As business becomes increasingly globalised, cultural intelligence and intercultural competence is becoming an essential strategic tool for cross-border relationship and team building, targeted branding and marketing, risk navigation and successful negotiations.

In the third of this series of Intercultural Challenges, I look at branding and marketing, because it is one of the bedrocks of how successful companies operate across borders in Asia.

 

TARGETING CHINA’S CITIES AND MARKETS

There is no formal definition of what constitutes a ‘first-tier’, ‘second-tier’ or ‘third-tier’ city in China.

But it’s commonly agreed that the top tier incorporates Shanghai and Beijing, as well as Guangzhou and Shenzhen, prosperous cities just across the border from Hong Kong and at the heart of the industrial Pearl River Delta.

Not only are these cities in effect mega-cities with populations of some 20 million people but they also have the highest incomes in the country. However, they account for only nine per cent of the country’s population.

There are many more people living in the second-tier cities, often defined as the provincial capitals and special administrative cities — 23 in all.

More than 300 million people live in China’s smaller cities, roughly equal to the population of the US. Many Western companies are hoping to target the customer base and labour pool of these cities and slowly shift their focus from the developed eastern seaboard into the centre and west of the country.

All prefecture level or county-level capitals are generally classed in the third tier. But the difference between second tier and third tier is not very precise.

Some experts set the barrier for a second-tier city at a population of three million and a minimum per-capita GDP of US$2,000 or more. Using that definition, there are some 60 cities in the second tier. In addition, China has 160 third-tier cities with populations of one million or more, out of about 655 cities in all.

However they are defined, it’s clear that the importance of second- and third-tier cities is growing. Just as people are migrating from the countryside to the city in massive numbers, companies are migrating from the expensive coast to target the interior.

MARKET CULTURES AND TRENDS

What does all this mean for Western companies? First, you can no longer view China as a single market. Targeting the masses will no longer work.

Already the game is changing to take account of the emergence of different categories of consumers and their own sense of their differences and individuality.

Companies now have to make extensive research of individual market cultures and trends across the entire ‘federation’ of China’s provinces and age groups to connect with each group and to stand out from competitors.

Understanding China as a homogeneous culture or business environment, with shared traditions, customs and etiquettes, is not sufficient to penetrate successfully into the second-tier and third-tier cities of the central and western provinces.

CHINA ALWAYS WAS MANY CULTURES

But then China never was a single, unified country of tastes, history, religion, beliefs and customs. From Xinjiang in the west to Manchuria in the northeast, China has always been an extraordinary patchwork quilt of cultures and peoples.

In this sense, the country could be considered as a version of Asia as whole, with its many related but unique cultures, traditions and ways of doing business.

For those entering the China market or seeking to expand, the lesson is clear. Although there may appear to be a global segment of aspiring middle class consumers in the country, local market conditions and characteristics in each of the regions and their cities are challenging Western companies.

NO ONE SIZE FITS ALL

The challenges they face extend to learning the appropriate business behaviour, culture and ways to build business relationships in each of China’s provinces and often in second- or third-tier cities too.

Instead of j[...]