International business: The economy of China - Assignment Example

?International Business Introduction The company is a UAE-based company started in 1950 as a family tailoring shop. Since then, the company has expanded and currently, it specialises in historic Islamic inventors. an example of this product is cannons that were worn used during Islamic medieval times. The company has a stable market given that it operates in a region where the Islam is the official and the largest state religion. Over the recent years, the company has experienced growth in its production and market share within the United Arab Emirates. The company would like to expand its operations to cover the overseas market, specifically China. The company was prompted to do this because of the increasing Islamic population in China yet there is only one company that produces these specific products. Choice of overseas market As stated above, the company was motivated to expand its operations to China because of the increasing Islamic population and yet there exists only one company that meets their specific needs related to products of historic Islamic inventors. The Muslim population in China includes both Chinese Muslims and immigrant Muslims. According to the 2009 census, there were 21,667,000 Muslims in China (Pew Research Center, 1). This is an indication that there is a large potential market for the products that will be produced by the company for the Chinese market. This market also has the potential of expanding due to the revival that Islam is experiencing in China. The company conducted a brief needs analysis among the customers in this market and found that some of the potential customers backed away from Historic Islamic inventors present in the market because of their high prices. This group mainly comprised of people of middle and low class. Basing on this information, the company established that there is a large and ready market in China for its products and it intends to use the low price strategy to capture this market. Even with lower prices, the company is bound to achieve an economic value in its operations in this market because of the expected high sales. There is a high concentration of Chinese Muslims and immigrant Muslims in urban areas compared to rural areas. There is therefore a high accessibility to the target market. Market Analysis China is a peaceful country and has enjoyed a good political stability over the recent years. Its political situation is therefore less likely to disrupt the operations of the company once it begins operating in it or when it starts exporting its products to China. The company is based in an Islamic country and therefore the political situation in relation to Islam in its target market is very important. Israeli (106) explains that in 1978, the Chinese government started to relax its policies towards Islam and currently, Muslims are not sidelined. The same applies to companies owned by Muslims or those based in Islamic companies. All other factors held constant, there are high changes of the company experiencing growth because of the existing political situation in China. The economy of China is good and this increases the chances of the company achieving good levels of business. English.eastday.com. (1) reveals that unlike the communist China, one important feature of the economy of the modern-day China is that it is based on private ownership of property. Being a private company, the economic climate of China is good for establishment and growth of the company in its overseas target market. The average economic situation among the Muslims specifically is also good and this means the company does not have to sell its products at a price too low to make significant profits. Although the 21.6 million Muslims comprise only 1.6% of the total population in China, this market is substantial for making good business. The infrastructure of China is well developed and therefore accessibility to customers will not be an issue to struggle with. With the nature of product that it produces, the operations of the company and its all year business are not likely to be affected by the topography and geography of China. China has large population, with a significant percentage of unemployed people. The company therefore has a large ready labour market. This labour market is also cheap compared to labour market in the UAE hence the company does not in any way require to export labourers from the UAE. As stated above, there is only one company in China that produces historic Islamic inventors like those produced by the company. Despite this, the company’s needs analysis report indicates that customers are ready to experiment on similar product from a different company that is ready to offer them at a cheaper price. The combination of these factors indicates that the company does not have a strong competitor in its overseas target market. The company therefore has a chance of entering and prospering in this market by offering its products at a cheaper price. Market Entry Strategy The best market entry strategy that the company should use to enter and establish in the Chinese market is the Greenfield site. This is a market entry strategy in which a company establishes a new operation in its new target market (Lymbersky 364). This means the company has to establish a physical manufacturing company and offices in China while running its normal operations back in the UAE. Although it may require huge capital to begin with and it is very involving, this strategy has significant advantages that outweighs these. Foremost, this strategy is important given that the company has to offer the highest quality of products in order to compete with the long established competitor that exists currently in the market. The company produces very high quality products and that is the basis of its success. This strategy is therefore the most relevant because it ensures products produced have high levels of uniformity. It allows a company to have a big control of its operations like designing, production and marketing. The green field strategy eliminates or reduces price escalation that could be caused by customs, transport or duties. This is important considering that the company is likely to win against its competitor by selling its products at a low price. Customer satisfaction is important and this strategy ensures this because it allows a company to adapt its products to the needs of the local people in its new market. In addition, it will guarantee the availability of goods, minimise delays and potential conflicts arising from resource allocation. As long as the economic and political risks remain low, the company will make more profits as compared to operating as a joint venture or outsourcing its production operations. Once established, the company could have the chance of producing other related products that are going to meet other various needs of the customers of Islamic background in china. This is unlike operating remotely through strategies like outsourcing. Conclusion and Recommendation China is a good target market for the overseas operations of the company. A combination of the above stated factors and analysis of the market indicate that it will be more significant for the company to adopt the Greenfield strategy as its strategy for entering into this market. The company should therefore liaise with consultants in china and get details on where or how to acquire a manufacturing plant. After this, the company should acquire the necessary legal documents and permission then deploy some of its experts to china to oversee the operation of its new manufacturing plant and manage the Chinese workforce employed by the company. References English.eastday.com. (2008). "China is already a market economy—Long Yongtu, Secretary General of Boao Forum for Asia". Online: http://english.eastday.com/e/ICS/u1a4035916.html. Retrieved on 1st November. 2011. Israeli Raphael. Islam in China, United States of America: Lexington Books. 2002. Lymbersky Chrisoph. Market Entry Strategies", Management Laboratory Press, Hamburg. 2008 Pew Research Center. (2009). Mapping the Global Muslim Population: A Report on the Size and Distribution of the World's Muslim Population. Online: http://pewforum.org/Mapping-the-Global-Muslim-Population.aspx. Retrieved on 1st November, 2011. Read More