The Management in China and the Chinese Business Policies - Essay Example

? Regulation and Management of Global Community:China Regulation and Management of Global Community: China Introduction It will be acknowledged that China is one of the leading world economies currently given their population density. The purchasing power in the country is relatively higher and there is high demand for the fast foods though different from those that are offered in UK. There are a considerable factor that should be considered by the UK branch before they venture into the business fully. Since China will be a new market for the expanding UK restaurant, they have to acclimatize themselves with certain strategies relating to fast-food restaurant in China, these includes; the government policies on foreign investments, the location of the business, and the kind of competition involved. These factors are important for enabling a critical evaluation of the business possibility of succeeding in the foreign country. Unlike in the UK, the fast food that are experienced in the Chinese market are different, for the business to succeed in China then, they have to consider those factors that relates to the type of food that is common or favourite in the Chinese culture. The same taste and preference that is experienced in UK is not the same one that will be experienced in China, for instance when in the UK most restaurants deal in fish and chip, in China the list expands to include fried bread sticks, roast chicken, soybean porridge, porridge, fried stuff buns and so on. As such, the management of the company should be conversant with the factors listed in order to realize success in the foreign investments. Relating to the foreign investment again, the management should be cognizant of the political, economic, and social (cultural) challenges that they are likely to meet while operating the business in China, they are reported below. Political Risks that might face the Management in China Foreign countries are always faced with a number of political risks and the fast-food restaurant is not an exception, as such, it will have its fair share of the risks. One of the most common political risks that will be faced in this relation is the taxation policy; China is a country that boasts of their domestic consumption given their large population. They also give preference to their local businesses first particularly in areas that need no specialized expertise like running a restaurant. The Chinese business policies are designed to support the local business and this is through giving higher taxation to the foreign countries as a way of discouraging them from doing business in China. If the business opt to consider China as their next business zone, they will have to contend with the higher rate of foreign businesses taxation, in other words, the profit margin for the company will be tremendously be reduced owing to the taxation policy. In a bid to control the influx of foreign businesses in china, the government of China has instituted bodies that regulate the extent though which foreign businesses are invading the Chinese market. Most of the regulatory bodies are keen to block those businesses that are dominant in the country, fast-food restaurant is one of the businesses that have dominated the Chinese market for a long time and there are chances that the UK branch investment will not be allowed to operate in the country (Adekola and Bruno 2007, p.34). Before allowing foreign business to operate in their country, China is keen to look into the benefits that they will accrue from the business. They have to look for factors such as will it create employment opportunities to the citizens, will it pay taxes, or will it just give unhealthy competition? In this case, starting a fast-food restaurant will be considered to bring unhealthy competition to the local business and chance are that they will not permit it and if they do, it is highly probable that they will have to introduce measures and controls for the business. The Chinese government introduced a policy that supports the local businesses through grants and initiatives; this is coupled with widespread home market lobbying through the pressure groups who appeals for the local products. Through these initiatives, it is true that the foreign business will be given a raw deal and will have to do extra work to counter the strong support that comes from the government (Paul 2009, p.53). The implication in this case is that the local products from the restaurant will retail at competitively low prices, when these is happening, the foreign business will be having the burden to pay heavy taxes and still retail their products at the competitive prices which is very difficult to maintain unless the turnover rate is extremely high . The business will have to consider this factor to help them arrive into that decision that is cognizant of all the variables facing them in the country of choice, China. It is true that China has ready market for any business given their number, it is also important to consider government regulations, policies, and laws that relates to the international business, in China, they are not favourable unless the business is technological in nature (Clark 2005, p.27). One factor that should be considered by most business is the government policies regarding the proposed business, there is no government that does not give absolute preference to their local people in those things that they can do. This is in a bid to avoid unfavourable balance of trade when doing business with others, it also make the local business thrive by not being subjected to fierce competition by the international groups (Longenecker 2012, p.39). The government is keen not to let the feeble local business face off with the more stable international businesses and the only way they can balance off the trend is by increasing responsibilities for the foreign businesses that in the end, they are disadvantaged and cannot favourably compete with the local businesses who are in this case advantaged. The company should expect these political risks even when they are going to venture into the business in the country. Economic Challenges in China It is certain that China is one of the biggest economies in the world today, the country experience high consumption rate and in most cases, it will lucrative to do business in the country given the ready market. Fast-food restaurants are therefore one business that can experience a boom in China given appropriate preparations and research. Notwithstanding, there are also some of the economic factors that must be looked into so that the management can make informed choices having been made aware of such. The management has to look into home economy of the country that they are interested to do business, like in this case China, it has to be realized that china experience heterogeneous economy (Johnson and Colin 2010, p.56). There are certain parts of the country with stronger economy compared to others and the management should consider these factors because if they opt for those places with weak economy, they are not likely to make business out of it. For instance, those provinces in the coastal parts of China tend to be more industrialized and the management should consider establishing their business in such areas given the strong economy. Research has shown that fast-food restaurant can only do well where the economy is strong, if the management will establish the business in main land, they are likely to experience low business in most cases hence not worth the investment. The management should thus consider parts of the country situated in the coastal regions such as Zhejiang and Fujian; these areas have stronger economies that will not experience low season for the fast-food products (Wall and Bronwen 2006, p.45). When this is established and a resolution reached, the management can consider opening several outlets along the coastal region so that they can maximize sales and opportunities that the place presents. The other important factor that will be affecting the business is the market routes and the trend of distribution in the country. In China, particularly in the coastal areas it is very difficult to have a reliable market routes and distribution trend if one is new in the business. The management should thus be quick to establish the business routes, know their supplies and the marketing strategies that they can use to make inroads in the market (Sen 2008, p.34). If this is not done fast enough, the business will experience serious repercussions in terms of satisfying the customers by making ready the varieties of fast-food stuffs that are available in China. The other challenge is that there are many similar businesses of fast food in China; hence, the business then must devise a strategy to cut a niche in the competitive market. They will have to learn about their competitors who enjoy a strong brand name that they have established for a long time, again, they should know the needs of their target customers and conform to it. They should also use their unique experience that they have from UK to make a difference in China and see if it can work to their advantage. Social Factors (Cultural Difference) The fact that the business wants to operate in a place that depicts a very different culture is very challenging, they will be operating in a place where perception of the people are different from those of their indigenous business area. Cultural difference is fundamental to be understood in situation like this, if one do not understand the culture of the people, it is impossible to do business with them. For instance, there is a great difference in menu of fast foods as will be noticed in China compared to that of the UK (Nieuwenhuizen and Barney 2007, p.63). In this reference, the business will have to consider seeking all the possible fast foods in China, there recipe and the expertise that will be making them in their established business in China. This is the number one priority factor to be considered in this course, the management must ensure that they avail those stuffs that conform to the tastes and preferences of the target customers. There is another cultural issue in China concerning consumer attitude and opinion, thought the economic plan in China, they are made to believe that they should promote their own businesses for internal growth; this is one factor that has been responsible for the enormous economic growth as seen today. The implication of this is that most of the Chinese customers will prefer fast-food restaurant that are run by Chinese because of their concern to develop their indigenous people. In this regard, for the business to grow, they should consider having all their employees I the restaurant being Chinese to create the perception of ownership, the UK branch should just be actors in disguise and should not be noticed to be foreigners in any way. The management should consider that Chinese are very sensitive in choosing whom they shop from, they believe in their own making and they should be pertinently about this (Stokes and Nicholas 2010, p.68). As it has been said before, there are many challenges that the business may face while operation in China that relates to ethics, and certain religious and cultural issues. The management through engaging the indigenous people in the business will learn some of the concerns that must be considered when dealing with the Chinese. It is important that when doing a business in the foreign land, you understand the ethical consideration in the region otherwise; you may find yourself conflicting with most of the established ethics in the region depicting the business in bad light. Following these development, the business will have to consider certain factors such as the lifestyle of the people of China, the demographic factors that should be most targeted for their products and the factors affecting the purchasing power of the people in the locality of the business (Kluwer 2010, p.17). When these entire factors are well considered and the business starts operating, the management should also invest in the advertisement and publicity of the business citing the uniqueness of the business in the most appealing way possible. Recommendations Given the challenges that are likely to face the management in their endeavour to start an international fast-food restaurant in China, there are need to put measures into place so that they can be in a position to engage in a business with returns. Firstly, the company should consider doing PESTLE analysis as well as SWOT analysis to identify their strengths and areas of weaknesses, upon this realization, they could use the information to project on what should be done to ensure that they have conform to those factors that are necessary for their survival in the foreign country. With regard to the political factors that might work against the business, the management should confer with the authorities and inform them of the intention of the business and the benefits that the business will have to bring into the country. They should state on the number of the employees they intend to employ in their business, all of them of which will be paying taxes to the government, this means that the existence of the company will be of benefit to the country. They will be reducing the rate of unemployment in the country and making the government earn through taxation. In such cases, the business is always given less punitive tax measures, and this will relieve that business of the excessive burden of paying taxes when they can employ their citizens. On the economic factors, the business should be situated in an area that has a strong economy, and as stated previously, most of the areas in China with strong economy are those that are situated along the coastal region. These areas are highly industrialized and most of the people have extra money to use in buying fast foods. This is a very critical factor in succeeding in the business, fast food products are not part of the basic items in life, if the business is situated in areas that are not stronger. There are chances that there will be low turnout given that the population there will be satisfying there basic needs first before they can consider luxury products like those of fast foods. This is the sole reasons that dictate that the business has to be position in areas that are known to have a strong economy and people can buy fast food anytime they wish without experiencing any economical hitch I relation to the purchase. On the cultural issues, the management will have to oblige and conform to the culture of the people in that region, similarly, they can also opt to introduce new products in the area to test waters with it and observe the response. The management will have to offer the products in the fast food that are in tandem with the needs of the people, the ethics and other cultural peculiarity as will be learnt from the people will have to be adhered to. This is the most challenging part given that they have for a long time only been in the UK market and have not experienced those of other areas. References Adekola, Abel, and Bruno S. Sergi. Global business management a cross-cultural perspective. Aldershot, England: Ashgate, 2007. Clark, William C.. Learning to manage global environmental risks. Cambridge, Mass.: MIT Press, 2005. Johnson, Debra, and Colin Turner. International business: themes and issues in the modern global economy. 2nd ed. Milton Park, Abingdon, Oxon: Routledge, 2010. Kluwer, Thomas. Small business management launching and growing new ventures.. 4th Canadian ed. Toronto: Nelson Education, 2010. Longenecker, Justin Gooderl. Small business management: launching and growing entrepreneurial ventures. 16th ed. Mason, OH: South-Western Cengage Learning, 2012. Nieuwenhuizen, C., and Barney Erasmus. Business management for entrepreneurs. Cape Town: Juta, 2007. Paul, Justin. International business. 4th ed. New Delhi: PHI Learning Private Ltd., 2009. Sen, Mridul. Business management. Jaipur, India: Oxford Book Co., 2008. Stokes, David, and Nicholas Wilson. Small business management and entrepreneurship. 6th ed. Andover: Cengage Learning, 2010. Wall, Stuart, and Bronwen Rees. International business. 2nd ed. New York: Financial Times/Prentice Hall, 2006. Read More