The Chinese Market Is More Than Just Its Urban Centers

. AMD’s success has forced Intel to respond with a similar strategy, developing low-end processors and phones for the rural market.

A key difference between these two examples was not geopolitics but their choice of market-entry strategy. Best Buy chose to concentrate on China’s wealthier but hotly contested urban centers. When AMD entered China in 2004, it focused on sellingto attract price-sensitive consumers in rural markets. In this way, it could avoid competing with Intel, then the market leader.

Consciously or not, in entering China through the rural market, AMD was copying a strategy that was behind the success of many of China’s current champions. Pinduoduo, the largest interactive e-commerce platform in China, founded in 2015, is a case in point. Founder Huang Zheng initially focused on serving China’s less affluent cities or villages, thereby avoiding competition from the likes of Alibaba and JD.com.

Huawei, now a gigantic telecommunications provider, also got started in the countryside. When the company was a young firm selling network switches in the early 1990s, it faced tough competition from the incumbent multinationals Alcatel, Lucent, and Nortel Networks. Founder Ren Zhengfei understood that Huawei would not have a chance against those giants, and to avoid them, Ren targeted market niches that were low income and difficult to access. His salesforce went from village to village.

Ironically, the strategy behind these successes also features in the playbook of Mao Zedong, the founding father of Chinese communism and an arch enemy of Western capitalism. As a young military commander in the 1920s, Mao realized early on that the traditional Marxist-Leninist revolutionary strategies of mobilizing factory workers in cities to seize political power would not work in China. With an overwhelmingly rural economy, the country had too little industry and too few factory workers.

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