Is Arrogance the Biggest Threat to Western Multinationals Succeeding in China?

What does it take for businesses outside China to now succeed in China given the substantial changes that have taken place in recent years in the competitive environment there?This short opinion piece from Dr Edward Tse in the South China Morning Post suggests that arrogance (on behalf of Western multinationals) might be one of the most significant impediments to success.

Dr Edward Tse makes reference in his piece to a superb article some months ago in The Economist which took a detailed look at the external environment facing Western Multinationals in China (I highly recommend you read this too).

Dr Tse adds some counter-balance to the argument that China is now less attractive to Western multinationals by pointing out that as the economic transformation of China has proceeded, for firms like Yum Brands, BMW and Apple, China has become the most important market from all of their highly globalised operations.

He also points out that Western businesses have brought a wide range of economic benefits to China, including substantial investment, business expertise and technology.

However, the main part of Dr Tse's piece is to consider what factors have led to Western businesses failing in China and his key argument is that of "arrogance":

"The root cause of many multinationals' dismal performance is, I believe, their "arrogant" DNA. When they expanded their business internationally, many were quite successful. Their products, services, brands and business models often helped them capture advantageous positions. Over time, this led many to believe they had a high probability of success wherever they went."

You could link this argument to the concept of localisation, which we cover in some detail during our BUSS4 China intensive exam coaching workshops and in the BUSS4 China Toolkit.

A Western business with a mindset that accepts the need to localise a successful product to meet the neets of customers in China is more likely to succeed than one that, arrogantly, assumes what works elsewhere in the world will succeed in China too!