There are three basic strategies for entering the Chinese market, including exporting through a Hong Kong intermediary, distributing through direct channels in China, and forming a joint venture. While utilizing a Hong Kong distributor has certain advantages, for instance, in the short term, it also has significant drawbacks. Firstly, while the Hong Kong wholesaler can sell directly to Chinese consumers in some restricted circumstances, in most situations, the Hong Kong distributor cannot directly sell to customers. It should instead cooperate with a Chinese firm licensed to conduct international commerce. As a result, the Hong Kong reseller may act as an extra intermediary in the China sales process. The employment of a mediator indicates that the items will be sold at a higher cost, with a lower overall sales volume.
Distributing straight to an approved foreign trade organization or an end-user company in China is an option to selling through a Hong Kong intermediary. Decentralization and restructuring have resulted in an increase in the number of actual entrance points for international exporters. Foreign competitors should recognize China’s present formal trade regime, the background of each trading body, the profiles of the key persons in charge of these organizations, and the benefits and drawbacks of each option.
An equity joint venture is a constrained organization in which Chinese and international partners participate and run the business together. Earnings and liabilities are divided according to each shareholder’s ownership stake. The joint venture legislation and its accompanying regulations lay out a very comprehensive set of rules and processes for forming and managing a joint venture in China. At the same time, joint venture discussions might last for years, resulting in unnecessary costs. Furthermore, during the duration of the agreement, investors are prohibited from withdrawing recorded funds. For Danone, it is feasible to emphasize the strategy of distributing through direct channels in China. Danone can swiftly deliver its top items to China by fostering cross-border e-commerce expansion and copying successful techniques at free trade areas. Danone can have a substantial chance to promote its high-quality goods from across the world to Chinese customers through local groups.
References
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