Entering the PRC market: a case‐based conceptual framework for small business

Abstract

Explores how easy (or otherwise) it is for small businesses to take advantage of the huge markets opening up in the People’s Republic of China. Profiles a Hong Kong‐based office furniture manufacturer and distributor (Logic Office Supplies) as an example of successful market penetration. Outlines the research methodology used ‐ field research conducted in 1992 and 1993, which looked at the historical development of the market, the industry size and profile, the growth of private enterprise, government relations, the legal environment and an analysis of the competition. Explains why the company chose to follow a four‐pronged entry strategy and how they implemented that strategy. Infers that the company’s success was largely due to a careful choice of partners. Points out that sales increased from HK$40 million in 1989 to HK$400 million in 1994. Applies this successful approach to drawing up a conceptual framework for smaller businesses wishing to expand into China. Talks about stage of entry, mode of entry, and whether to opt for permanent representation or joint ventures. Provides a model showing five stages in the process of expanding into China. Concludes that it is not easy to expand into China and that the best route for small businesses to follow is to sell through trading houses and distributorships.