After reading the case that is below, how can a foreign company entering China ensure that it tackles the most important little things that end up being huge barriers to success as we approach the year 2020 when China is expected to have significantly increased purchasing power among its middle class? Write your opinion, as a manager, on how to face cultural issues like those described in the case, when entering foreign markets.

The People's Republic of China opened up to foreign investments in the late 1970s. Since that time, numerous companies have tried to establish operations and sell their products to customers in China. Many more companies will try in the years to come China is expected to have some 190 million people in the middle- and upper-income categories by 2020. This is an increase from only about 17 million people in these income brackets as recently as in 2010. China's purchasing power for virtually all products and services has strong potential, and foreign companies will seek these market opportunities. What have we learned culturally that can help Western-based companies in China's marketplace?

Some background on China can serve as a starting point for a better understanding of the culture in China and what some well-known companies such as Best Buy and eBay have done to target the Chinese marketplace. The motivation for many foreign companies to enter China beyond those that have been there for a few decades for reasons of low-cost production was the triple growth of the Chinese economy that was seen from 2000 to 2010. China overtook Japan to become the second-largest economy in the world behind only the United States, and its large population makes for an enormous target market. Investment from foreign companies was the largest driver of China's growth in the decade from 2000 to 2010. However, many companies also increased their exports to China. The United States, for example, saw its companies increase exports to China by 542 percent from 2000 to 2011 (from about $16.2 billion to $103.9 billion), while total exports to the rest of the world increased by only 80 percent in the same time period.

Interestingly, while foreign investments grew, domestic consumption as a share of the Chinese economy declined from 46 percent in 2000 to 33 percent in 2010. This consumption declineâcoupled with slower growth globally and, ultimately, the worldwide economic downturn that started in 2008âraised questions about China's momentum. Right now, around 85 percent of mainstream Chinese consumers are living in the top 100 wealthiest cities. By the year 2020, these advanced and developing cities will have relatively few customers who are lower than the middle- and upper-income brackets by Chinese standards. The expectation is that these consumers will be able to afford a range of products and services, such as flat-screen televisions and overseas travel, making the Chinese customer much more of a target for a wide variety of consumption. This begs the question, can the unprecedented Chinese growth really continue, and would it come from increased consumption?

The resounding answer is yes according to research conducted by McKinsey & Company. McKinsey found that barring another major economic shock similar to what we saw in 2008, China's gross domestic product (GDP) will continue to grow, albeit not at the historic levels seen between 2000 and 2010 when it grew about 10.4 percent annually. The growth from 2010 to 2020 is expected to be about 7.9 percent per year, which is still far above the expected growth for the United States (2.8 percent annually), Japan (1.2 percent annually), and Germany (1.7 percent annually) the three countries among the top four worldwide economies along with China. And, the key is that consumption will now be the driving force behind the growth instead of foreign investment. The consumption forecast opens up opportunities for foreign companies to engage with Chinese consumers who are expected to have more purchasing power and discretionary spending. But culturally translating market success from one country or even a large number of countries to the Chinese marketplace is not necessarily as straightforward as it may seem. Often, a combination of naivety, arrogance, and cultural misunderstanding has led many well-known companies to fail in China. Lack of an understanding of issues such as local demands, buying habits, consumption values, and Chinese customers' personal beliefs led to struggles for companies that had been very successful elsewhere in the world. Let's take a brief look at Best Buy and eBay as two examples.

Best Buy, the mega-store mainly focused on consumer electronics, was founded in 1966 as an audio specialty store. Best Buy entered China in 2006 by acquiring a majority interest in China's fourth-largest appliance retailer, Jiangsu Five Star Appliance, for $180 million. But culture shock hit Best Buy, best described by Shaun Rein, the founder of China Market Research Group. He pointed to a few reasons for this culture shock and lack of success. First, the Chinese will not pay for Best Buy's overly expensive products unless they are a brand like Apple. Second, there is too much piracy in the Chinese market, and this reduces the demand for electronics products at competitive market prices. Third, like many Europeans, the Chinese do not want to shop at huge mega-stores. So, these three seemingly easy-to-understand cultural issues created difficulties for Best Buy. Solving these issues, Best Buy believed that it would have to develop and implement a different business model for the Chinese market than it has used, for example, in the United States. Now, how far should a company go outside its normal business model to adhere to the cultural values and beliefs of a new market? Strategically moving forward, Best Buy opted to close all of its Best Buy branded stores in China and focus on its wholly-owned local Jiangsu Five Star chain of stores. But will this new strategic business model be successful with the new makeup of customers in China expected by 2020?

eBay, the popular e-business site focused on consumer-to-consumer purchases, was founded in 1995. The company was one of the true success stories that lived through the dot-com bubble in the 1990s. It is now a multi-billion-dollar business with operations in more than 30 countries. But China's unique culture created problems for eBay in that market. Contrary to the widespread cultural issues that faced Best Buy, one company in particular (TaoBao) and one feature more specifically (built-in instant messaging) shaped a lot of the problems that eBay ran into in China. Some 200 million shoppers are using TaoBao to buy products, and the company accounts for almost 80 percent of online transaction value in China. Uniquely, TaoBao's built-in instant messaging system has been cited as the main reason for its edge over eBay in China. Basically, customers wanted to be able to identify a seller's online status and communicate with them directly and easily function not seamlessly incorporated into eBay's China system. Clearly, built-in instant text messaging is a solvable obstacle in doing business in China. It sounds easy now when we know about it, but may not always be the case when we take into account all the little things that are important in a market.

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Case Study

Skolnikland is in Eastern Africa, with a population of 30 million people. The country has a plains region, a hill region, and a region with high mountains. It has a number of ecosystems. The plains are dry for much of the year, there is some rainforest, and the rest of the country includes both hills and mountains. There are two seasons of heavy rainfall.

The citizens come from several ethnic groups that tend to live in their own regions and speak different languages. The ethnic groups largely follow one of three different religions. The large cities are mixed ethnically. One ethnic group is economically and socially very dominant. The people from this group live in the capital and most of the large cities. The national language is the language of this dominant ethnic group.

According to World Bank criteria, Skolnikland is among the poorest countries in the world. The economy has been growing at about 4% per year on average over the last decade, but the economy had very slow economic growth in the decades prior to that. The richest 10% of the population controls 80% of the national income.

About 80% of the people live in rural areas and 20% in urban areas. The number of people living in urban areas has been growing recently at an increasing pace. Most people earn their livelihood in agriculture but there is an increasing garment manufacturing industry in the two largest cities. There are also a number of mining industries. In addition, other export industries are beginning to grow, mostly focused on the export of commodities to China.

The total fertility rate is about 4.5 but it has been declining slowly over the last two decades, from over 6. There is an almost equal number of men and women in the population. Infant mortality is about 90 per 1,000 live births. Maternal mortality is about 500 per 100,000 live births. Thirty-five percent of the children are underweight for age.

The adult literacy rate is about 40%. The educational enrollment rate, especially for girls at the primary and secondary levels, has been growing slowly, but steadily. Most recently, this rate has been growing at an increasing pace and about 75% of the girls now attend school regularly, although many of them are of very low quality.

Only about 50% of citizens have access to safe water. Only about 30% have access to sanitary disposal of human waste.

HIV prevalence is 7% of the adult population. The number of new HIV cases annually has begun to plateau. About half of the people eligible for treatment for HIV are on treatment. Malaria is rampant in the plains.

Investments in the road system have been growing at a solid pace in the last decade and the use of private automobiles has begun recently to increase more rapidly.

Skolnikland has a pluralistic health system that is made up of public and private institutions, publicly financed providers, licensed private providers, unlicensed medical practitioners, and traditional healers. There is no health insurance, except for some free services for the poor in the few publicly financed hospitals, which the better off people do not attend. The health system is not very effective or efficient and is generally of low quality. The HIV, TB, and malaria programs are not effective or efficient and they are just beginning to adopt paradigms for services that follow global best practices.

QUESTION 26

What is a DALY?

Refer Case Study from question 1 to answer this question.

A. An indicator that compares the burden of deaths across the population of different countries.

B. A composite health gap indicator that measures the amount of health and disability-free life that is lost because of disease, injury, and premature death.

C. A WHO indicator used to summarize the expected number of years to be lived in good health.

QUESTION 27

What is an example of a conditional cash transfer that you can use to improve child health?

Refer Case Study from question 1 to answer this question.

A. Provide tax breaks to families with children.

B. Give money to mothers whose children received a full course of vaccination.

C. Pay higher fees to vaccination programs with better outcomes.

QUESTION 28

What usually takes place during the demographic transition?

Refer Case Study from question 1 to answer this question.

A. Fertility falls before mortality falls

B. Mortality falls and then fertility falls

C. Mortality and fertility fall at the same time

QUESTION 29

Which force is likely to have the greatest direct impact on epidemiological change in the medium and long terms on today's middle-income countries?

Refer Case Study from question 1 to answer this question.

A. Population growth

B. Population aging

C. Urbanization

QUESTION 30

Which is the most accurate statement about the distribution of age at death in Niger (a very low income country) and Norway (a very high income country) today?

Refer Case Study from question 1 to answer this question.

A. About 5% of the deaths in Niger are among those under 15, while the overwhelming majority of deaths in Norway are among those over 65.

B. About 30% of the deaths in Niger are among those under 15, while the overwhelming majority of deaths in Norway are among those over 65.

C. The overwhelming majority of deaths in both countries occur among people aged 65 and over.