Good evening ladies and gentlemen. It’s a great pleasure for me to be here today. My name is Frank Pan and I’m the Nike’s director of sports marketing in China. When I received the invitation to speak at this conference I felt honoured and exited about the opportunity to speak about the possibilities and challenges of the Chinese market. First I’ll account for our goals entering the Chinese market. Second I’ll speak about some of the difficulties and failures we have experienced.
Third I’ll tell you how we, in spite of these problems, have succeeded on the Chinese market and the reasons for the success of our strategy. Finally I’ll point out important cultural differences between the American and the Chinese culture, and discuss the important necessary tools to achieve success in China. Nike is a big part of Chinese sports clothes market. Nikes is a quality-conscious company with focus on design. The main goal for Nike is to reach out to the new middle class, which seeks western culture.
We are on the right road as we can see on a very positive development. The sales rose 66% last year, to an estimated $300 million, and Nike is opening an average of 1. 5 new stores a day in China. Another goal is to migrate inland from China’s richer east-coast towns. Success aside, we have had our difficulties and failures. In 1997 we ramped up a production just before the Asian banking crisis killed demand, then flooded the market with cheap shoes, undercutting our own retailers and driving many into the arms of Adidas.
Two years later, we created a $15 Swoosh-bearing canvas sneaker designed for poor Chinese. The “World Shoe” flopped so badly, that we killed it ourselves. We also had some production problems, which resulted in grey sneakers instead of white. Entering the market of China we have had a big problem with corruption both inside and outside the company. We believe that it’s necessary to look out and check up on your employees. In spite these problems we have managed to succeed on the Chinese market. It has been a long process succeeding on the Chinese market.
Phil Knight first travelled to china in 1980, before Beijing could even ship to USA. By the mid-‘80s, Knight had moved almost his whole production to China from Taiwan and South Korea. But he saw China as much more than just a workshop, and as he said: “There are 2 billion feet out there – go get them”. It was relatively easy getting Nike recognized. We outfitted the top Chinese athletes and sponsored the first Chinese basketball league in 1995. We also opened the first High School Basketball League, which now has spread to over seventeen cities around China.
Three-on-three tournaments, where also arranged. The Chinese market responded: sales through the 1990’s picked up 60% a year. As time went on the Chinese began to call sneakers “Naik-ke”. We gambled on the new middle class would develop a whole new set of values, centred on individualism. I believe we where smart not coming in to China trying to sell usefulness, but selling status. Finally I’ll point put some of the main cultural differences between the American culture and the Chinese culture. The main difference is the business culture.
The American market is very deal-focused, while the Chinese market is very relationship-focused. China is also a hierarchical culture, which means you have to adapt to their business culture and respect the hierarchy. You will also adapt to their body language, which can be very different to the American. But the golden rule is: The seller always adapt to the buyer. The most important tool for understanding foreign cultures is intercultural competences. Containing intercultural competences allows you to understand the cultures and respect them fully. Thank you for your time