Problem
The tremendous macro-economic performance of China is well known. For the past three decades, multinationals have poured in. After the financial crisis, many companies looked to China for salvation. China's market is still the world's most enticing.
Although it accounts for just under 10 percent of private consumption in the world, it contributed more than any other country to the growth of consumption over the past few decades.
Firms like GM and Apple have made fat profits there. Now there are worrisome signs that the gold rush is slowing and, some direly forecast, coming to an end.
Some companies are leaving. Revlon said in December that it was pulling out altogether. L'Oréal, the world's largest cosmetics firm, said soon afterwards that it would stop selling one of its main brands, Garnier. Best Buy, an American electronics retailer, and Media Markt, a German rival, have already left, as has Yahoo, an internet giant.
Tesco, a British food retailer, has given up trying to go it alone, and entered a joint venture with a state-owned firm. Some of those who are staying are struggling. IBM reported that revenues in China fell by 23% during the last quarter of 2015.
Remy Cointreau, a French drinks group, reported that sales of its Remy Martin cognac fell by more than 30% during the first three quarters of last year because of a plunge in China.
Yum Brands, an American fast-food firm, said in September last year that same-store sales in China had fallen by 16% in the year to date. Indeed, a Sinodependency Index weight American multinationals by their China revenues; Sino-dependent firms used to outperform their peers, but in the past two years their share prices have done worse than others.
Foreign companies that want to stay and succeed in China will have to put in even more effort. Many will have to adjust their strategy for a changing market.
From the above scenarios, A key strategic recommendation would include which of the following and why
A. Shift from going for raw growth to enhancing operational efficiencies and productivity.
B. Aggressively pursuing joint ventures with state-owned competitors.
C. Closing up shop and looking elsewhere in the world for the market that would substitute for potential consumption of China
D. Loosening operational controls to give Chinese subsidiaries greater strategic freedom.
E. Enforcing a One China policy that standardizes products and processes across the Chinese markets.