How can foreign multinationals effectively respond to design piracy in china?

Abstract

Design piracy is potentially lethal for foreign multinationals making products in China, as high cost designs gets pirated with low manufacturing costs at acceptable quality for low priced sales in China and abroad. Two common options of dealing with piracy are protect and encourage but neither effectively resolve this issue. We therefore suggest two distinct market options. The first option (labelled product enhancement) is to convert products through locally relevant redesign into significantly higher value products that address the small but high potential upper class Chinese who are less likely to seek pirated goods. The second option (labelled service enhancement) is to leverage local low cost services available in China to enhance their products by creating bespoke ethnic Chinese embellishments that appeal to upper-middle class Chinese customers and by creating stronger product-service combinations that lock in the customer. While these options do not prevent piracy, they lead to more China specific products that are less likely to be pirated into international markets. We illustrate how European furniture firm IKEA, can potentially adopt both these modes in combination to create a distinct market space in China, without compromising on their product designs or low cost business processes that are effective worldwide.