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Multinational Companies Must Expand To Cover China's Smaller Cities Or Risk Losing Market Share

November 1, 2010: 12:41 AM EST

International companies operating in China must expand their sales, marketing, and distribution efforts to cover the country’s smaller cities or risk losing market share to domestic and foreign rivals. Demand for consumer goods is increasing in these secondary cities, which are territories not familiar to many multinational consumer goods vendors but often serve as launching pads for regional Chinese vendors before they grow and expand into the country’s larger cities. Realizing this trend, international consumer goods vendors, such as Procter & Gamble Co. and KFC Corp., expanded their operations to include provincial cities. P&G products are now available in Tier 5 markets. In order to expand to new territories, companies must realise that there are regional variations between the smaller cities, with different cuisines, dialects and cultures, as well as climates. The companies will also need to be able to work not only with modern trade channels, but also the traditional channels in the country, which are likely to exist for some years to come. Local merchandizing is often weak, and so the companies might also need to build and run a large sales force of their own.

James A C. Sinclair, "Reaching China's Next 600 Cities", The China Business Review, November 01, 2010, © US-China Business Council
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