Expand to China: Eh, Maybe Not?

Will US corporations ignore 1.4 billion people?
February 25, 2024
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Apple Store in China

Dominate the national market, then expand to China. This has been the playbook for major US corporations like Apple (entered China in 2012), Amazon (entered China in 2004), and Starbucks (entered China in 1999).

Today, US businesses in China face significant headwinds:

  • China’s economic growth is slowing – FT reported China’s GDP grew by 5.2% in 2023, the third lowest rate since 2000.

  • Increased competition from local players – Huawei dethroned Apple as the smartphone market share leader in China in Oct. 2023, per CNBC

  • Increased tension between the US and China relations – China barred Teslas from entering specific Chinese housing compounds per Fortune; China shut down the Beijing offices of a US consulting firm per Fortune; The US cut China off from AI chips per CNN.

With significant challenges ahead, US corporations are souring on China. Per Reuters, Alexander Lacik, Pandora CEO, said, “I think it’s going to be a long and tedious journey,” when asked about China after missing sales projections.

Despite being a massive market, China has been notoriously hard to enter, and it looks increasingly difficult. Do all roads still lead to China, or do US corporations need to re-think their strategies? There is a growing graveyard of successful US companies that have failed in China, including Google, Facebook, Amazon, Uber, and Best Buy.

The issue is...

the alternatives aren’t great either. Mexico, India, and Vietnam are seen as alternatives but lack the infrastructure and security level required for a wave of US companies to enter.

So, despite the rhetoric, business in China goes on for now.

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