How can local companies compete against multinationals?

The Chinese government has developed a city-cluster plan to encourage equitable and balanced scaling across cities as multinationals in China are looking for more strategies to overcome competition. The New National Urbanization Plan aims for an urbanization rate of 60% (about 200 million people), an increase from the 53% urbanization rate in 2013. A better understanding of regional specialization and strategic decentralization is vitally important for companies that hope to reach a wider market in China and hone their MNC strategy approach.

While external and internal demand fundamentals in the country continue to improve, Chinese authorities are committed to fending off economic risks, from elevated inflationary pressure in China’s industrial sector to local COVID-19 outbreaks in Guangdong. At the subnational level, local governments have been pushing forward their regional development agendas. Officials in Shandong are promoting green development, while their counterparts in Yangtze River Delta are bringing in more investments to grow their strategic industries. Liaoning continues to ramp up the transition toward new energy industries, and the Fujian government is stepping up efforts to accelerate its technological transformation.

Multinational executives should optimize resource allocation in each city cluster to better coordinate your sales force, distribution partnerships, and supply chain efforts. A successful cluster-based go-to-market MNC strategy could include any of the following strategies to overcome competition:

• Channel Expansion: Follow a profitable expansion sequence to address the question of whether to “go wide” or “go deep,” based on business scale and market positioning.
• Organizational Decentralization: Reallocate resources to optimize functional responsibilities (e.g., sales centers can be decentralized to regional hub cities adjacent to local businesses; manufacturing sites can be relocated to clusters with smaller specialized cities).
• Talent Mapping: Deploy high-potential employees in key offices to second- and third-tier operations to share best management practices and develop local recruitment and training programs (these strategies will be tough to execute in the immediate future).
• Product Differentiation: Conduct careful customer and industry segmentation analyses for different city clusters and develop tailor-made submarket and regional strategies.

With the rising local capabilities and complex regulatory barriers in China, multinationals will continue to experience rapid growth of competition from local players. With this in mind, executives should develop more localized strategies in order to gain competitive advantages and outperform local players in China.

FrontierView has all the information you need about your market, industry, and company in real-time to power your business decisions. We offer a solution that puts the right information at the right time, at your fingertips. If you would like more insights into your specific markets, Start Your Free Trial to speak with a dedicated Client Services Manager and receive complimentary access to our offering.

. 1999 Mar-Apr;77(2):119-29, 187.

Affiliations

• PMID: 10387768

Competing with giants. Survival strategies for local companies in emerging markets

N Dawar et al. Harv Bus Rev. 1999 Mar-Apr.

Abstract

The arrival of a multinational corporation often looks like a death sentence to local companies in an emerging market. After all, how can they compete in the face of the vast financial and technological resources, the seasoned management, and the powerful brands of, say, a Compaq or a Johnson & Johnson? But local companies often have more options than they might think, say the authors. Those options vary, depending on the strength of globalization pressures in an industry and the nature of a company's competitive assets. In the worst case, when globalization pressures are strong and a company has no competitive assets that it can transfer to other countries, it needs to retreat to a locally oriented link within the value chain. But if globalization pressures are weak, the company may be able to defend its market share by leveraging the advantages it enjoys in its home market. Many companies in emerging markets have assets that can work well in other countries. Those that operate in industries where the pressures to globalize are weak may be able to extend their success to a limited number of other markets that are similar to their home base. And those operating in global markets may be able to contend head-on with multinational rivals. By better understanding the relationship between their company's assets and the industry they operate in, executives from emerging markets can gain a clearer picture of the options they really have when multinationals come to stay.

Similar articles

• The hidden dragons.

  Zeng M, Williamson PJ. Zeng M, et al. Harv Bus Rev. 2003 Oct;81(10):92-9, 137. Harv Bus Rev. 2003. PMID: 14521101

• The end of corporate imperialism.

  Prahalad CK, Lieberthal K. Prahalad CK, et al. Harv Bus Rev. 2003 Aug;81(8):109-17, 142. Harv Bus Rev. 2003. PMID: 12884671

• Capitalizing on capabilities.

  Ulrich D, Smallwood N. Ulrich D, et al. Harv Bus Rev. 2004 Jun;82(6):119-27, 138. Harv Bus Rev. 2004. PMID: 15202293

• Creating corporate advantage.

  Collis DJ, Montgomery CA. Collis DJ, et al. Harv Bus Rev. 1998 May-Jun;76(3):70-83. Harv Bus Rev. 1998. PMID: 10179655

• Corporate imagination and expeditionary marketing.

  Hamel G, Prahalad CK. Hamel G, et al. Harv Bus Rev. 1991 Jul-Aug;69(4):81-92. Harv Bus Rev. 1991. PMID: 10112922

MeSH terms

How do local businesses compete?

What are some ways a multinational company can have a competitive advantage over local businesses?

How do you compete with local competitors?

What strategies can the companies use to compete in the global market?