Global Market Expansion To China - Essay Example

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[Insert Case] Global Market Expansion To China [Insert Texas A&M Commerce In partial fulfillment of the requirements for [Insert Subject] [Name of Professor] [Date of Submission] Table of Contents Abstract………………………………………………………………………………………...3 Introduction…………………………………………………………………………………….4 Why China? …………………………………………………………………………………...5 Global Marketing………………………………………………………………………………6 The Business and Consumer Market…………………………………………………………..7 Organizing for Global marketing………………………………………………………………8 Factors to Consider…………………………………………………………………………….8 Culture………………………………………………………………………………….8 Social…………………………………………………………………………………...8 Policies…………………………………………………………………………………9 Technology……………………………………………………………………………9 Achieving Global Competitiveness…………………………………………………………..10 Conclusion……………………………………………………………………………………11 References……………………………………………………………………………………12 Appendix A…………………………………………………………………………………..13 Appendix B…………………………………………………………………………………..14 Abstract Over the past decades, companies have been expanding globally in order to tap and develop new market opportunities and also to expand the scope of their operations, availing of cheaper resources and other commodities to better optimize their performance. Basically, global trade also entails that countries will open their doors for products from other nations to penetrate their markets. In expanding company operations and outsourcing labor, China has always been the nation that is the center of discussion. Basically, because of the very low labor, manufacturing, and operational expenses in China, it has attracted many other companies to make it the gateway of their expansion into the global trade. Also, China is the fastest growing and largest consumer market in the world, yet it is interesting to note that many overseas retailers have struggled and failed in that market (Rein, 2011). There is a Chinese proverb which says, “don’t test the depth of a river with both feet.” This paper will seek to guide our company through the steps and strategies that we have to undertake in order to understand and succeed in the global marketing expansion of the company. Introduction With the premise that our company has maximized our marketing capabilities within the geographical bounds of our nation, we must then realize that the next logical step is to expand the scope of its operations in order to cater and discover more market opportunities. But unlike the operations in the domestic territory, there are many factors that need to be considered and evaluated if the company is to be successful in its expansion. Global marketing has been a trend of the past decades since it utilizes the advantages of other nations in an exchange of trade of commodities which will hopefully promote healthy competition and stimulate economic development of the parties involved. But in order to take advantage and come up on top, the complexities of global trade should be analyzed and strategies should be laid out by the company. The strategies to handle the vast supply chain management system and the added value system must be developed and implemented (Lee, 2012). This research paper, therefore, aims to provide the company with the general knowledge regarding global trade and why China is the best option for expanding, exploring, and investing. Strategies for successful global marketing are also highlighted in order to pave the way for the transition of the company from a domestic market to the international trade market. Why China? Appendices A and B illustrate that China is a very ripe market for consumers and global expansion. Data in these appendices shows that China is behind only the USA in its GDP. Over the past 30 years, the nation’s economy has grown with an average rate of barely 10% per year; by 2010, it has taken from Japan a status of the world’s second largest economy (Trade and Investment: China, 2011). This entails that, next to America, China has the most promising market population and is, therefore, a ripe nation for investment and business ventures. It is very evident that with it being the second largest economy, it is only timely and logical that it is targeted as a key market as regards the international trade and investment. It is also important to note that the focal point of China’s development spurt was caused by its economic reform process wherein it encouraged foreign direct investments (Fung et al., 2002). It is very interesting to note that China is America’s second largest trading partner in manufactured goods (the first one is Canada because it is still operationally more efficient considering the geography and proximity of China to the USA). This is largely because the hourly compensation of China’s manufacturing working class is only 4% of that of the worker in the United States (Banister & Cook, 2011). The payment level is far below that in the neighboring East Asian countries like Japan and Taiwan and even in India and Philippines. Disregarding implications this may have to the Chinese economy, it is very beneficial in the operational stand point of the United States since it presents an enormous opportunity for company savings in the labor expenses. Needless to say, this is one of the very attractive commodities in expanding operations in China. With their country not lagging behind technological advancements, it is not such a risky move if the quality and efficiency of production is to be considered in the bigger picture of the operations of the company. Also, as mentioned before, it must be stressed that what makes China a very lucrative and attractive nation for global marketing is that its policies are geared towards accommodating foreign investors into its territory and nurturing them (Fung et al., 2002). With their economic policies, foreign direct investments flowed resulting to the surge of their economic developments. Since 1990, China has the world’s largest FDI among developing countries (Fung et al., 2002). Global Marketing The rationale behind global marketing is that the world has no center and no boundaries (Lee, 2012). It means that all countries interact with one another. This does not discriminate between powerhouse economies and emerging markets. This market internationalism links and ties up the international interests of the market and also influences the global consumer preference, which results in a similar experience and demand of consumers. But although likeness in demands can be established, it is still a complex market expansion move since customers from around the world have different preferences and tastes that are heavily dictated by their culture. Political strategies and boundaries also set precedence over international trades where from one region to another there exist different and seldom clashing policies and laws that heavily affect the gameplay of the company as compared as to the situation when it only limits the operation domestically. While domestic marketing is limited to the domains and lands of a regional established space, international marketing, on the other hand, takes place anywhere the marketer finds an opportunity to expand around the world. With the emergence of the Chinese economy, other countries are forced to compete with the advantage that they have conjured which is the low-skilled labor and the low cost of product it entails (Herd, 2011). It is imperative in global marketing that one should play on the strengths that are available and not compete against them. Therefore, in the next pages of this paper, it will be detailed as to how to take advantage over China’s economy. The Business and Consumer Market Before expanding the marketing operations of the company, the market to target must first be identified. There are two kinds of market, the business market and the consumer market (Kotler & Keller, 2009). Business markets are the organizations or entities that purchase and acquire products and services for the benefit of using them for another production process in order to come up with another product or service. In the exchange of ownership of products through business markets, value is added in every step until it reaches the consumer market. The business markets must therefore be able to understand what values customers are looking for and how they their products and services must be tailored in order for consumers to get the value they want. It must be realized that the supply chain management system of a company plays a critical role in developing these values and also minimizing the costs of the final product in order to maximize profit and maximize the appeal to consumers. This concept is important to understand the global trade. With the change in geography and demographics, it is important to track and monitor the business markets that will benefit from the movement of the products. Some regions may offer more benefits in a particular product system, while other nations might give the advantage to another aspect. By putting this into perspective, in order to maximize the outcome of global marketing in China, we must, therefore, understand the strengths in mid-level or business market level purchases. By understanding China’s advantages such as the low labor costs and the foreign investment friendly policies, our company may consider to outsource majority of the production processes to this region. The company can also incorporate systems buying and selling wherein we buy a total solution from one seller in China for the sub components of the products (Kotler & Keller, 2009). Organizing for Global marketing For the company to develop successful global marketing strategies, it needs to consider the demographics and expectations of the consumers. By doing so, the company can assess and develop analytic competence in segmenting the market in order to position the product better. The next chapter of the paper will indicate the factors that should be evaluated in organizing the approach for global markets. Factors to Consider Culture Consumers’ behavior is affected by their culture, which is the “fundamental determinant of a person’s wants and behaviors” (Kotler & Keller, 2009). The environment where a person grows up will shape his or her preferences and values that are essential for purchasing decision process. With this premise, by engaging in global trade with China, we must understand the culture of this country if they are to be the consumer market of our products. Religion, language, national and regional tastes, and morals of their society should be considered (Hamilton & Webster, 2007). Society The social interaction also shapes consumers’ market preferences. The life expectancy and the average ages of the people living in the region should be considered so we can have a better knowledge as regards the types of markets that are available and the groups that can be segmented in order to position the products of the company better. Policies As have been mentioned earlier, the policies of global and international trade in China are favorable for investors. Therefore, the company will have no problems investing and expanding operations in China. With the country’s policy supporting the low labor rates, it will also prove to be a very good advantage to outsource manufacturing processes to this region. Ultimately, the goal of global marketing is to promote free trade throughout the whole world so that there are no boundaries of any kind in international trading. Therefore, tariffs will eventually be removed to foster oneness in the world. Technology A good example of technology aiding global trade is the success story of Wal-Mart. Advancements in technology paved a way to improve the retail industry. The barcode system revolutionized the retail industry much more than any other inventions or innovations. Wal-Mart made such good use of this advantage that it can be named a reason for the company’s dominance in the world retail industry. With the company practicing lean inventory by fast turnover rate and high replenishment of goods, accurate and real-time data management and monitoring became a necessity. No opportunity loss is allowed when the stock is running out; however, minimizing inventory levels is also important so that the product is not overstocked. Furthermore, this allowed Wal-Mart to have an efficient operation in its worldwide markets. This enabled them to provide the lowest prices for their consumers and, ultimately, also pressured their suppliers to cut down their expenses. This can also be traced as one of the reasons why many American companies were outsourcing to China their manufacturing departments. With the advent of new technologies, new marketing opportunities have also risen and the creation of value adding opportunities has been developed. Our company must be able to understand this medium for marketing since 1.7 billion people worldwide access the internet and nearly 50% of the internet population dwell on the Asia pacific region (Lee & Carter, 2012). Achieving Global Competitiveness The first and very essential step in international trade is exploring the vast global market and finding a niche international market which has similar needs to those of the already established domestic market consumer. By focusing and targeting this kind of a market, the company will obviously be risking less since it has the advantage of not going blind in this kind of investment as the domestic experiences prove very useful in establishing dominance over this new target market. Conclusion Marketing is not about the product, it is about the people. Therefore, products have to be tailored for the people if a company is to create success. Due to cultural, political, regional, and other differences, our company must adjust our strategies to fit the new market segment targeted for our expansion. It is also imperative to use strengths of a company and not to engage in a niche where many other players work. In China, for example, since there are have huge advantages in terms of manufacturing in the country, the company can perhaps take an approach of adding value to the product by increasing the quality on the service level. Also, by considering the factors that affect marketing, especially on the global scale, the company must take advantage of segmenting the market and attacking it using the modern technology. References Banister, J. & Cook, George. (2011). China’s Employment and Compensation Costs in Manufacturing Through 2008. Monthly Labor review. March 2011 issue. Fung, K. et al. (2002). Foreign Direct Investment in China: Policy, Trend and Impact. Hong Kong. Hamilton & Webster. (2007). The International Business Environment. Oxford: Oxford University Press. Herd, Richard et al. (2011). China’s Emergence as a Market Economy: Achievements and Challenges. OECD Better Policies for Better Lives. Kotler, P. & Keller, K. (2009). Marketing Management (13th ed). Upper Saddle River, NJ: Prentice-Hall. Lee, Kiefer & Carter, S. (2012). Global Marketing Management (3rd ed). Upper Saddle River, NJ: Prentice-Hall. Rein, Shaun. (2011, March 7). Why Best Buy Failed in China. Retrieved from http://www.cnbc.com/id/41882157/Why_Best_Buy_Failed_in_China House of Commons. Business, Innovation and Skills Committee. (2011). Trade and Investment: China. Eighth Report of Session 2010-12. Appendix A TOP 10 GDP List by the International Monetary Fund (2011) Rank Country GDP (PPP) $Million  World 78,897,426  European Union 15,821,264 1  United States 15,094,025 2  China 11,299,967 3  India 4,457,784 4  Japan 4,440,376 5  Germany 3,099,080 6  Russia 2,383,402 7  Brazil 2,294,243 8  United Kingdom 2,260,803 9  France 2,217,900 10  Italy 1,846,950 Source: World Economic Outlook Database, April 2012, International Monetary Fund. Accessed on May 3, 2012. Appendix B TOP 10 GDP List by the World Bank Rank Country GDP (PPP) $Billion —  World 76,647.403 —  European Union 15,878.231 1  United States 14,586.736 2  China 10,169.521 3  Japan 4,301.822 4  India 4,194.856 5  Germany 3,044.241 6  Russia 2,812.383 7  United Kingdom 2,233.883 8  France 2,194.118 9  Brazil 2,185.421 10  Italy 1,908.569 Source: World Development Indicators database, World Bank. Accessed on May 3, 2012. Read More