China, China, China – The 3C Model

By Angus Street

The 3C Theory takes on many iterations in the corporate and business world. For an SME it can be a business planning analysis that looks at the company, competitor and customer. In the start-up world, it is a growth tool that integrates culture, capabilities and configuration to drive innovation.

Market pioneers such as Blackmores, A2 Milk, Freedom Foods, Jurlique, and Bridestowe Estate Lavender see opportunities first, bring more and better products successfully to market, and mitigate market ambiguity by orchestrating the incorporation of the following three elements of a China market expansion strategy:

1. CAPABILITIES
Capabilities are a feature, faculty or process that can be developed or improved. Capability is a collaborative process that can be deployed and through which individual competences can be applied and exploited. The relevant question for capability is not “who knows how?” but “How can we get done what we need to get done?” and “How easily is it to access, deploy or apply the competencies we need?”

A business should recognise that to succeed in China a business must look to transform its key processes into strategic capabilities that consistently provide superior value to the customer. It must create these capabilities by making strategic investments and it must establish an internal infrastructure that links together and transcends the traditional export sales business unit. 

If the business does not have the capabilities it should set about hiring, renting, partnering or acquiring before it decides to engage the China market.

2. CAPACITY
Capacity is the power to hold, receive or accommodate.  It’s about “amount” or “volume” and the relevant question related to capacity is “Do we have enough?” and, “What can we supply?”.

Anyone who has dipped their toe in the China market will have had or heard of discussions with large importers requested “10 containers a week”. What is revealed is that many businesses have developed unique processes and capabilities that have left their internal capacity very thin. They are constrained not only by their inability to get their employees skills and know-how to a level where it was needed to scale, but also by the investment it takes to introduce new systems and technology to increase capacity to meet market demands.

If capacity is an issue, use those constraints to your advantage. Perhaps creating a ‘limited edition’ product run will increase the desirability of your brand in a new market. While volume won’t be your market entry strategy, value may just create a competitive advantage that you didn't see.

3. CAPITAL
Capital is the cash, debt or equity needed to expand. Capital can be injected during times of growth, dipped into during times of crisis and build upon sustainability. The relevant questions is not just “how much do I need” but more, “what am I going to use it for” and “when do I expect to receive a payback”. 

It is the linchpin, the achilles heel and quite often the largest barrier to your China market strategy. Capital barriers are much more than just the investment in capabilities or the significant investments in fixed assets to increase capacity. There is also the high costs for regulatory certification, extensive research and development as well as marketing and advertising expenditure to attract eyeballs and build trust. 

While capital and the associated investment cost is what stops many businesses engaging China, it must also be seen as a double edged sword. If your business cracks this difficult barrier, then you are already ahead of the game.  

Keep in mind that entry into the China market is always in some way possible, even though it may be somewhat constrained to your initial visions of market share grandeur.  Start small, start with the capabilities and build a plan to address your business’s capacity and capital issues and remember, Bastion S&GO is able to help you build your 3C China strategy. 

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