Category Archives: BUSINESS IN CHINA

Practical insights into how Chinese companies operate, make decisions, and engage with overseas markets. Articles here focus on trust, alignment, communication, and the real-world dynamics that shape cross-border business outcomes.

BUSINESS IN CHINA

LV Under Assault in China: When Companies Ignore Public Sentiment

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European luxury giant Louis Vuitton (LV) is losing a David vs. Goliath battle in a China trademark case, where the company already won its case in court but is losing public support after the case verdict went viral among China’s netizens.

The case revolves around Molly Tea, a local beverage brand founded in Shenzhen in 2021, built around jasmine milk tea and marketed as an aspirational brand centered on traditional Chinese cultural imagery. In just a few short years, the company has become a genuine success story, with 2,300+ stores in China and international locations across the US, UK, Canada, Australia, and Southeast Asia.

The problems with LV began when Molly Tea applied for trademark protection on its four-petal flower design, part of a broader brand identity built around simplifying Chinese cultural elements into geometric shapes.

China’s trademark office (CNIPA) rejected the applications. Following the rejection, Molly Tea still chose to use the design in its public marketing and advertising anyway. This led to the lawsuit, which was decided in LV’s favor: Molly Tea was fined $1.5 million (USD), ordered to stop using the contested design, and ordered to issue a public apology across all official channels.

But the real trouble for LV began only after they won in court.

What Really Got LV in Trouble in China

In the past six weeks since the Chinese court’s verdict was handed down, the case has gone viral on Chinese social media, with LV losing public support in China for several key reasons:

Cultural ownership: While LV’s brand story attributes the designs in question to Gothic and Japanese influences, many Chinese consumers instead traced those same designs back to Tang Dynasty art, part of China’s cultural heritage. This led to the image of a foreign luxury brand claiming exclusive commercial rights to aspects of the Chinese people’s shared cultural heritage, enough to leave a bad taste in many consumers’ mouths.

Power imbalance: LV vs Molly Tea was not a story of a Chinese company making inroads against LV in the luxury industry. To many Chinese netizens, it felt like a powerful European luxury conglomerate suing a smaller company that sold milk teas for $2.20.

A pattern of behavior: Over the past five years, LV has filed more than 1,700 trademark actions in China, largely against small shops, workshops, and local brands. In Chinese consumers’ minds, this made the story grow from one case against Molly Tea to the image of a global brand systematically attacking China’s street-level businesses.

Public humiliation: The final nail in the coffin for LV in the battle for public sentiment was the required public apology, which most sources agree must have been asked for by LV. For many in China, this went beyond a mere legal resolution into downright public humiliation, which is never a good look for an overseas brand in China given the country’s history with foreign powers from the mid-19th through the mid-20th century, a period still referenced today as the “century of humiliation.”

The thread that connects all these points is that LV had the law fully on its side in the Molly Tea case. Officially, they did nothing wrong. But they’re still losing where it counts.

The Problem Companies Make With Public Sentiment

The mistake many companies make is assuming everything can be resolved in the legal arena: Win a legal case? Great. Lose a case? Pay the fine and move on. But as we can see from the LV case, it’s rarely that simple.

I’ve seen this pattern time and again from inside the room where these decisions get made: companies focus on what works or makes sense legally and file legal cases without factoring in how consumers, media, partners, and other local stakeholders will react, and what biases they may develop.

The problem with legal first and public sentiment second, as we can see in the LV vs. Molly Tea case, is that while protecting IP can be very important to maintaining a strong brand in a new market, none of it matters if the consumers turn against you. No consumer trust equals no one to buy the brand you spent so much time and effort protecting.

If you’re interested in thoughtful perspectives on China, cross-border work, and how culture, incentives, and organizations shape real outcomes, you’re welcome to subscribe to China Culture Corner and receive future posts by email.

I also share related ideas and longer-form video commentary on LinkedIn and YouTube, and post updates across the channels linked above.

If you or your organization is navigating China execution or cross-border alignment challenges, I work with teams on an embedded and remote basis. Reach out directly: Sean@SageSightConsulting.com

BUSINESS IN CHINA

Trust Isn’t Universal: Where China-Global Companies Get It Wrong

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Trust is one of the most important aspects of China-Global business. It doesn’t matter whether you’re selling, operating, or partnering in a new market: success often depends on ensuring that the customer, team, or partner has a reason to trust you over the next best option. And it’s very easy to get wrong.

One of the challenges I often see in China-Global business is that companies, executives, and teams on both sides aren’t optimizing their actions to build trust in their new market. Instead, they’re often just following actions that have traditionally built trust in their home market.

In these cases, no one at the HQ questions the type of trust they need to build, or even whether they think of “trust” as a core problem. They simply focus on actions they assume to be correct and wonder why partners, customers, and employees continue to leave.

Building Trust Isn’t Universal

The key point to remember is that trust, and the reasons people and businesses extend it, are not universal. The actions that build trust vary based on the market, consumer, business, and need. More importantly, businesses change and evolve, as do their customers. Even if a business hits upon a winning solution for a given market, there’s no guarantee that it will continue to deliver results several years into the future.

Here are several examples of ways that companies with good intentions get trust-building wrong in new markets:

Global Brands Struggling in China: Many overseas brands have been struggling in China in recent years. Not because China is hard, but because they have failed to adapt to a market that no longer reveres overseas brands without question, and failed to account for the rise of local competitors who move faster than them and have better insights into local consumers.

This has resulted in overseas brands moving too slowly and offering categories that Chinese consumers were not interested in, or that did not provide value comparable to what Chinese competitors already offered. In short, they were expecting their global brand and foreign roots to build trust, even though in many industries it no longer matters in the ways that it used to.

Chinese OEMs Expanding Overseas: Chinese OEMs are very good at making high-quality products and tailoring them to exact buyer needs. I’ve been in the room in meetings with overseas buyers and have witnessed their focus and attention to detail.

The problem comes when many of these OEMs decide to expand overseas under their own brand name, and still act like trust needs to be built in the same ways it was before. This helps explain why so many Chinese OEMs continue to focus on product specs and have had trouble connecting and building trust with consumers.

China-Global Partnerships: I previously gave a presentation at a Chamber of Commerce event on cross-border business failures between Chinese and Latin American companies. One core issue that kept surfacing was how quickly the Chinese side expected projects to progress and how quickly they expected profits to start coming in.

When results didn’t come quickly, the Chinese side often pulled out, and the local partners and governments had never taken trust and expectations into account before signing the deal.

China-Global Leaders: You Need an Engine

If these failure points for building trust are so obvious, why don’t more companies take them into account when the cost of not doing so is the loss of revenue, market share, partnerships, and core employees?

The answer is that companies are complex systems, with built-in processes, culture, and incentives, all of which resist change when attacked from a singular direction. Companies need a combined “Engine” to build trust in new markets, even when it runs against conventional corporate operational patterns.

Here are my suggestions, based on fifteen years bridging the trust, collaboration, and operations gap between Chinese and overseas companies:

Diagnosis: The first step is a clear diagnosis, conducted either by internal or external experts, with the experience and ability to look beyond what’s considered normal or “right” internally, to focus on what the target customer, partner, or employee requires to build trust, as well as the existing internal actions and incentives that run counter to it.

Specialized HQ Teams: Organizations often change very slowly, which is why it can be effective to create specialized teams whose job it is to build trust in new markets and with customers and partners in those markets, the way new markets need.

Teams with incentives directly tied to the needs of customers and partners in overseas markets are often the only ones willing to make needed changes. And teams need to be based, in full or in part, at the HQ, because that’s where power rests, and that’s where change needs to begin.

Better aligned processes and incentives: Lastly, it is also necessary, in the longer run, to adjust HQ-wide processes to better provide support to overseas teams, partners, and employees. While specialized teams can provide effective short-term momentum and problem resolution, what they are able to achieve still depends on HQ resources and processes.

Chinese HQs that are unable to slow down when it’s needed will likely fail to build trust, and the same applies to overseas HQs whose slow processes and approvals can’t keep up with the needs of Chinese consumers and businesses.

Without an engine that aligns your entire HQ toward building trust for new customers, partnerships, and internal operations, it’s all too easy to end up following the wrong signals, which will undermine trust if they don’t destroy it completely, and leave openings for local competitors to leap ahead.

If you’re interested in thoughtful perspectives on China, cross-border work, and how culture, incentives, and organizations shape real outcomes, you’re welcome to subscribe to China Culture Corner and receive future posts by email.

I also share related ideas and longer-form video commentary on LinkedIn and YouTube, and post updates across the channels linked above.

If you or your organization is navigating China execution or cross-border alignment challenges, I work with teams on an embedded and remote basis. Reach out directly: Sean@SageSightConsulting.com

BUSINESS IN CHINA, WORK IN CHINA

Your “China Problem” Isn’t Culture. It’s Operations.

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Recently, I sat down with a group of global executives visiting Shenzhen. They wanted to understand China Speed. I told them that was the wrong question. The real question wasn’t what China Speed is. It was why it exists, and what it means for how their own organization needs to operate.

That conversation reflects how most overseas businesses approach China. They focus on big concepts like culture, China Speed, and the Chinese way of doing things. And they frame the gap as something to study or overcome, not something to operate inside.

But framing it that way turns a practical business problem into something that feels permanently out of reach.

The Misdiagnosis: Culture Can’t Be Solved

Framing China business challenges purely in terms of culture turns what should be practical business problems into near-insurmountable dead ends. Here are a few examples:

Culture is too opaque: Chinese culture consists of thousands of years of history. Even locals and experts don’t know it all. There’s no time for businesses to learn everything in ways that meaningfully impact short-term business timelines.

Culture is too foreign: Chinese business culture often feels like the complete opposite of how overseas businesses feel comfortable operating, and it’s often framed as either the right way or the wrong way. It’s therefore no surprise that many overseas businesses have alternated between pushing a “global” playbook in the Chinese market or handing everything over to local teams and hoping for the best.

Culture is too personal: Culture doesn’t sound like anything that can be part of a global or local business strategy. It’s therefore not surprising to see the “Chinese Business Culture Problem” pawned off on individual business leaders or managers. And learning about Chinese culture online is no way to solve business problems in the here and now.

So if “culture” isn’t the answer to solving China’s business challenges, what is?

The starting point is understanding that Chinese companies aren’t doing things differently because of who they are. They’re doing things differently because of the environment they’re operating in, and their choices are rational.

The Reframe: It’s Operational Logic

During the conversation with the overseas executives in Shenzhen, I reframed the culture argument this way: “Chinese companies don’t move fast because of their culture. They move fast because their competitive environment exerts specific pressures, which force Chinese companies to make specific, rational operational choices to compete and survive.”

That’s not to say that culture plays no role. The difference is that culture helps to understand China, but it does not help drive shorter-term business decisions.

Chinese companies, teams, and professionals usually have very logical reasons for acting the way they do, whether it be the most practical way to make money, staving off competitors, maintaining internal unity or teamwork, or protecting one’s career.

Here’s how I’ve seen the Chinese operational logic play out:

CEOs pivot fast and kill what isn’t working. I’ve seen Chinese CEOs pivot carefully planned marketing campaigns in less than two days when a competitor moved early. There was no discussion, no alignment meeting, no cross-functional sign-off. From the outside that looks chaotic. From the inside, it was completely rational: The window was closing, and waiting for consensus would have meant missing it entirely.

Companies run parallel teams deliberately. I’ve seen Chinese tech companies use parallel teams not just to move faster, but to raise internal standards. Two teams working simultaneously on the same problem, both knowing the other exists. No announcement, no explanation. A second team simply appeared. Everyone understood what it meant. The standard had been raised without a single difficult conversation.

Even small businesses operate this way. And I’ve seen a single-person gelato shop in Shenzhen create over 200 flavors in two years (roughly two new flavors every week) specifically designed for the local palate. Not as a marketing strategy. As a direct response to a consumer standing in front of her asking what’s new. If one person with no budget operates this way, consider what a well-resourced local competitor can do at scale.

All of these actions look and feel strange or wrong from the outside. But they make sense on the inside. Viewing them as culture doesn’t help overseas companies change or adapt. Viewing them as rational operational choices within the Chinese context does.

The Complication: Adaptation Has a Ceiling

Culture can’t be changed or adapted to. Not really. And not by organizations. Many global organizations may have China teams made up of highly-skilled Chinese professionals. But they’re still reporting to overseas HQs that use overseas logic and cultural norms. And while they are Chinese, they are still operating within a foreign system.

Overseas companies also have more considerations, stakeholders, and rules than many of their Chinese competitors do. They have to consider how their actions may be perceived by people across many countries and cultures. Many local competitors just have to think about one.

That’s one reason why “just follow local culture” or “let a local China team or partner handle everything” rarely works out. If you completely separate a local China operation or partner from your own business logic and needs, they’ll only make decisions about what makes sense in a purely Chinese context, without regard to how it might affect your global business.

A core question overseas business leaders should ask is: Are you actually trying to fix operational challenges for China, or simply push the adoption of global operational methods in China? One helps you operate effectively in China. The other is pushing a system that makes you feel comfortable but may not work in the local context.

The question isn’t how to copy the model. It’s understanding the operational logic well enough to find what actually works within your constraints.

The Implication for Western Leaders

The signals on the ground are usually already there. Local Chinese team members will already know what is going wrong. And local partners will already understand how the competitive landscape works.

The challenge is when those signals can’t be heard. I remember an agency pitch from several years ago, where my team briefed an overseas executive based in China on new local shopping trends and how they were changing retail in China.

His response? “That’s not the way we do things here.”

When operational signals and local needs are coming through loud and clear, but overseas businesses are either unable to hear them or unwilling to act on them, the culture framing just becomes another reason to dismiss what the market is already telling you.

The question isn’t whether your China team or partner understands the market. It’s whether your organization is designed to listen to them

If you’re interested in thoughtful perspectives on China, cross-border work, and how culture, incentives, and organizations shape real outcomes, you’re welcome to subscribe to China Culture Corner and receive future posts by email.

I also share related ideas and longer-form video commentary on LinkedIn and YouTube, and post updates across the channels linked above.

If you or your organization is navigating China execution or cross-border alignment challenges, I work with teams on an embedded and remote basis. Reach out directly: Sean@SageSightConsulting.com