International - Business Plan Example

International Business International Business International Business Group: China Mohamad Hachem Import Clothes from China Part 1: Product/Service Description The business plan selected for our group involves importing apparels from China for marketing and distribution in Canada. Clothing is a necessity for the civilized society and our company foresees great potentials for this product to be sold in Canada. The primary reason for selecting this product to be imported and sold in Canadian market is due to the increase in population and increase in overall consumer spending on apparels. Another motivation has been driven in lieu of the current economic crisis which suggests the consumers are looking for reasonably priced clothing. However, it is to be kept in mind that the apparel selected for selling in the Canadian market needs to be according to the trends of the market they will be marketed in. The reason for selecting China for this product is due to the benefit from economies of scale. The textile products from China are considered to be cheaper and of reasonable quality as compared to other possible markets which can be accessed to import from. The product that our group has decided to import from China is apparels. Our company aims to market apparels for market segments identified on the basis of gender differentiation and age bracket from the age of 16 and above. In this way the company aims to cater adult clothing for both men and women. In order to meet our company’s objective we will import clothing items like trousers, shirts and t-shirts for men and formal as well as casual wear for females. The product line for men will include shirts both casual as well as formal, t-shirts, trousers, jeans, suits and sportswear. For women, we intend to provide tops, trousers, suits, blazers, night wear, jeans, skirts, gowns and beachwear. The product line is meant to aim that a person can have the entire range of clothing from party-wear to office-wear. However, this requires careful selection and planning as apparels is relatively seasonal item and fashion trends can change rapidly making clothing line outdated and difficult to sell. Moreover, the overall cultural and social values prevailing in the market are major drivers of apparels market. Therefore it is further suggested that the company will make selection of apparels from suppliers in China on the basis of the designs of clothes that are in line with the social and cultural preferences of the people living in Canada. Part 2: Country Analysis The country selected for purchase of apparels to be marketed in Canada is China. China has emerged as a global economic leader offering great opportunities for businesses locally and globally. The decision for choosing China for sourcing of apparels for Canada is based on the following country analysis which evaluates the country’s overall conditions and feasibility for doing business in this country. Business climate and political stability The full name of the country is People’s Republic of China that was established in the year 1949. The Chinese dynasty marked most of the country’s history which was replaced in the year 1912 by the Republic of China. The country has remained a communist regime with one party that is Chinese Communist Party ruling the affairs of the country with very small representation of other highly regulated parties in the National People’s Congress. Thus, the country is a people’s democratic dictatorship according to the constitution (People.com, 2007).The political system in China is very elaborative with 23 provinces, 5 autonomous regions, and 4 provincial level municipalities with capital at Beijing. There are separate administrative establishments for Hong Kong and Macao. The controversy revolves around the inclusion of Taiwan as one of the China’s provinces and exertion of pressure over the state. Furthermore, contentions in Tibet have raised concerns by the UN and other countries as the government seems to be violating human rights in this region. China is amongst the largest growing economies in the present times. The country has been following highly successful economic reforms started in 1949. After some shocks in 1960s and 1970s, the country redefined its economic policy to develop what is now called as “State Capitalism”. This ideology which is also referred to as a “Socialist Market Economy” has resulted in a high and stable growth for the country’s economy. The large population of the country presents a huge market for the clothing industry. Geographical Issues The country is second largest in terms of size in the world. The country is surrounded by Yellow Sea and East China Sea in the east and mountain ranges (Himalaya), high plateaus and Gobi desert at the west. The country is facing a grave threat of desertification (The Independent, 2007). The major rivers of the country are Yellow river Yangtze, Brahmaputra, Amur, and Mekong. The country borders with countries including India, Nepal, Pakistan, Russia and Mongolia. Legal Framework China has a judicial system which consists of people’s courts, the Supreme People’s court, the people’s procuratorates, military procuratorates and other special people’s procuratorates, and the Supreme People’s procuratorate as the highest prosecutorial agency in China (lawinfochina, 2009). The country follows major international conventions on protection of IP. The various laws for protecting IP and unfair competition in the country are: Trademark Law, General Principles of Civil Law, Regulations on Customs, Protection of Intellectual Property Rights, Law against Unfair, Competition of the PRC, Copyright Law of the PRC, and Patent Law of the PRC. The laws are implemented by the State Intellectual Property Office. However the implementation is quite weak and the country has rampant copying of copyrighted things. Protection of intellectual property The infringement of intellectual property is a common issue in China. Foreign companies investing in the country are faced with problems as the intellectual property piracy has caused severe contentions between foreign investors and local Chinese companies. However, it is observed that China has poor regulatory framework to curtail this problem and furthermore local companies are provided protection in such cases which is undermining confidence in the local market. Foreign investors have been concerned with this situation as local Chinese companies are not only copying brands but also other intellectual property such as product designs and technology. These Chinese companies have also been successful in gaining access to markets in South East Asia and particularly in Russia and Africa. This has been the case of many international companies such as D&G, Gucci etc which have lost millions of dollars because of copyright infringement. which have shifted their plants to China but are facing greater challenges from counterfeit products and misuse of their brands. The government of China has realized issues of IPR affecting country’s image and has implemented several laws to overcome these problems but concrete results are yet to be achieved. Regional Cultural Variation Regional cultural variations are obvious in China. The country is mostly agricultural state with major concentration in the Western provinces where as the Eastern provinces are industrialized. Major cities of China which have been the economic powerhouse of the country are very much influenced by the culture that exists in Europe and American. As people living in these areas have high levels of income there are greater tendencies towards spending on commodities which are considered as luxuries by those living in the agriculturally dominated areas of the country. The regional cultural variation in China could be understood from the following remarks made by E. N. Anil in the China Daily “The Chinese are a people with diverse physical traits, dialects and traditions. They are multi-cultural, multi-religious, and a multi-ethnic society, having as many 55 ethnic groups as diverse and interesting as the geography and the history of the country they inhabit. Several of them are descendant of Arabs who came here via the Silk Road in early centuries” (Anil, 2008). Business customs and practice Chinese business customs and practice are very different from those followed in the Western countries. In China business customs are spiral and much more informal compared to others. The communication is nonverbal and the use of indirect language is common. In case of conflicts mediation is carried out through third parties instead of relying on courts. The relationship between Chinese companies and clients is based on a formal agreement which is based on written terms and conditions. During business meetings gestures are informal and friendlier than practiced in the western countries (Legacee, 2009). Religion, Culture and Language The major religions followed in China are Buddhism and Taoism. In addition to these there is a large population belonging to the religion of Islam residing in the Western provinces of China. The culture is based on the principles of Confucianism and conservatism. The May Fourth Movement and the Cultural Revolution initiated by the CPC in 1949 were the major influencers in the 20th Century. The official languages of the country are Standard Mandarin (spoken) and Simplified Chinese (written) (PPRC, 2000). The Chinese culture is marked with festivals and there are several holidays in calendar years which are given in regards to celebrations of the Chinese events such as Chinese New Year, Dragon Boat festival, Lantern Festival, Moon Festival etc. People living in China are friendly and they are welcoming to foreign businessmen and millions of tourists who travel to China every year to have the pleasure of its beautiful landscape and architecture which marks the Chinese culture for many centuries. Attitude to foreign investment and repatriation of funds China had a mixed pattern towards foreign investment which has evolved from much stricter stance in earlier years to presently much relaxed policies of the government. The era initiating in 1970s saw a change in the government’s attitude towards foreign companies coming into the country with their investments. However, foreign investment was restricted in a way that these investors have to enter into some form of joint collaboration with local Chinese companies. The liberalization of economic system has allowed the economy to grow at rates unparalleled to any other economy (Zhang, Krug, & Reinmoeller, 2006). With more foreign companies targeting Chinese markets for selling their products and services the government’s aim to achieve greater FDI however there are certain issues which are of concern to foreign investors. The Chinese government allows 90% of profits to be repatriated from businesses carried out by foreign companies in China. This also requires registration with State Administration for Foreign Exchange (SAFE) and companies need to report to them the amount of capital that remains within before remitting any amount of profits (NZTE, 2009). Tax system Before remitting profits from business in China foreign companies need to submit their tax returns Chinas State Administration of Taxation (SAT) for assessing the amount of Foreign Income Tax payable by these companies. The tax structure allowed preferential income tax rate of 15% to foreign companies as compared to 33% charged to local companies. Foreign companies also had tax benefits which were considered unfair by local companies (Chung, 2007). The government of China has taken some initiatives to pull back some of the tax breaks which were offered to foreign companies. The current tax regime has put a 25% income tax on profits generated by business and appropriated to foreign investors based on their share in the capital (Weizhen, 2009). Reference List Anil, E. N. (2008). Regional Differences. Retrieved November 10, 2009, from FactsandDetails.com: http://factsanddetails.com/china.php?itemid=115&catid=4&subcatid=18 Chung, O. (2007, April 11). How foreign firms dodge taxes in China. Retrieved November 11, 2009, from Asia Times Online: http://www.atimes.com/atimes/China_Business/ID11Cb02.html Independent. 2007. The gathering sandstorm: Encroaching desert, missing water. [Online]. 9th November, 2007. Available at: http://www.independent.co.uk/news/world/asia/the-gathering-sandstorm-encroaching-desert-missing-water-399653.html Lawinfochina. 2009. Legal System of China. [Online]. Updated on: 13th October, 2009. Available at: http://www.lawinfochina.com/Legal/index.asp. Legacee. (2009). The Global Leader: Understanding Chinese Business Culture and Business Practices. Retrieved November 11, 2009, from Legacee: http://www.legacee.com/Culture/CultureOverview.html NZTE. (2009). Navigating China. Wellington: New Zealand Trade & Enterprise. Weizhen. (2009). Taxation of Foreign Enterprises in China. Retrieved November 11, 2009, from Weizhen Global Consultants: http://www.wzreg.com/en/business.asp?id=22 People.com. Constitution of the Peoples Republic of China. [Online]. Updated at: 29th May, 2007. Available at: http://english.people.com.cn/constitution/constitution.html. PPRC. 2000. Law of the Peoples Republic of China on the Standard Spoken and Written Chinese Language (Order of the President No.37). [Online]. Updated at: 31st October, 2000. Available at: http://www.gov.cn/english/laws/2005-09/19/content_64906.hcbbtm. Zhang, X., Krug, B., & Reinmoeller, P. (2006). Historical Attitudes and Implications for path dependence: FDI development and Institutional changes in China. 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