How International Specialty Chemical Companies Can Win Big in China
Even though China’s specialty chemical market has nearly doubled in size over the last decade, not many international specialty chemical companies have been successful in fulfilling their growth and profitability aspirations from this market. Foreign companies in the sector are facing major setbacks in terms of growth and market share in China. Our market research […]
Even though China’s specialty chemical market has nearly doubled in size over the last decade, not many international specialty chemical companies have been successful in fulfilling their growth and profitability aspirations from this market. Foreign companies in the sector are facing major setbacks in terms of growth and market share in China. Our market research experts suggest that margins in specialty chemicals in China market for international companies are structurally lower than in other regions and also show wide variance between leaders and laggards. The highly fragmented specialty chemicals market in the region is dominated by overcapacity and intense competition. Although some argue that the lower margins are a part of their global strategy to capture growth in China and establish a long-term presence in the country, there are evident signs that international companies are failing to keep up with the market’s growth.
Considering the fact that China’s specialty chemical market is witnessing steady growth, international specialty chemical companies operating in China must rethink their existing approach and strategies to avoid getting left behind.
Identifying the problem areas for specialty chemical companies in China
The performance shortfalls of international specialty chemical companies in China are fueled by a number of factors. This includes:
- Insufficient tailoring of products to suit the Chinese market and counter offerings of Chinese competitors
- Western companies have limited access to important potential customers (SOEs and fast-growing private organizations in second and third-tier cities)
- Lack of in-depth market insight, insufficient relationship-building capabilities, and a lesser number of entrepreneurial Chinese top talent in key company positions
- Increasing number of local Chinese competitors that are able to offer products and compete for high-end segments
- Highly effective and entrepreneurial incentive structures by aggressive private entrepreneurs demonstrating capabilities to make investments at lower rates of capital expenditure
- Rapid adoption of western technical-know-how and technologies by Chinese competitors, making it easier for them to offer highly competitive products
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How international specialty chemical companies can rethink their market strategy
International specialty chemical companies operating in China can learn from their past mistakes and strategize to reengineer their operations to thrive long-term in the country. Correctly positioning themselves in the market will prove crucial for specialty chemical companies over the next decade. Experts at Infiniti Research has listed below some steps that companies must consider making a part of their approach.
Build market and segment level insights
Specialty chemical companies must take into consideration China’s growth trajectory while evaluating specific segments for its growth potential in the country. Experts at Infiniti Research suggest that specialty chemical companies must consider adopting a granular approach that considers regional differences when assessing various specialty-chemical segments. Careful assessment of second and third-tier cities may also show signs of higher growth potential in the years to come.
Develop products tailored to the Chinese market
Designing products to meet the demands of Chinese customers at competitive price points is crucial to success for international specialty chemical companies in the long run. Providing more sophisticated products to Chinese customers would be crucial as local competitors are increasingly adopting western technologies to develop new and improved products. Specialty chemical companies must provide their local teams in China with maximum resource support and operational authority to launch products that are tailored to Chinese consumers.
Learn from past investment mistakes
Making the Chinese market a central part of your company’s long-term growth strategy and investment plans is pivotal in bringing success to your business operations in China. Prioritize on long-term goals and analyze the track record of international specialty chemical companies in China to learn from their previous errors.
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