From: allin
Engaging in doing business in China necessitates a complete re-evaluation of established business practices [00:00:02]. Approaching the Chinese market with overconfidence often leads to failure, requiring a “first principles, bottoms up” approach [00:00:10].
Initial Entry Strategies
When first looking to enter China, companies are often advised to secure a 50/50 local partner [00:00:15]. However, questioning this common practice and opting to build operations independently on the ground can be a viable strategy [00:00:20]. Experience suggests that direct operations can lead to fair treatment without observed bias [00:00:28].
Navigating Globalized Competition
The competitive landscape in China can extend globally due to the actions of the Chinese government [00:00:35]. Entities like the sovereign wealth of China (CIC) engage in investing hundreds of millions and billions of dollars into competitors globally [00:00:40]. This strategy aims to deplete a company’s financial resources, making it harder to compete in China [00:00:49]. An example of this is Apple’s reported billion-dollar investment in DDI, a company Apple typically would not invest in [00:01:03]. This phenomenon, dubbed the “Chinese war went global,” requires companies to shift strategic goals from “going for the gold” to securing “the silver” [00:01:11].
Negotiation and Market Share Tactics
When facing intense competition, such as with DD, a key strategy involves aggressive spending to create leverage [00:01:21]. For instance, burning $75 million a week at the peak of negotiations can induce fear in a competitor, ensuring a deal is secured [00:01:29]. This approach, likened to a game of poker, can lead to skyrocketing market share during negotiations, effectively putting pressure on the opposing party [00:01:47]. This aggressive negotiation strategy is crucial to get a deal done in China [00:02:06].