How have some Chinese companies achieved success in foreign markets?

Over the last 30 years the world has seen drastic changes in the Chinese way of making business. Nowadays, China has opened its businesses to the rest of the world, especially America and Europe (Teagarden & Cai, 2009). As a result, their economy has increased and the evolution of the companies have changed to be from closed doors to be international and multinational (Teagarden & Cai, 2009). This essay will analyze, first of all, how some Chinese companies have had success abroad, looking at the strategy that they applied to expand and to improve their products. Furthermore, this essay will show examples of successful Chinese firms, such as Lenovo and TCL Group, and how they achieve it.

According to Teagarden & Cai (2009) Chinese companies have expanded abroad for three reasons. Firstly, ‘to secure natural resources to satisfy the demand of their home costumers for raw and fuel; secondly to identify and secure foreign technology and know-how; finally, to escape home market saturation and ruthless price wars’ (Teagarden & Cai, 2009: 73). In addition, Teagarden & Cai (2009) noted that in order to become multinational firms, Chinese companies followed a pattern of four phases:

Learning phase, firms started to build alliances with international respected companies, such as, possible competitors or acquisitions, absorbing the information about new technology and services, and know-how to improve their own brand. However, achieving this phase was no easy, China had its doors closed for foreign businesses for decades. They needed to train their key managers about how international companies work and manufacturing skills.

Build-Up Phase, once companies absorbed knowledge they started to research and improve their own brand, and imitating the existing technology achieving innovation and chain expansion, namely, exportation of their product.

Internationalization Phase, during this phase Chinese companies focused on ‘building brand, localization of products and services for new markets, and differentiation of products to support higher margins’ they did what was ‘good enough’ for the market (Teagarden & Cai, 2009:78). An important issue during this phase was to research and develop the products, and to keep the key talent of the company, such as managers and engineers.

Globalization Phase, companies were known locally, regionally and internationally, their products were already improved offering innovative services. However, as The Economist (2007) has highlighted, while more global the companies are more aware of corporate social responsibility they need to be, namely, foreign stakeholders will expect, not only innovative and effective products, but also they will open their doors and invest their money to companies that are social responsible.