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Business Management

Jeff Kim (China) - Expanding Online Business into China: Securing a Technology Advantage

Management leaders at many European businesses worry that their organization has not yet established its online presence in China. They believe that they have "missed the boat" on expanding their business in China; and they express concern over early-mover advantage. For the most part, they worry that B2B supply chain partners and Internet consumers have already chosen the winners. Fortunately, nothing could be further from the truth.

Despite the hype surrounding China market entry from some high-profile consumer brands and large online properties, most Western businesses - large and small - have only recently begun to develop their online strategies for China. US-based Gap and Italy-based Luxottica Group, for example, both just established an e-commerce presence in China this past spring for some of their most popular brands.

Later can be luckier

But how do new Chinese market entrants gain advantage over early movers? Simple - they can speed down the same paths of technology infrastructure, business licensing, and service provider partnerships that early movers had to navigate extremely slowly and cautiously. Thanks to social networking and a blitz of media coverage for all things China, there exists today a vast amount of data regarding online successes and failures in China. This enables European business managers to make business and infrastructure choices more quickly and easily than before. Newcomers also can avoid the sub-optimal Internet infrastructure architectures and partnering agreements that hamper early movers' business performance.

New China entrants can benefit from best practices developed across several areas, including the following:

• Identifying and securing proper Internet licenses
• Choosing the optimal Internet infrastructure strategy
• Selecting an appropriate and reputable service provider

An organization may have already made substantial progress in one area, but online success in China depends upon a strategy that accounts for all three.

Understanding China's Internet licensing requirements

China's central government and some provincial governments require online businesses to acquire proper licensing before serving content and conducting e-commerce. As consumer protections grow in China, so do laws governing online businesses. Considering that China has 19 different provinces with at least 10 million Internet users in each, European businesses should familiarize themselves with the licensing requirements specific to their targeted regions. They should also keep in mind that the Internet licensing landscape in China evolves frequently. Rules change often, agencies are revamped, and new agencies are added. In fact, just this past year, the central government opened a new Internet monitoring agency that adds an additional layer of oversight and rules to which online businesses must adhere.

Choosing the optimal Internet infrastructure strategy

Many disparate networks make up China's Internet, and peering between these networks does not occur as seamlessly as it does in Europe and the US. This sub-par peering can negatively impact website and Web application performance when content must travel across different regions of China. At the same time, just like their Western counterparts, Chinese online consumers demand a quality end-user experience and robust website performance.

To ensure a quality end-user experience, IT managers need to implement infrastructure strategies that correspond to the geographic location of their target market of end users. If their target market exists predominantly in a single Chinese province, establishing a local web hosting presence in a single data center makes sense. However, if the target market resides (or might reside) in multiple provinces, IT should follow the success that early movers have had by leveraging a content delivery network (CDN). CDN service providers run a distributed network of servers throughout China so that they can circumvent network peering issues and deliver content fast and reliably to any major province.

Knowing your business partner


Prior to signing on with a service provider, European businesses should understand that service provider's local and global capabilities. While a regional provider may suit your China website delivery needs, worldwide coverage requires a CDN with a global presence. Check the provider's track record for managing its own operations within China and whether or not it's experienced disruptions to its own operations in recent years. In the case of global infrastructure decisions that include China, elevate the China-specific discussion and customize partner agreements before making any commitments.

By Jeff Kim,  coo at CDNetworks

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