China Partnerships are Back – Thanks to the NDRC

Anti-Trust battles between Bjg and MNC giants are an opportunity for smaller, nimbler partnerships.

Beijing has been focusing its main anti-trust artillery, namely the National Development and Reform Commission, or NDRC  on the activities of large international MNCs with commanding market shares in sensitive areas. In the last few weeks the NRDC has been investigating makers of powdered milk, pharmaceuticals  and even certain types of product packaging. The common thread between these cases – and the reason they are likely to continue – is Beijing’s policy to strengthen domestic industry.

Consumer Safety is the New Pillar Industry

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China has never been shy about putting national security policy ahead of corporate profits, but in the past government protected “pillar industries”  were in line with PRC initiatives to develop heavy industry and capital investment. Now that the economy is being rebalanced to focus on consumption and services, it is not surprising that Beijing is putting the screws to MNCs that have successfully built up market share at the expense of domestic industries that were fragmented, inefficient – and often dangerous.

Competitor of My Competitor – Competitor or Potential Partner?

If the commentators are right and China’s new anti-trust zeal is aimed at breaking the hammerlock that some MNCs have over segments of the Chinese market, then there may be opportunity for new entrants to the China market. In a struggle between giants, the quick and nimble may profit (assuming they don’t get crushed under foot).
Let’s face facts – the Chinese government may or may not have a point that MNC giants are unfairly monopolizing the market for pharmaceuticals, powdered milk, or whatever consumer product Beijing looks at next, but that doesn’t mean that Chinese consumers will immediately start trusting local brands. In fact, this may the perfect opening for new international brands or JVs to exploit a disruption in the market.

A decelerating Chinese economy means that consumers are going to start allocating capital more carefully –  they are not going to start feeding their families sketchy food and drugs to save a few mao. (Stop Bleaking Out about the Chinese Economy ) I’m sensing an “end to the China Story” theme in the established media – and that’s great news for smart marketers who have been looking to enter or expand in China. This time around, pick the right partner, develop goals that make sense, and look for openings left by disruptive shifts – thanks to the government.

Partnerships Are Back

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Heroes hook up while the giants battle.

Keys to benefiting when giants battle:

Picking good local partners is key. In China, market opportunity means nothing if your new partner is just out to steal your technology and business methods.
Make it easy for customers to say yes. Figure out what the Chinese consumer likes about the Western brand, and be more of the same. Chinese like overseas brands for safety, reliability, purity. Don’t try introducing anything new to the mix. You should be about protecting the children.
Niches get Riches. Anti-trust moves dovetail perfectly with 2nd & 3rd tier marketing strategies. If you have been squeezed off the shelves in the big city distribution channels, this is a great opportunity to take a look at China’s burgeoning 2nd tier – as well as the rapidly urbanizing 3rd & 4th tier towns.

Anti-trust activity is definitely bad news for giant MNCs who have spent years educating the Chinese market about premium products and high quality – but it may be a great opportunity for overseas investors who are willing and able to form the right partnerships.

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