The world needs more Chinese brands
What can internationalization bring to Chinese companies?
For Chinese companies, going overseas, it is not only about creating new streams of revenue, it is also about balancing risks, increase value of the company, optimizing operations, maximizing the inventory, running open innovation programs and many other strategic aspects.
What could internationalization bring to Chinese companies?
Top line: Sales increase. There’s no country bigger than China, and as such, sales increase can’t be the sole reason of going overseas. But on some segments, the potential is higher overseas. For instance, the market for camping cars is large in the USA but small in China. The internet makes it all the more easier to sell overseas and incrementally add revenues.
Business management: Moderating business risks. For instance, the suspension of new video game license in late 2018 in China was a blow to studios that had no presence overseas. Those which had presence overseas were able to weather the blow.
Bottom line: Reduce inventory. The ability to be present in various countries make it possible to sell inventories that did not find takers in China as well as using various distribution channels or various uses of the same product in overseas countries
Innovation: Being an international company helps inoculate innovation in the company and also adopt new solutions.
Leveraging or consolidating a first-mover advantage: Some companies can leverage even further their first-mover advantage by going overseas and being the first to provide a product or solution that has already tested and proved successful within the local market of China.
Valuation of the company: Some companies consider scaling overseas when they move to Series D or E or pre-IPO in order to increase their value or to get chances of getting listed in NYC, in HK, in London or other places. For already listed companies in China, acquiring companies overseas could turn into a very easy value creation as PE ratios are lower overseas than in China and could consolidate in the P&L.
Going overseas is a process and we are here for every step of the way
- It can start with market places or distributors but will require to think about independence at some point (independence from Amazon)
- After the first steps and a first momentum, it requires rebranding and adaptation local markets
- Taking your brand to the next level requires various distribution channels after the use of market places such as brick and mortar, flash sales, KOLs who drop-shipped. In BtoB, that might require the set up of a proper office that can bid directly in the targeted countries