The companies that succeed will be those that:

• Carefully select and vet local partners, conducting thorough due diligence on their market reputation, financial stability, and existing business relationships
• Invest time in building strong relationships with partners beyond contractual agreements, understanding that guanxi (relationship building) is fundamental to Chinese business culture
• Establish clear governance structures and communication protocols from the outset
• Maintain active involvement in the partnership rather than taking a passive role, ensuring alignment with company objectives and quality standards.

At Shaeps we can help you establish and manage a long-term commitment to the market through consistent investment and presence.