Myth 5: The same business logic in the West can be applied successfully to China
Although many business principles from the West can be applied to China, not everything is transferable. For example, the patent cliff that is common in the West is far less severe after IP expiration in China. Glucobay, Bayer’s 17-year-old, long off-patent drug, only sold $12–15 million in the U.S. in 2010, but its sales in China surged by 22% to $283 million. Bayer CEO Marijn Dekkers said, “We’re still winning market share” with Glucobay in China. Glucobay’s commercial success can be attributed both to the rapid spread of type 2 diabetes in China, and to Bayer’s clever marketing strategies. Due to the Chinese preference for Western brands, many Western pharmaceutical products continue to do very well after IP expires.
To conclude, China’s great rise was built through a series of small and cautious steps. Progress has been made “crossing the river by feeling for stones,” as Deng Xiaoping put it. The Chinese government launches a small pilot program, pauses to iron out any problems and then, if successful, expands the program on a much larger scale.
Western companies hoping to succeed in China may also consider this approach. No one doing business in China should expect overnight success; some growing pains are inevitable. It takes time to fully understand the importance of the cultural differences, the dynamics of the business relationships, and the unique challenges and opportunities associated with doing business in China.
There are many opportunities in China, but companies must proceed with care, patience, and persistence. In addition to industry-specific risks, such as product approvals from regulatory authorities, there are general risks, such as high inflation, the real estate bubble, labor unrest, growing disparities between the rich and the poor, etc. It is essential to pick a trusted local team to navigate and lead during both good times and bad. The new challenges and experiences that arise as part of doing business in China are what make the eventual success even more rewarding.