Chinese firms tackle obstacles in Europe

Warc, 1 February 2013

BEIJING: Regulatory issues, worries about product quality and low levels of brand awareness are among the primary obstacles facing Chinese companies in Europe, a study has revealed.

The European Union Chamber of Commerce in China, the trade body, allied with KPMG and Roland Berger, the consultancies, to poll 74 businesses which had established a presence in Europe.

Some 52% had faced regulatory issues when trying to do so. Cultural differences were also raised by 40%, with costs on 37%, currency risks on 32% and problems understanding the market on 25%.

Customer concerns about the quality of Chinese goods registered 23% here, as talent management logged 22%, low brand recognition posted 21% and negative perceptions of Chinese investment hit 15%.

Despite this, fully 97% of firms planned to devote further funding to Europe in the future, with 82% increasing their expenditure, as well as 13% matching prior spending and 2% cutting budgets.

Another 85% of the panel listed boosting market share in the region as a goal, while 47% pointed to providing products for the Chinese market and 34% hoped to access local R&D resources.

"The majority of Chinese enterprises are entering the Europe market ... to sell their goods and services in a region with over 500m relatively affluent consumers, and therefore they are in Europe, for Europe."

Germany had attracted the greatest number of companies thus far, beating France, Italy, the Netherlands, the UK and Spain. Slovenia, Latvia, Lithuania and Estonia came bottom of this list.

A 14% share of operators had been active in Europe for under two years, while 32% pegged this total at two-to-five years, and 19% at six-to-ten years. This left 35% with a history of 11 years or more in the area.

Setting up a European branch had proved the most widespread strategy to date, with 66% of companies pursuing this approach. Mergers and acquisitions yielded 26% here, topping joint ventures on 18%.

Respondents' main future priorities were to expand, both organically and through mergers. Improving research and development capabilities via these routes was also a core objective.

"Further to this, it was commonly cited that the respondent enterprises will look to localise their investments more in terms of hiring more local staff and adjusting the branding strategies," the study said.

Data sourced from European Chamber of Commerce in China; additional content by Warc staff