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Maria Korolov

China Localization: Hard but Worth It

Written by Maria Korolov
1/2/2013 14 comments
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When Kentucky Fried Chicken first came to China in the late 1980s, its "Finger lickin' good!" slogan was mistranslated as "Eat your fingers off."

Since then, KFC has gotten very good at serving the Chinese market. Today, the company has more than 4,000 restaurants in China.

The restaurants are clean, brightly lit, and feature the fried chicken they're known for. However, there's also a breakfast menu that features rice porridge with pork and pickles. For lunch, there's an egg drop soup. And for desert, my favorite -- egg tarts.

The company plans to add 500 more restaurants next year.

There's plenty of room for growth; China has around 160 cities with populations of more than a million. The US, by comparison, has just nine. And Yum Brands, KFC's parent company, plans to expand to smaller cities as well.

But KFC's success in China isn't just about making sure that translations are accurate, or about adapting the menu. China poses a unique set of challenges to foreign brands looking to enter its markets.

These challenges do include language -- China is home to a number of different languages, mutually unintelligible dialects of those languages, and writing systems. In Shanghai, for example, it's common to see Arabic script on restaurants featuring cuisine from western parts of China. And Chinese characters themselves can either be written in traditional or simplified styles.

Then there's logistics. Western restaurants and supermarket groups often have to set up their own distribution networks in China from scratch, due to a shortage of transportation companies offering end-to-end refrigeration.

And it's not just food-related industries.

For example, China is the only country where Amazon delivers all of its products on its own -- more than 20 million items this year, with the majority of buyers paying on delivery.

Then there's the presence of strong, fast, hungry competitors, cultural barriers, and regulatory and political hurdles. For example, both Fiat and Dior ran into problems in China when their celebrity spokespeople -- Richard Gere and Sharon Stone -- endorsed Tibetan independence.

The Internet can dramatically magnify these kinds of cultural or political missteps. The Richard Gere commercial, for example, never even aired it China, but spread virally through social media.

All these challenges add up, and even strong international brands can fail in China. For example, China is one of the few places in the world where Google doesn't dominate online search. Best Buy and Home Depot shut down their China stores in 2011.

Walmart has met stiff local competition too, and has scaled back its expansion. It recently announced that it will open 100 new stores in the next three years, down from its previous pace of around 50 or 60 new stores a year.

Software companies also have to deal with interface challenges and piracy. For example, computers and phones in China used to rely on transliterations of Chinese words into the English alphabet. When combined with accent marks, this is called "pinyin," and isn't the best possible approach.

Many Chinese characters are pronounced differently in different regions, and characters can share the same pronunciation while having different meanings.

But technology is finally starting to catch up. With touch screen phones and tablets, Chinese users are finally able to enter characters the way they normally write them.

In addition, iPhone 5's Siri speaks and understands Chinese, which helped Apple sell two million units in China during the first three days of release, breaking previous records. Apparently, the starting price of around $850 for the basic 16 gigabyte model didn't deter shoppers.

All in all, it's much harder for American companies to do business in China than the other way around. Chinese companies looking for US distribution have access to distributors and retailers well versed in working in China, and a population of young employees who grew up with mandatory English classes and American TV shows and movies in every local DVD den.

A company looking to enter China for the first time needs to have trustworthy local partners. But many of these market-entry experts are new to the business, and while they may claim to have connections, they might not have a lot of solid experience.

China is a giant, fast-growing market, but don't expect immediate results. Invest the time and resources in doing the preliminary research, and finding the right team. They need to have the ability -- and the authority -- to adapt to local requirements and experiment with different strategies.

— Maria Korolov is president of Trombly International, an editorial services company that provides coverage of emerging technologies and markets. She has been a journalist for more than 20 years.

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— Kim Davis Follow me on TwitterVisit my LinkedIn pageFriend me on Facebook, Community Editor, Internet Evolution

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Kim Davis
Thinkernetter
Thursday March 7, 2013 4:57:57 PM
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Reminds me of those ridiculous facsimile Apple Stores which opened up all over China a year or so ago.  Even the employees assumed they were working for Apple.

shehzadi
IQ Crew
Thursday March 7, 2013 12:53:49 PM
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@dcawrey ..I agree with you ...Chinese are making imitation of almost everything on self-styled base. Protection of copyrights its almost chimera for most businesses who want to retain their identity. Even then ...the huge Chinese population and their mammoth share in world ecomony has lured so many business tycoons to try their luck in China. I think ...Chinese have understood that they could no longer live in isolation. They are making efforts to open up their markets for international investors. That's why we are seeing more and more western companies opening up their outlets in Chinese mainland. Seclusion would stifle Chinese economic growth. Chinese economy is something which has made the whole Chinese nation proud about its superiority across the world. 

dcawrey
IQ Crew
Monday January 7, 2013 11:52:47 AM
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This is a great piece on the challenges of doing business within China, but one element that has been left out is intellectual property. 

Companies doing business in China face having their ideas or products completely ripped off. And the legal recourse for trying to punish imitators is difficult, if not impossible to pursure. China has a ton of benefits for businesses to expand into, but also some serious risks that can cause a ton of problems in a long term sense. 

nasimson
Thinkernetter
Monday January 7, 2013 10:31:03 AM
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Just as Apple has made a remarkable headway by selling two million pieces which facilitate the Chinese language...

In the same way the great Coca cola company has more or less adopted the same strategy..They have created a Chinese trademark which means 'tasty soft drink' or 'tasty and happy'  and this trademark is highly contributing towards the rapid success of coca cola in the Chinese market and making it one of the top US companies in China.

check it out

http://csymbol.com/chinese/chinese_branding.html

Maria Korolov
Thinkernetter
Sunday January 6, 2013 3:14:33 PM
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Paul --

I'm not sure whether US lawmakers do punish US companies for their compliance with foreign laws. ... Okay, there are laws in place to prohibit the sale of certain technologies to enemy states, and embargoes, and things like that. And there's the Corrupt Foreign Practices Act, that prohibits you from bribing foreign officials.

I can't think of too many other examples, though, where following the law of one country would violate the laws of another. I guess privacy is the major one -- in the EU, in particular, laws about collecting certain information are very strict. So, say, you've got one country that prohibits you from collecting, say, ethnic data on your employees. And another country requires you to collect ethnic data on employees as part of anti-discrimination alws. You could have a potential conflict there.

Records retention could be another issue -- one country might require the retention of certain transaction records for a certain number of years, and another country might prohibit it.

When it comes to legal authorities getting their hands on corporate data, it's a lot easier to do it when the data is in your country. All you need then is a court order, or whatever it is the local laws require, and you can get your records.

If legal authorities want to get to records overseas, they have to get cooperation from the foreign authoriteis. We've seen plenty of cases where that cooperation is slow or difficult to come by -- in intellectual property infringement cases, in tax avoidance cases, Wikileaks. For more clear-cut criminal activity, like murder, countries tend to be much more cooperative with one another.

A few years ago, Yahoo got a lot of bad publicity for giving up information about dissidents to the Chinese government, and this resulted in lawsuits from human rights activitists.

When I had an office in China, I made sure that all corporate records were kept outside of the country, typically on servers in the U.S. because I never wanted to be put in that position.

Michael P. Kassner
Thinkernetter
Saturday January 5, 2013 8:24:45 PM
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I will be curious to learn what you decide. I also believe we are using different measuring sticks. 

Paul Whyte
Researcher
Saturday January 5, 2013 8:09:57 PM
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"As for quietly, how much do you know about Mr. Bezos versus Mr. Gates or Mr. Jobs?"

Very little I will say. But that will change shortly as Amazon gradually establishes itself as the leading e-retailer. Whether the Mr. Bezons will ever the reach the heights of Gates or jobs remains to be seen.

Paul Whyte
Researcher
Saturday January 5, 2013 7:17:25 PM
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"After all, for some companies, issues of politics and free speech are much less central than they are for an information company like Google. And you can't expect every company to support the politics of every country where they do business.

I'm based in the U.S., for example, and I certainly don't support everything that our politicians do. If I had to leave a country whenever I disagreed with the politics there, I'd be based on a tiny island in the middle of nowhere, selling my stuff to passing seagulls."

That's so true Maria.

So if I may ask, on what basis does the U.S. law punishes U.S. companies operating in places like China for involving or promoting issues that are contrary to human rights and democracy? Will law makers take into consideration whether the company is an information company or not?

By the way, just heard that the spending power of seagulls have quadruple in the last decade!!!!

Michael P. Kassner
Thinkernetter
Saturday January 5, 2013 6:58:43 PM
no ratings

Paul, you used laudable, I just said I was amazed. And, Amazon's history is littered with examples of where they saw a need and then figured out how to solve it. 

As for quietly, how much do you know about Mr. Bezos versus Mr. Gates or Mr. Jobs? 

Paul Whyte
Researcher
Saturday January 5, 2013 6:49:55 PM
no ratings

Why is Amazon's relatively success in China a laudable feat? Who really would think that Amazon will not succeed in China? I think the nature of Amaozn's business makes it easier for them to succeed even in the most politically repressive enviroments like China.

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