Effective Pricing Strategies for Foreign and Chinese Companies

Abstract

For foreign companies with high quality products, China is seen as an easy-to-conquer market that offers huge potential along with breathtaking developments. In contrast, Chinese companies see foreign markets as a challenge best confronted with their typically most effective strategy: low costs. Yet the situation for both foreign and Chinese companies is far more complex and these traditional approaches hardly take the real dynamics into consideration. Chinese firms frequently perform better than expected with mixed strategies, leaving the low-cost sector to compete with international rivals with high-quality production. On the other hand, foreign companies often face serious pricing challenges when trying to gain considerable market share growth and become profitable on the Chinese market. To gain a deeper understanding of effective pricing strategies for both Chinese and foreign companies, we have analysed the situation from three perspectives: the pricing of Chinese companies in their domestic market (chapter 3); the pricing of Chinese companies in foreign markets (chapter 4) and the pricing of foreign companies in China (chapter 5). But before we start with the three cases, let us take a closer look at the basic concepts of pricing (chapter 2) which is a key instrument of success in the processes of strategy building.