Building a Cart Behind Closed Doors – What Costco Did Wrong in China

China market entryThe Chinese idiom “Building a Chariot Behind Closed Doors”  comes from the story of a man in ancient China who was planning to build a horse-drawn cart. As it turns out this man did not actually know how to build a cart. But instead of consulting with other carpenters and learning how to build one, he went into his workshop, closed the doors, and went about building his cart according to his own fancies. Needless to say, when the cart was finally completed, it did not work nearly as well as the man had intended.

The moral of this story is that when one sets out to accomplish something, especially something one has never done before, it is vitally important to first learn the correct method before acting.  And while this would seem to be obvious to most, within the arena of international business, which is composed of many different countries and cultures, it is often quite easy to make similar mistakes.

This idiom in Chinese: 闭门造车, bì mén zào chē

In the Chinese market, it is all too common for Western businesses to make errors based on existing experiences from their home countries. And while these errors may begin small, they can eventually snowball into a business model or product that is completely unsuited to the actual needs of Chinese consumers or businesses. In order to effectively enter the Chinese market, it is essential for Western companies to first understand the ACTUAL on-the-ground situation in China regarding their target market, consumers, potential competitors, and the relevant laws and regulations. No matter how good a company’s product or service is, doing one’s homework first can save a lot of time, effort and money. Below is an example on how a China market entry can go very wrong:

“Home Depot” in China

Home Depot, a US Big-box retailer catering the “Do It Yourself (DIY)” home design market, is more or less a household name in the United States. Home Depot aimed to repeat their success in China when it entered the market in 2006. However, in 2012 Home Depot admitted failure and made the decision to close all its China based stores while it reconsidered its approach in the Chinese market. And while many cultural and business factors have been cited by experts in the examination of this market entry failure, it might be most helpful to consider the following two points.

First, Chinese consumers (and home owners) by and large do not place a high value on manual labor, and may look down on those who perform it (e.g. in big Chinese cities, the term “farmer” is often an insult). Second, when Chinese consumers do need something constructed or repaired in their homes, they almost always outsource to a cheap contractors available in many suburban and urban areas – they don’t repair their homes themselves. And so, despite the fact that there was an obvious red flag, Home Depot still decided to enter the Chinese market and sell a DIY concept to consumers that don’t buy DIY.

This example just goes to show how easy it can be to get things wrong in China if one doesn’t take the time to look closely at the actual characteristics of the market. So when building your business model for China, don’t do it behind closed doors, because a “Western Cart” just may not roll the right way in China. Go to China and see things for yourself first.

Thanks for reading!

Do you have any additional thoughts or questions on market entry pitfalls and failures in China? Do you know any other useful Chinese idioms that are similar to the one above? Please feel free to share your thoughts in the comments section below.

Follow the China Culture Corner to receive regular updates by email!

Advertisements


Categories: Chinese Idioms

Tags: , , , , , , , ,

2 replies

  1. But where Home Depot failed, B&Q – with a similar concept – seems to be doing rather well, at least for as far as I can see it, here in Shenzhen. Could that be because Shenzhen is an immigrant city? Or would it be because Hongkongnese (of which now many live here) have less dedain for manual labour than mainlaind Chinese?

    Like

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: