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China Briefings

Reports on China issued by Samsung Economic Research Institute

Strategies to Enter Second- and Third-tier Cities

Strategies to Enter Second- and Third-tier Cities

Samsung Economic Research Institute Beijing Office

Oct. 13, 2011

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Classifying cities based on economic size and population density helps analyze the consumer markets of the city. Accordingly, 287 cities of at least prefecture-level have been categorized into four types: first-tier, second-tier, third-tier and fourth- and fifth-tier cities. Among them, second- and third-tier cities present business opportunities with their economic development, increasing consumption and large population.

Foreign companies have chosen first-tier cities in entering the Chinese market, raising brand recognition to establish and expand their customer base. However, those cities are now saturated as their economic growth has slowed, brand competition intensified and customers have become more mature. Therefore, they can find good markets in other cities.

The second- and third-tier cities are further divided into four types: managerial-type city, traditional city, manufacturing city and modern-style city, in the order of their growth potential for consumption and businesses. As information dissemination media has changed from traditional and simple type to multilateral and digitalized ones in these areas, those considering entering the market should build strategies based on unique characteristics of each type.

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