CONFIDENTIAL

FOR INTERNAL USE WITHIN

CLIENT COMPANY ONLY

NÄSTA SVENSKA

TILLVÄXTEPOK I KINA

BASERAT PÅ EN STUDIE OM TILLVÄXTMÖJLIGHETER I KINA

31 Augusti 2016

BUSINESS SWEDEN 29 AUGUST 2016 2

TODAY’S PRESENTER

JOHAN WAHLFORS

Project Manager, China

8 years of international consulting experience

2 years in China

Business Sweden, China

Established in 1994

Offices in Beijing, Shanghai, Hong Kong

300+ clients served annually

BUSINESS SWEDEN 29 AUGUST 2016 3

SEMINAR OBJECTIVE AND AGENDA

CHINA IS STILL ASIA’S ENGINE

ATTRACTIVE INDUSTRIES

LESSONS LEARNED FROM 10+ SUCCESSFUL SMES

MARKET ENTRY BUILDING BLOCKS

MARKET

UPDATE

INSIGHTS FROM

SME STUDY

EXPERIENCE SHARING FROM CHINA ACTIVE SMES

QUESTIONS AND ANSWERS DISCUSSION

COMPARISON OF ECONOMIC SIZE, ECONOMIC GROWTH AND POPULATION 2012

(SIZE OF BUBBLE INDICATIVE OF POPULATION)

BUSINESS SWEDEN 29 AUGUST 2016 4

CHINA WILL DRIVE THE FUTURE GLOBAL ECONOMY

SOURCE: EUROMONITOR, WORLD BANK

0

1

2

3

4

5

6

7

8

9

10

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000

China

Russia

India

Germany

Japan

USA Brazil

France

Sweden United Kingdom

Real GDP growth, %

GDP, USD bn

ATTRACTIVENESS SEEN AS A POTENTIAL MIXTURE OF ECONOMIC SIZE, GROWTH AND POPULATION.

MER: MARKET EXCHANGE RATE; PPP: PURCHASING POWER PARITY

China 2050

OVERVIEW OF GLOBAL RANKINGS

BUSINESS SWEDEN 29 AUGUST 2016 5

SWEDEN HAS A STRONG COMPETITIVE EDGE TOWARDS

CHINA, IN PARTICULAR REGARDING INNOVATION

SOURCE: WORD ECONOMIC FORIUM, WORLD BANK, WIPO, OECD DATABASE, EUROSTAT 2015

SWEDISH COMPANIES SHOULD LEVERAGE ON INNOVATIVE EDGE AND/OR BRAND NAME WHEN ENTERING CHINA

GLOBAL

RANK

LEGATUM

PROSPERITY

GLOBAL

INNOVATION

R&D AS %

OF GDP

GLOBAL

COMPETIVENESS

CORRUPTION

PERCEPTION

KNOWLEDGE

ECONOMY INNOVATION UNION

1 1. SWEDEN

2 2.SWEDEN

3 3. SWEDEN

4 4. SWEDEN 4. SWEDEN

5

6 6. SWEDEN 10. SWEDEN

7

20 19. CHINA

30 29. CHINA 28. CHINA

50 54. CHINA

70 77. CHINA

100 100. CHINA N/A

BUSINESS SWEDEN 29 AUGUST 2016 6

SWEDISH COMPANIES HAVE A LARGE AND LONG-TERM

COMMITMENT TO CHINA

SOURCE: BUSINESS SWEDEN ANALYSIS

0

100

200

300

400

500

600

700

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

Th

ou

san

ds

Indirect employment at local firms

Direct employment at Swedish firms in China

Thousand employees

*ESTIMATES BASED ON EMPLOYMENT DATA IN CHINA FOR 257 SWEDISH COMPANIES, COMPLEMENTED BY

DATA FOR ROUGHLY 900 SWEDISH ESTABLISHMENTS IN CHINA, ASSUMING 2.5 ADDITIONAL JOBS CREATED

PER EMPLOYEE AT A SWEDISH COMPANY IN CHINA; LATEST AVAILABLE DATA AS OF DECEMBER 2015

7,2%

CAGR

1980-2015

413 000

Factor

2.5x

165 000

THE SWEDISH FOOTPRINT IN CHINA

400+ Swedish companies established in

China

150 000 – 200 000 local employees in

Swedish companies

45 bn SEK in total exports to China

200+ bn SEK in revenue generated by

Swedish companies in China

29 AUGUST 2016 BUSINESS SWEDEN 7

CHINA HAS DRIVEN GLOBAL GROWTH IN THE PAST

DECADE AND IS STILL THE LARGEST CONTRIBUTOR

SOURCE: EUROMONITOR, WORLD BANK

CONTRIBUTOR TO GLOBAL GROWTH

2%

5%

5%

7%

8%

10%

14%

19%

31%

Japan

Africa

Middle East

West Europe

Central & EastEurope, Turkey

Latin America

USA/ Canada

Asia Pacificexcl. Japan & China

China

% of World Growth 2005-2014

13%

12%

25%

8%

6%

24%

4%

3%

6%

% of World GDP 2014

ABSOLUTE GROWTH IN GDP

USD bn

2000 ∆ 2005 ∆ 2010 ∆ 2014

1205

2269

6040

10360

4x

10x

9x

x China GDP Equivalent to one Swedish GDP

*GDP PER PROVINCE IS BASED ON 2014 DATA, COUNTRY GDP DATA IN PPP TERMS IS BASED ON 2014

DATA RELEASED 2014 BY IMF

**1 INTERNATIONAL DOLLAR $ NOMINALLY CONVERTS TO 6.40 CNY ACCORDING TO THE AVERAGE 2014

EXCHANGE RATE, AND TO 3.7603 BY PURCHASING POWER PARITY (ALTHOUGH PRICES VARY FROM

REGION TO REGION WITHIN CHINA)

Colombia Anhui

Jiangxi

Sweden

Lithuania

Morocco

Nepal

Cyprus

Ecuador

Vietnam

Chile

Pakistan

Malaysia

Australia

South Korea

Spain

Venezuela

Thailand

Belgium Norway

Netherlands

Iraq

Romania

Egypt

South Africa Israel

Hong Kong

Switzerland

UAE

Taiwan

Philippines

Italy

Botswana

ECONOMICAL SIZE OF PROVINCES

29 AUGUST 2016 BUSINESS SWEDEN 8

CHINA IS TODAY AN ECONOMIC POWERHOUSE WITH

PROVINCIAL GDP EQUAL TO MANY EU COUNTRIES

0 to 250

250 to 500

750 to 1000

500 to 750

GDP PPP*, 2014 (USD bn**)

1000 to 1,500

Over 1,500

SOURCE: THE ECONOMIST INTELLIGENCE UNIT, 2015

NATIONAL BUREAU OF STATISTICS OF CHINA

NICHE MARKETS IN CHINA VS. PASSENGER VEHICLE MARKETS IN OTHER ECONOMIES

BUSINESS SWEDEN 29 AUGUST 2016 9

NICHE INDUSTRIES IN CHINA ARE LARGER THAN MANY

KEY MARKETS IN OTHER COUNTRIES

SOURCE: CHINA GAMING INDUSTRY REPORT; INTERNATIONAL ORGANIZATION OF MOTOR VEHICLE

MANUFACTURERS; IRESEARCH; TURKISH STATISTICS INSTITUTE; INTERNATIONAL, COUNCIL ON CLEAN

TRANSPORTATION POCKETBOOK 2014; PRESS SEARCH; MCKINSEY GLOBAL INSTITUTE ANALYSIS, 2014

USD bn, 2014

18

16 16

14

11

9 9 8

3 3 2

ChinaOnline

Gaming

Turkey China O2O*Dining

Belgium Thailand Austria China Spa's Poland China NailCare

Vietnam Greece

* OFFLINE-TO-ONLINE SERVICES THAT DELIVER FOOD FOR CONSUMERS WHO ORDER ONLINE

CHINA’S GDP DEVELOPMENT INDUSTRY GROWTH INDICATORS, YTD

29 AUGUST 2016 BUSINESS SWEDEN 10

THE ECONOMIC SLOWDOWN IN CHINA IS EVIDENT, BUT

MAINLY AFFECTS TRADITIONAL INDUSTRIES

5,9

7,3

8,2

9,2

10,4 10,5 0,104

0,093

0,077 0,077 0,074 7,0

0%

5%

10%

15%

0

15

201

0

201

1

201

2

201

3

201

4

201

5e

Hu

nd

red

s

Exports GDP

-20%

-17%

-9%

-18%

-25%

-20%

-15%

-10%

-5%

0%

Electricityconsumption

Railway Cargovolume

Exports Imports

3,0

SOURCE: IMF, WORLD ECONOMIC OUTLOOK, 2015, BUSINESS SWEDEN ANALYSIS, 2015

Real GDP growth % 2010 – 2015e

Nominal GDP, USD Trillion

BUSINESS SWEDEN 29 AUGUST 2016 11

THE CHANGE IN THE TRADITIONAL INDUSTRY SECTOR

HAS MARKET, CUSTOMER AND COMPETITOR DIMENSIONS

SOURCE: BUSINESS SWEDEN ANALYSIS

THE MARKET

IS CHANGING

THE CUSTOMER

IS CHANGING

SLOWDOWN IN INVESTMENTS

OVERCAPACITY

BUY DOMESTIC CAMPAIGN

MNCS INCREASINGLY BUY LOCAL

”GOOD ENOUGH” ATTITUDE

CUSTOMER TURNING TO MID-MARKET

1

THE COMPETITOR

IS CHANGING

TECHNOLOGY GAP NARROWS

CONSTANT PRICE PRESSURE

LOCAL COMPETITORS BECOMING GLOBAL

2

3

ANTI-CORRUPTION DRIVE

FUTURE

GROWTH

BUSINESS SWEDEN 29 AUGUST 2016 12

CONSUMPTION AND INNOVATION ARE TWO MEGA

TRENDS WHICH WILL DRIVE FUTURE GROWTH

SOURCE: BBC, CNBC, BLOOMBERG, CNN, WSJ, FORBES

INNOVATION

From resource to

innovation driven

economy

R&D spending 284 bn

USD in 2015

No 1 in number of patent

applications

CONSUMPTION

58% of GDP growth in

2015

630 m middle class by

2020

Foreign brands still

attractive

Rapid growth of online

sales

BUSINESS SWEDEN 29 AUGUST 2016 13

SEMINAR OBJECTIVE AND AGENDA

ATTRACTIVE INDUSTRIES - CHINA

MARKET UPDATE

INSIGHTS FROM

SME STUDY

DISCUSSION

BUSINESS SWEDEN 29 AUGUST 2016 14

MOST INDUSTRIES HAVE AN EXCITING OUTLOOK IN

CHINA

80 NEW AIRPORTS BY

2020

630 MILLION INTERNET

USERS

1,29 BILLION MOBILE

PHONE USERS

400 MILLION PEOPLE

WHO ARE +60 OR

OLDER

30% TYPICAL CHINESE

HOUSEHOLDS

SPENDING ON

EDUCATION

60% AVERAGE ANNUAL

GROWTH RATE OF

INVESTMENTS IN

CHINA’S CLEAN

TECHNOLOGY

SOURCE: CHINA BRIEFING; EU SME CENTRE; CHINA INTERNET WATCH; DELOITTE; MARS MARKET

INSIGHTS; ASIA PERSPECTIVE

AEROSPACE

E-COMMERCE

HIGH-VALUE

MACHINERY

ICT

HEALTH CARE

PRIVATE

EDUCATION

LIFE SCIENCES

CLEANTECH

FOOD &

BEVERAGES

BUSINESS SWEDEN 29 AUGUST 2016 15

THIS STUDY MAINLY FOCUSED ON TWO PROMISING

INDUSTRIES – ICT AND LIFE SCIENCE

PO

TE

NT

IAL F

OR

IN

NO

VA

TIO

N*

MARKET OPPORTUNITY**

AEROSPACE

E-COMMERCE

HIGH-VALUE

MACHINERY

ICT

HEALTH CARE

PRIVATE

EDUCATION

LIFE SCIENCE

CLEANTECH

FOOD &

BEVERAGES

*POTENTIAL FOR INNOVATION REGARDS FACTORS SUCH AS; GROWTH IN PCT APPLICATIONS, INVESTMENTS IN INDUSTRY,

GLOBAL INNOVATION INDEX, CHINESE INNOVATION TRACK RECORD AND NEED FOR INNOVATION INFLECTION POINTS

**MARKET OPPORTUNITY REGARDS FACTORS SUCH AS; MARKET GROWTH AND GROWTH PROJECTIONS, GOVERNMENTAL

SUPPORT AND OTHER MARKET INFLECTION POINTS SOURCE: BUSINESS SWEDEN RESEARCH

BUSINESS SWEDEN 29 AUGUST 2016 16

IN THE FULL REPORT THREE SUB-INDUSTRIES WITH

LARGE POTENTIAL FOR SME´S ARE DETAILED

PHARMACEUTICALS

BIOENGINEERING

MEDICAL DEVICES

ETC.

CONSUMER ELECTRONICS

TELECOMMUNICATIONS

INTERNET OF THINGS (IOT)

ETC.

SOURCE: BUSINESS SWEDEN RESEARCH

MARKET

POTENTIAL INNOVATION LAG

INFLECTION

POINTS

SWEDISH

CAPACITY

CRITERIA FOR SUB-INDUSTRY FOCUS

1

2

3

SUB-INDUSTRY EXAMPLES AEROSPACE

E-COMMERCE

HIGH-VALUE

MACHINERY

ICT

HEALTH CARE

PRIVATE

EDUCATION

LIFE SCIENCE

CLEANTECH

FOOD &

BEVERAGES

THREE DRIVERS INTERESTING OPPORTUNITES

29 AUGUST 2016 BUSINESS SWEDEN 17

THE MEDICAL DEVICE MARKET LOOKS PROMISING DUE

TO AN AGING AND MORE DEMANDING POPULATION

SOURCE: MARS MARKET INSIGHTS, ENTERING CHINA’S EMERGING LIFE SCIENCES MARKETS: THE

OPPORTUNITY FOR ONTARIO STARTUPS, 2014; MAINE INTERNATIONAL TRADE CENTER, MEDICAL DEVICES

INDUSTRY OPPORTUNITIES IN JAPAN & CHINA, 2015

A NEW WAY OF LIVING

Changing diets and impact of pollution

Affordability to pay for advanced health care

AN ACCESSIBLE MARKET

50 bn USD Market by 2050

92% of technologies hail from foreign companies

AGEING POPULATION

400 million 60+ in 2020

Rapid increase of “western” diseases

IN VITRO DIAGNOSTIC DEVICES

11% of total medical devices market

Specifically listed in China’s 12th five-year plan

DIAGNOSTIC IMAGING

Double digit growth expected for the coming years

Strong demand of foreign high tech solutions

OPHTHALMIC DEVICES

21,3% of total medical devices market

Rapid growth in line with growing elderly population

BUSINESS SWEDEN 29 AUGUST 2016 18

SEMINAR OBJECTIVE AND AGENDA

LESSONS LEARNED FROM 10+ SUCCESSFUL SMES

MARKET UPDATE

INSIGHTS FROM

SME STUDY

DISCUSSION

2005

Life science

Medical image

enhancement

67 MSEK*

2006

Automotive

Testing of vehicles,

tires and components

37 MSEK*

2008

Engineering

Advanced CAN

solutions

69 MSEK*

2011

CleanTech

Sustainable energy

solutions

52 MSEK*

2012

ICT

Biometric identification

technology

670 MSEK*

2013

Engineering

Contract

manufacturer

1 510 MSEK*

2012

Life science

Systems for blood

analysis

217 MSEK*

2011

ICT

Customer care

solutions

132 MSEK*

1996

Automotive

Collision repair

equipment

670 MSEK*

2005

Life science

Medical vascular

simulation

75 MSEK*

2008

Engineering

Oil smoke, mist and

dust filters

111 MSEK*

2010

Engineering

Control- and on/off-

valves

268 MSEK*

BUSINESS SWEDEN 29 AUGUST 2016 19

SME:S INTERVIEWED IN CHINA

1995 2015 2005

NOTE: SELECTION OF CASE COMPANIES HAS BEEN BASED ON COMPANY FINANCIALS, COMPANY

INNOVATION, MARKET POSITION AND LOCAL PRESENCE

SOURCE: COMPANY WEBSITES, INTERVIEWS

* GROUP FINANCIALS FROM LATEST FISCAL YEAR

COMMON SUCCESS FACTORS

1 PRODUCT INNOVATION

2 LOCAL PRESENCE

3 BRAND AWARENESS

4 DISTRIBUTOR COOPERATION

5 MARKET RESEARCH

6 LOCALIZED PRODUCT OFFERING

7 CUSTOMER SEGMENTATION

8 ENGAGED INVESTOR/S

9 POLITICAL CONNECTIONS

ESTIMATE OF IMPORTANCE TO COMPANY (1-5)

29 AUGUST 2016 BUSINESS SWEDEN 20

CHINA KEY SUCCESS FACTORS

2,3

3,0

3,0

3,2

3,5

3,8

4,2

4,5

4,8

INDICATES TOP 5 – FURTHER ANALYZED ON THE FOLLOWING PAGE SOURCE: COMPANY WEBSITES, INTERVIEWS, BUSINESS SWEDEN ANALYSIS

2,0

2,4

2,9

3

3,1

3,1

3,3

3,5

3,5

COMMON CHALLENGES

1 QUALIFIED STAFF

2 DIFFERENT BUSINESS CULTURE

3 GUANXI (RELATIONSHIPS)

4 INTELLECTUAL PROPERTY

5 COMPETITION

6 COMMUNICATIONS

7 BUREAUCRACY AND RED TAPE

8 ENVIRONMENTAL ISSUES

9 BRIBERY / CORRUPTION

ESTIMATE OF IMPORTANCE TO COMPANY (1-5)

29 AUGUST 2016 BUSINESS SWEDEN 21

CHINA CHALLENGES

SOURCE: COMPANY WEBSITES, INTERVIEWS, BUSINESS SWEDEN ANALYSIS INDICATES TOP 5 – FURTHER ANALYZED ON THE FOLLOWING PAGE

BUSINESS SWEDEN 29 AUGUST 2016 22

FROM THE SWEDISH COMPANIES WITH CHINESE

OPERATIONS COMES FIVE MAIN LEARNINGS

SOURCE: INTERVIEWS, BUSINESS SWEDEN ANALYSIS

INSIGHTS FROM

ESTABLISHED SMEs IN CHINA

A. INVEST & DEVOTE - DO NOT DIP YOUR TOES, DIVE IN

B. ACTIVE CHOICE

OF PARTNERS - CHOOSE, DO NOT GET

CHOSEN

C. BE LOCAL - SALES IN CHINA REQUIRES

LOCAL PRESENCE

D. PROTECT IPR - IPR IS MORE THAN PATENTS

AND TRADEMARKS

E. STAY AGILE - ADJUST, ADAPT AND THEN

RE-ADJUST

29 AUGUST 2016 BUSINESS SWEDEN 23

A. INVEST & DEVOTE

SOURCE: INTERVIEWS, BUSINESS SWEDEN ANALYSIS

- DO NOT DIP YOUR TOES, DIVE IN

OBSERVATIONS AND TAKEAWAYS

Ensure you know your market and entry segment

Choose internal leader with solid product understanding

Expect “double” lead time and budget for establishment

Carefully consider alternative legal structures

Hold back on major structural investments until you have

the first customer on board

Devote time to internal communication and adapt to the

business culture

SUCCESS FACTORS AND CHALLENGES

3,5

3,5

SUCCESS FACTOR: MARKET RESEARCH

CHALLENGE: DIFFERENT BUSINESS CULTURE

CASE COMPANY

Cleanergy has despite various challenges stayed in the

highly regulated market and is now on the verge of

impressive contracts

Top success factor: Product innovation, Brand awareness

and Local presence

Top challenges: Bureaucracy and red tape, Different

business culture, Environmental issues

“China is still a complicated market to operate on, especially

within the greentech due to all regulations, hence one need to

be dedicated even if your conditions for making business

changes.” - Cleanergy

29 AUGUST 2016 BUSINESS SWEDEN 24

B. ACTIVE CHOICE OF PARTNERS

SOURCE: INTERVIEWS, BUSINESS SWEDEN ANALYSIS

- CHOOSE, DO NOT GET CHOSEN

OBSERVATIONS AND TAKEAWAYS

SUCCESS FACTORS AND CHALLENGES

3,1

3,8

SUCCESS FACTOR: DISTRIBUTOR COOPERATION

CHALLENGE: COMPETITION

CASE COMPANY

“Our market is a bit special since the hospitals buy everything

through agents or distributors. They cannot simply have too

many suppliers. Hence, it is important with good relationships

to the suppliers which provide the bigger hospitals.” - Mentice

Decide if you need a partner or a distributor

Dedicate time and money to find your business partner

Over-invest in educating of your business partners – you

need true ambassadors

No distributor can cover whole China

Evaluate by number of business cards rather than “CV” Mentice has established relationships with influential and

well-connected local distributors that have access to

different hospitals

Top success factor: Product innovation, Brand awareness,

Local presence

Top challenges: Guanxi (relationships), Competition,

Bureaucracy and Red Tape

29 AUGUST 2016 BUSINESS SWEDEN 25

C. BE LOCAL

SOURCE: INTERVIEWS, BUSINESS SWEDEN ANALYSIS

- SALES IN CHINA REQUIRES LOCAL PRESENCE

OBSERVATIONS AND TAKEAWAYS

SUCCESS FACTORS AND CHALLENGES

3,5

4,5

SUCCESS FACTOR: LOCAL PRESENCE

CHALLENGE: QUALIFIED STAFF

CASE COMPANY

“Being in China is A and O! You have to be physically in the

market in order to be able to travel to see and meet your

customers. You cannot do this sitting in Sweden.” - Somas

Establish local presence to build trust based relationships

Start with existing product but be ready to adapt

Adjust price to local market but don’t underprice by default

Understand recruitments of partner, licensing and JV in

your specific industry

Somas did not enter China until a local contact with market

insights and good networks was found

Top success factor: Localized product offering, Product

innovation, Brand awareness

Top challenges: Different business culture, Guanxi

(relationships), Competition

29 AUGUST 2016 BUSINESS SWEDEN 26

D. PROTECT IPR

SOURCE: INTERVIEWS, BUSINESS SWEDEN ANALYSIS

- IPR IS MORE THAN PATENTS

OBSERVATIONS AND TAKEAWAYS

SUCCESS FACTORS AND CHALLENGES

3,1

4,8

SUCCESS FACTOR: PRODUCT INNOVATION

CHALLENGE: INTELLECTUAL PROPERTY

CASE COMPANY

“Issues concerning intellectual property is still a hassle even

though things are getting better for us. One has to try to turn

all obstacles info an advantage.” - Car-O-Liner

One needs a wider perspective on IPR including patents,

know-how, trademarks and intangible assets

Do not underestimate risk of infringement

China practice the principle of “first to file” – be the first to

register your own trademark

Know-how will be passed on – Don’t be naive when

sharing sensitive information Even in times of infringements and copycats Car-O-Liner

has been able to turn the event into a business opportunity

Top success factor: Localized product offering, Product

innovation, Market research

Top challenges: Qualified staff, Guanxi (relationships),

Competition

29 AUGUST 2016 BUSINESS SWEDEN 27

E. STAY AGILE

SOURCE: INTERVIEWS, BUSINESS SWEDEN ANALYSIS

- ADJUST, ADAPT AND THEN RE-ADJUST

OBSERVATIONS AND TAKEAWAYS

SUCCESS FACTORS AND CHALLENGES

3,5

3,2

SUCCESS FACTOR: LOCALIZED PRODUCT OFFERING

CHALLENGE: GUANXI (RELATIONSHIPS)

CASE COMPANY

“Working in China one can never relax since the market

changes so fast, hence you cannot have an inflexible business

model then you lose out on business opportunities.” eBuilder

Local customer support is crucial

Establish redline market adaptation loop to HQ

Local mandate to tailor offering

Speed and flexibility is key

Be set for sudden changes and always have a plan B e-Builder has thanks to an agile mindset and an adaptive

business model been able to launch new service lines as

well as using customers as multipliers

Top success factor: Distributor cooperation, Product

innovation, Local presence

Top challenges: Competition, Different business culture,

Intellectual property

BUSINESS SWEDEN 29 AUGUST 2016 28

SEMINAR OBJECTIVE AND AGENDA

MARKET ENTRY BUILDING BLOCKS

MARKET UPDATE

INSIGHTS FROM

SME STUDY

DISCUSSION

BUSINESS SWEDEN 29 AUGUST 2016 29

TWO STEP MARKET ENTRY

ST

UD

Y C

ON

CLU

SIO

NS

STEP 1:

MARKET SEGMENT SELECTION

AND ENTRY STRATEGY

STEP 2:

MARKET ENTRY PLAN

There are numerous examples of innovative

Swedish successful companies in China

Product innovation, local presence and brand

awareness are most important success factors

Qualified staff, different business culture and

Guanxi are common challenges

Devotion to the market entry, active selection of

partners, a holistic mindset on IPR and an agile

mindset is also key

OU

TP

UT

Market entry plan Market analysis (sub-industry level)

Market entry strategy

China’s next growth wave driven by innovation

and consumption of a larger middle class

Significant opportunities for SMEs with

innovative offerings

Opportunities can be found in most innovation

driven industries

Knowledge of the market and its competitive

climate is required

Pinpoint a certain sub-industry or market niche

as well as a target segment

Choosing the right market entry strategy is vital

GO /

NO-GO

BUSINESS SWEDEN 29 AUGUST 2016 30

STEP 1: MARKET SEGMENT SELECTION AND ENTRY

STRATEGY

MARKET ANALYSIS

(SUB-INDUSTRY LEVEL)

KNOWLEDGE OF MACRO CLIMATE AND MARKET TRENDS

BREAKDOWN OF MARKET INTO HIGH PERFORMING SUB-INDUSTRIES

KNOWLEDGE OF INNOVATION WHITE SPOTS

KNOWLEDGE OF MARKET NEEDS

ANALYSIS OF DOMESTIC COMPETITION

A

MARKET ENTRY

STRATEGY B

A COMPETITIVE EDGE

A CLEAR VALUE PROPOSITION FOR THE CHINESE MARKET

A SPECIFIED TARGET GROUP

TRADEMARK AND PATENTS SECURED

A VIABLE MARKET ENTRY STRATEGY

BUSINESS CASE AND CALCULATED PAYBACK

KEY ELEMENTS AND KEY ENABLERS

BUSINESS SWEDEN 29 AUGUST 2016 31

FIRSTLY PERFORM A DEEP DIVE MARKET ANALYSIS TO

DISTINGUISH ADDRESSABLE MARKETS

Identify market trends

Identify sub-industries and niche markets with significant potential

Analyze competition

Define how to compete on the market

Analyze domestic capabilities and need of foreign innovation in China

Identify potential substitute products and other threats

Define market readiness

Identify potential hurdles for entry, e.g. tedious registration process, taxation

MARKET ANALYSIS

(SUB-INDUSTRY LEVEL) A

KEY ELEMENTS AND RECOMMENDED ACTIVITIES

BUSINESS SWEDEN 29 AUGUST 2016 32

THEN DEFINE COMPETITIVE EDGE AND DECIDE ON

LAUNCH MARKET

Perform market segmentation and define target groups

Decide launch market

Secure trademark and patents

Investigate potential registration process for offering

Evaluate market entry strategies

Define market launch timeline

Calculate business case and determine payback MARKET ENTRY STRATEGY B

KEY ELEMENTS AND RECOMMENDED ACTIVITIES

BUSINESS SWEDEN 29 AUGUST 2016 33

STEP 2: MARKET ENTRY PLAN

A

B

D

F

C

E

DISTRIBUTORS AND PARTNERS DISTRIBUTION SETUP

PARTNER SELECTION

INNOVATION

INTELLECTUAL

PROPERTY

UNIQUE TECHNOLOGY

AND OR SOLUTION

CUSTOMER KNOW YOUR FIRST

CUSTOMER(S)

MARKET

POSITION

LOCAL BRAND AWARENESS

CREDENTIALS FROM WEST

OFFERING

QUICK START WITH GLOBAL

PRODUCT

RESPONSIVE

LOCALIZATION

LOCAL PRESENCE AND THE LOCAL TEAM LOCAL SALES OFFICE

LOCAL EXPERIENCED STAFF

KEY ELEMENTS AND KEY ENABLERS

BUSINESS SWEDEN 29 AUGUST 2016 34

FIRST DECIDE ON CHANNEL TO MARKET AND HOW TO

ESTABLISH A POSITION ON THE MARKET

Tailor distribution setup according to industry praxis and company need

Depending on industry, investigate entry via partner cooperation

MARKET ANALYSIS

(SUB-INDUSTRY LEVEL)

A

KEY ELEMENTS AND RECOMMENDED ACTIVITIES

DISTRIBUTORS AND

PARTNERS

Decide and then differentiate (company product strength and innovation –

patents, know-how, trademark or intangible assets)

Do not underestimate the risk of infringement

China practice the principle of “first to file”

Showcase company heritage, history and global reach

Display experience and understanding for the market and technology

If possible, showcase past market entries and refer to these

Invest time in relationships and networks

INNOVATION

MARKET POSITION

B

C

BUSINESS SWEDEN 29 AUGUST 2016 35

NEXT EVALUATE CUSTOMER ALTERNATIVES AND

OFFERING BEFORE BUILDING A LOCAL FOUNDATION

Evaluate customer base and explore possibility of following an existing

customer…

…or sign with new customer before entry

Consider existing customer as multiplier and door opener

Local customer support is crucial to pick up on trends and feedback

MARKET ANALYSIS

(SUB-INDUSTRY LEVEL)

D

KEY ELEMENTS AND RECOMMENDED ACTIVITIES

CUSTOMER

Start with existing product offering

Be local in how product is presented and sold

Practice the principle of good enough, be flexible in level of technology

Establish redline market adaptation loop to HQ

Set up local presence as soon as possible to build trust and relationships

Employ local Chinese staff and focus on sales and marketing capabilities

Profit from mix of Swedish and Chinese mindset

Depending on industry, political connections is not be underestimated

OFFERING

LOCAL PRESENCE AND

THE LOCAL TEAM

E

F

BUSINESS SWEDEN 30 AUGUST 2016 36

SEMINAR OBJECTIVE AND AGENDA

MARKET UPDATE

INSIGHTS FROM

SME STUDY

EXPERIENCE SHARING FROM CHINA ACTIVE SMES

QUESTIONS AND ANSWERS DISCUSSION