IBM recently announced the findings of a new study which concludes that in order for multinational companies to succeed in China they will need to develop strategies that focus more on China's mass markets, and increasingly less on top-tier cities where the competition is fierce and the market potential is maturing. Here is an area of interest to us:

Human Resources Challenges

The study also revealed that multinationals face a severe and growing talent shortage in China. This is a bottleneck to growth that will only worsen as they compete with each other and domestic companies for employees with critical skill sets needed for the mass market. Candidates lacking English language skills and "soft" skills, such as communications and managerial capabilities, were the top two reasons cited by multinational recruiters for the current talent shortage for multinational positions.

In order for multinational companies to grow, survey respondents indicated they will need to build their internal talent pipelines. This includes, for example, developing deeper partnerships with universities and vocational colleges to build and gain preferential access to a pool of talent that can be groomed with the skill sets needed to pursue mass markets.

Despite some marketplace perceptions of a "glass ceiling" limiting Chinese professionals from rising to management positions, multinational companies are reporting high levels of management staff localization, particularly in operational roles such as sales, logistics and manufacturing. This trend will increase as companies seek to scale up operations cost-effectively and gain the local market insight needed to pursue mass markets.

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Prashanth Rai