Companies focus more on innovation, less than expansion

Slowing economic growth and changing consumer behavior are reshaping multinational companies' strategies in the Chinese market, as innovation and marketing are gaining more importance, a report by Booz&Co finds.

"Chinese consumers are increasingly opting for quality goods at higher prices and adopting online shopping and social media to gather product information, which are the two key trends driving company strategy in China," the report said.

The results are based on an annual survey of 89 companies, most of which are MNCs, co-conducted by the US consulting firm and the American Chamber of Commerce in Shanghai.

Such trends in consumer behavior have been observed in China in reports published in previous years, Steven Veldhoen, a partner with Booz & Co, said on Wednesday.

"There is no revolutionary trend we observed in the Chinese market this year as it used to be over the past decade, that's a sign that the market is starting to stabilize," Veldhoen said.

"In the past it was all about seeking new opportunities, but now it's more about developing your core competitiveness and do what you do the best."

"There are companies that used to adopt to market changes very quickly but didn't build their internal strength. These companies are really suffering from current trends," said Adam Xu, a director at Booz&Co in Shanghai.

He quoted a senior executive from a leading international beverage company as saying, "When it comes to the beverage business, it was always about expansion, but now it's a mixed strategy about grasping new markets, but also emphasizing the per-store sales."

"China is still a growth market, but it's shifting from a mode of extensive growth to a mode of intensive growth," Wang said.

"In a way, it's consistent with the macroeconomic trend the Chinese economy has experienced."