Firms tap new markets in China

3 April 2013

SHANGHAI: Many Western companies are reacting to urbanisation and the growth of the middle class in China by adapting their products and moving into new markets.

Keeping up with the rapid changes taking place in China is uniquely challenging, according to Bruce McKern, professor of international business at China Europe International Business School in Shanghai.

"Many multinationals are having difficulty with the need to be fast and flexible in the China market, while at the same time conforming to headquarters' norms," he told the Wall Street Journal.

John Jullens, a partner at consulting firm Booz & Co in Shanghai, observed that many of his clients in the industrial sector had been affected by both this problem and the economic slowdown.

"In parallel," he said, "demand is increasingly shifting to the newly-emerging urban centers of inland China, so that multinational companies will simultaneously have to realign their business models as well."

Some companies are seizing the opportunities, however. Otis Elevators, part of United Technologies, for example, sees significant growth prospects in a drive to increase the stock of affordable housing.

This year, the Beijing government plans to start building 6m low-cost high-rise units and complete another 4.6m, and Otis has responded by producing smaller elevators suited to these new developments.

Dover, a supplier of pumps and hydraulic systems, has also branched out into  areas like food labelling and packaging, noting that more than 40% of growth in the global market for marking and coding is expected to come from China between now and 2015.

"Chinese consumers will increasingly want to know what they are buying is safe," Michael Zhang, Dover's Asia president, told the Wall Street Journal.

The company is also investing tens of millions of dollars every year in mergers and acquisitions in China, a figure Zhang would like to see rise to hundreds of millions of dollars.

"We believe anything that is consumer-related presents opportunities for Dover as the Chinese middle class grows," he said.

Data sourced from the Wall Street Journal; additional content by Warc staff