International Digital Marketing in China

Regional Characteristics and Global Challenges

Lala Hu

• Publisher: Palgrave Pivot
• Year: 2020
• Print ISBN:
  9783030381592
• eBook ISBN:
  9783030381608
• Topic: Business
• Subtopic: International Business
• Index: Business

This book examines key issues in international digital marketing in China from a theoretical and empirical perspective. Divided into two main parts, it begins with an analysis of China's cultural characteristics and business environment, with a particular emphasis on the Chinese digital context. The book goes on to present original empirical studies and an investigation into recent challenges and opportunities for international firms in the fashion sector.

With nearly 900 million internet users and an e-commerce market volume of over one thousand billion US dollars, China is the world's largest digital market. While this creates significant opportunities for international firms, there are many factors to consider when approaching this market. In order to understand the Chinese digital scenario, the book analyzes the characteristics of local internet platforms and consumer patterns.

The book also presents a real-world case study on a luxury retail firm operating in China,
Florentia Village, and the results from a questionnaire on Chinese mobile shoppers. On this basis, it provides a conceptual framework and discusses the theoretical and managerial implications for international firms operating in China, making it an enlightening book for scholars, students, and practitioners alike.

© The Author(s) 2020

L. HuInternational Digital Marketing in Chinahttps://doi.org/10.1007/978-3-030-38160-8_1

Begin Abstract

1. China’s Marketing Macro Environment: Cultural Characteristics and Regional Heterogeneity

Lala Hu¹

(1)

Department of Economic and Business Management Sciences, Faculty of Economics, Catholic University of the Sacred Heart, Milan, Italy

Lala Hu

Email: [email protected]

Abstract

This chapter analyzes China’s main environmental characteristics that affect foreign firms’ international marketing strategies in this market. Scholars have identified factors that are shared with other emerging markets (such as institutional voids), but also specific ones, including China’s internal heterogeneity and a fragmented distribution system. The latter has been long considered one of the most critical factors for business success in the Chinese market. A more recent characteristic is represented by the technological innovation driven by Chinese firms from the digital sector. As Chinese firms have leapfrogged to the technologically mature phase of the web by surpassing foreign rivals from more traditional markets, China has also become a setting for reverse innovation, which pose opportunities but also challenges for foreign firms to reach their target and grow in this market.

Keywords

ChinaCultureDistributionInstitutional voidsReverse innovation

End Abstract

The Characteristics of China’s Macro Environment

In the late 1990s, marketing scholars increased their interest on emerging markets as a setting for international firms that require them to rethink their marketing strategies (Arnold and Quelch 1998; Batra 1997; Prahalad and Lieberthal 1998). Emerging economies represent low-income, rapid-growth countries that use economic liberalization as their primary engine of growth (Hoskisson et al. 2000). In such contexts, existing perspectives and practices that used to work in traditional markets turn to be unfit due to emerging markets’ specific characteristics (Dawar and Chattopadhyay 2002; Sheth 2011). At the same time, emerging markets are considered an opportunity to advance marketing theory and practice (Burgess and Steenkamp 2006), for example as test beds for product innovation (Arnold and Quelch 1998).

In emerging markets, main barriers that might limit foreign firms’ international activities are represented by factors of the macro environment, which are beyond firms’ control (Tesfom and Lutz 2006). The marketing macro environment include socio-cultural, economic, political, and technological forces that impact the activities in the micro environment, which comprises customers, suppliers, regulatory agents, and intermediaries instead (Achrol et al. 1983). The macro environmental characteristics of emerging markets might constitute barriers for international firms as they are very dissimilar from the ones in the home market and Western countries in general.

Traditionally, China has been included among emerging markets together with the other countries belonging to the BRICS acronym (Brazil, Russia, India, and South Africa), therefore it has been analyzed within this stream of international marketing research since the first studies back in the 1990s. During the same period, the Chinese economy has boomed reaching double-digit GDP growth until 2010.

Emerging markets’ main characteristics include “institutional voids,” defined by Khanna and Palepu (2000) as the lack of institutions that are necessary to support business operations. In these countries, the implementation of globalization strategies is inhibited by missing reliable information on the market, an inefficient system of intermediaries, and unpredictable government actions (Khanna et al. 2005). In China, institutional export barriers are divided into two categories: formal barriers (related to government policy and legislation) and informal barriers (Li and Liu 2018), which depend on guanxi (see the following paragraph).

In addition to emerging economies’ institutional context, Sheth (2011) has identified characteristics connected to market heterogeneity, shortage of resources, unbranded competition, and inadequate infrastructure. Regarding market heterogeneity, it is considered at demand- and supply-levels: on the demand side, it is mainly driven by consumer diversity in income, whereas on the demand side it results in a large variety in offerings. This characteristic is even more accentuated in the Chinese market as it presents a high cultural diversity and different economic conditions within its territory, which are analyzed in the following paragraphs.

Cultural Characteristics

The Chinese society, like other Asian countries such as Japan and Korea, is strongly influenced by Confucianism, which stresses scholarship, hard work, thrift, and perseverance following the teachings of Confucius (551–478 BC) (Yeung and Tung 1996). While Taoism and Buddhism are marginalized doctrines nowadays, Confucianism is considered as the most representative culture value in China, which affects people’s social lives and their consumer behaviors (Jiang and Shan 2018).

Confucian values are also reflected in Hofstede’s (1980) cultural dimensions’ model, originally developed based upon employees of IBM and found by subsequent research to well represent broad differences in national culture (Smith et al. 2013). Hofstede (1980) identified five universal dimensions of culture: power distance, individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, and long-term vs. short-term orientation. Later, Minkov (2007) added another dimension, indulgence vs. restraint, which has been integrated in the original model, resulting sixth-dimensional now.

According to Hofstede’s model (Fig. 1.1) (Hofstede et al. 2010; Minkov and Hofstede 2011), China is characterized by (in brackets China’s score for each dimension, in a scale ranging 0–100):

Fig. 1.1

China’s scores on Hofstede’s cultural dimensions

(Source Hofstede et al. [2010])

• A high level of power distance (80), given by a pervasive centralized authority and hierarchical structures;
• A low degree of individualism (20), therefore China is a collectivist country, where group decisions usually prevail over individual’s ones, contrarily to Western countries that are more individualistic;
• A medium-high level of masculinity (66). Usually, in masculine societies there is a higher emotional and social role differentiation between genders;
• A low rating on uncertainty avoidance (30), suggesting a low level of stress or anxiety in unstructured or unknown situations;
• A long-term orientation (87), as Chinese people concentrate their efforts more on the future rather than the present and the past;
• A low rating on indulgence (24), therefore there are more restrictions on the enjoyment of life and fun.

A major characteristic of the Chinese business culture impacted by Confucianism and China’s cultural dimensions is guanxi, a Chinese word that literally means “relationship” or “personal connection.” Guanxi concern the establishment and management of social networks that can facilitate business activities in China (Arias 1998). Several studies have found that guanxi are a significant factor that influences the behavior of firms in Chinese marketing channels resulting in positive business performance (Lee et al. 2001; Zhuang et al. 2010).

Even if some scholars have argued that factors including market liberalization, institutional mechanism, outward investment, “guanxi learning” of foreign companies, and online intermediaries (Gu et al. 2008; Wilson and Brennan 2010) might reduce the importance of guanxi when doing business in China, recent studies suggest that one major advantage of the cooperation between international firms and their Chinese partners is still represented by the access to guanxi not available otherwise (Hu 2018; Towers and Xu 2016).

In addition to the country’s cultural characteristics as a whole, China’s internal differences should be also taken into consideration. The 1.4 billion population includes 56 ethnic g...

Table of contents

• Cover
• Front Matter
• 1. China’s Marketing Macro Environment: Cultural Characteristics and Regional Heterogeneity
• 2. The Characteristics of the Chinese Digital Market
• 3. Chinese Digital and Mobile Platforms
• 4. Luxury and Fashion Retailing in China: The Case of Florentia Village
• 5. Mobile Commerce in the Fashion Sector in China
• 6. The Mobile Customer Journey in China: Implications and Future Research Areas
• Back Matter