E-Commerce in China - Research Paper Example

E-Commerce in China Table of Contents Introduction: 4 PEST Analysis: 5 Political Factor: 5 Economic Factor: 6 Social Factor: 6  Technological Factor:7 Environmental Factor: 8 SWOT Analysis of Taobao: 9 Strength: 9 Weakness: 9 Opportunities: 10 Threats: 10 Suggestions: 11 Advantage: 11 Disadvantage: 12 Conclusion: 12 Reference: 14 Introduction: China is a huge nation, and one of leading manufacturer of chemical, fertilizers and steel in the world. In 2010, Industries of China contributed 46.8% in GDP. The local government of China and many private players are contributing in industrial development of China. Foreign players are also contributing and investing in industries of China (Bradsher, 2012). China is most engaging place for business communities, local and foreign players are investing more in this. Since, China has good legal policies in industry sector; it aids China to develop more rapidly. Like market size, cost of work force and other potential factors are more favoring to industrialist to develop to business in China. However, there are some challenges too that industry developers have to face before starting the business in the market of China. Foreign players have to tackle with cost reduction and local competitors; these are huge challenges for any foreign player. In this we are going to discuss about analysis of electronic market of China with the help of PEST analysis and SWOT analysis of E-Commerce industry of China. PEST analysis of China’ market will aid the reader to understand about its strengths and weakness in aspect of political, economical, social and technological factors, these factors are external factors which aids to analyze e-commerce industry. In other hand SWOT analysis give a brief introduction of Taobao, is e-commerce company in China, so the readers will able to know about the internal’s strengths, weakness, opportunity and threats of the company. PEST Analysis: Political Factor: Political variables incorporate government regulations and lawful issues and characterize both formal and casual leads under which firm must work. Furthermore it is asserted that the political energy is presumably the most turbulent constrain in natures domain (Fahey & Narayanan, 1986). In the previous one decade, the Chinese government appends extraordinary imperativeness and center to the advancement of e-trade in the most crowded nation, for instance, on issuing the Summaries of the Middle/Long Term Science and Technology Development Plans of China and the Development of Information Industry Plans in the Eleventh Five-year and Long Plan in 2020 Years in The Ministry of Information Industry, the "provision of e-business stage innovation" has been recorded as a key point (Lili, 2011). In term of the lawful framework, the Chinese legitimate skeleton for e-trade is still in its incipient stage and has officially accomplished a few issues. China has restricted experience with drafting e- trade enactment for issues, for example, transnational security, protected innovation rights assurance and expense. Whats more regulations supporting zones discriminating to the advancement of e-trade, for example, the protection, buyer rights, and approval of electronic contracts and distinguishment of computerized marks have yet to be composed. Anyhow the lawful arrangement of China does create rapidly to help the e-trade. Economic Factor: Improvement in economic a piece of a nations surroundings could have huge effects on the Small and Medium Enterprises and their exercises. These variables incorporate the aggregate GNP pattern, GDP for every head, exchange rate, inflation rate, natural energy and crude materials accessibility and expense, work level, interest or premium rate, fiscal and monetary policies, policies of bank and many more (Wong et al., 1995).   Social Factor: To recognize the social and cultural factor of China includes close categorization of the general public. Demographic changes, for example, growth of population, developments and age circulation will be vital and cultural qualities and social patterns, for example, family size and social practices (Ralston et al., 1997). Such variables are: Buyer lifestyles Education Environmental issues Immigration/Emigration Demographic issues Religion The quick economic development, there are developing individuals having Internet get to and utilize internet for purchasing online. Numerous individuals represent themselves as Taobaoer by using Taobao, the biggest B2c e-business site. Chinas 420 million users of Internet use approximately billion hours every day online & a year ago, 185 million prepared no less than one online buy. As indicated by Boston Consulting (BCG), the amount is anticipated to build four times as bigger by 2015. Also E-business has as of now been altering the mode Chinese shoppers consider purchasing online. Its another captivating knowledge to relish (Gelfand et al., 2000). Anyhow like numerous other physical purchasing, deceiving and fake items are basic in online retails shops however the most crowded shops have a tendency to offer quality and cost focused items to the clients or will mention obviously the conceivable quality issues of the items in the presentation of the items in the booklets or vouchers. In Chinese trade there should regularly a require and desire for up close and personal call to exist keeping in mind the end goal to develop a feeling of trust which is identified with the Hofstedes idea of independence cooperation in which culture of China is measured as bearing a high aggregate points (Phan, 2005).      Technological Factor:  Technological factors have as feature areas, for example new items being produced, new buying instruments (intranet, additional net), new creation innovation, new dispersion systems (Internet) and fresh strategies for living up to expectations (e.g. versatile information transfers)  (Jixin and Dan, 2009). One technological issue that thwarts the advancement of Chinese B to C commerce is the absence of a steady and safe online installment frameworks and this issue is further fortified by Chinese purchasers inclination for lofty UAI (Hempel and Kwong, 2001). Furthermore, taking into account the point of view of Ortolani here have been just 1% charge card entrance in China recommending that most generally utilized installment system had low acknowledgement in China; and installment framework to help online Visa transaction is likewise confronting low use. The absence of secure online Visa installment framework is single of the vital explanations for this low utilization and entrance (Haley, 2002).   Environmental Factor: Environmental factors submit to all forces specifically related, impacted or dictated by the encompassing environment. This incorporates, however is not constrained to climate, atmosphere, topographical position, environmental alter and even protection. Regardless of the way that environmental security effort is still small in China in light of the fact that the greater part of center and necessity had been credited to the assuagement of destitution and financial improvement which bring about the low open support in environmental assurance work, in late years, with considerable budgetary progression and standard of living raised, wage level and additionally the debasement of environment, the government of China has begun teach people in general regarding the environmental insurance. Furthermore with a combined exertion since the non-administrative associations and media, for example, daily papers, radio and television, we are seeing an expanding environmental mindfulness in people in general bringing about progressions in the buyer practices to put surroundings security in a superior imperativeness stage (YUAN, ZHANG and YANG, 2009).   SWOT Analysis of Taobao: Strength: Taobao is one of the leading e-commerce company in China market, and it followed both business pattern i.e. business to consumer and consumer to consumer. It has more than 200 billion users, these users are registered. As an organization, Taobao is created a strong brand in China market and most popular among the population of China. The company has good relationship with their customers, this give them a more advantage than their competitors (Li, Li and Lin, 2008). They have multiple diversifications in their business, its make them unique from others. For instance, third party online payment system, secure online payment system, these types of features are very innovative and much safe for consumers and sellers. They have good and safe online transaction platform for their customers and sellers in e-retailing sector. Even though, instant messaging and chat system for consumers when they need help and suggestions. In addition, consumers and seller can talk or chat while purchasing and selling product via Taobao (Li and Liu, 2007). Weakness: The website of Taobao is designed for only Chinese people; and it only support in China only. It is a major drawback of Taobao, it stops them to globalize. Contains of Taobao website is written in Chinese language (Ye et al., 2009). In Taobao’s website, there are many fake products are available. Since, the users of Taobao do need to pay any amount to use this website of selling and buying, so the company never verifies their users and its details. Even though, it is very hard for Taobao to monitor their users in regular base. Opportunities: Since, online retail shop is new idea in current market scenario and it has high demand among the population, especial among the youth. This new idea gives a big strength to Taobao in the market of China. It also leads Taobao to enhance their sales functions and contributing in economics of China. The government of China is encouraging these types of business in China’s market and also providing additional helps to the companies of e-retail shops. China government is investing more in this sector to boost the market of China. One of the biggest strength of Taobao is their payment mode. It is much safer and secure for users than other e-commerce business. It is advantage to Taobao over their competitors in this field. Threats: For new entrants in this industry, is very difficult to meet desires of the customers of China. Since, this industry is growing very fast and need lots of capitals. However, the government of China is helping new players in this sector by providing capitals and other necessary things. So there is a little threat of Taobao from new players. However, there is some strict policies are adapted by the government of China in third party payment and license. These policies may restrict Taobao in this sector. Even though, People’s Bank of China is monitoring the third party payment system among the company and their users to avoid fraud cases (Jie and others, 2010). The logistic cost in this sector is very high and even China is a large nation and spread in large area of land. Since, it being difficult of Taobao to distribute or supply the products to the customers. Another issue with Taobao is time, distributions of product takes lots of time, since China is huge nation. This factor may go against of Taobao (Tao, 2009). Suggestions: It is very difficult for new entrant to enter in e-commerce industry. Since, in this industry, every company needs to develop a relationship and trust with the customers. It because, in e-commerce, the customers have pay money to sellers via online and other thing the quality of goods should meet with the desires of customers. For new player, it may be big challenge to fulfill this in first step and to maintain and retain customers in this sector; new player will take long time. Even though, to setup a logistic and make strong supply chain in China will be very difficult. To avoid these barriers, new player should follow basic rules of the market. To develop a business in this sector, the new firms should have huge amount of capital and good supply chain strategy, so that the company can build a strong relationship with customer in short time. A good supply chain will help the firm to deliver the product to customer in perfect time (Tao, 2009). Even though, new firm should use best policies for third party payment system and it should be secured. These steps will help the new firm to build a brand in the market of China. Advantage: The above steps will helps lots to new player and the nation in many ways. In this sector, if a new firm is trying to enter, then it will be good for the economic condition of China. It will boost the economic power of China and gives lots of employment to the population of China. It also contributes in GDP of China and creates more opportunity for other industries. Disadvantage: The main disadvantage for new player in entry mode is supply chain and capital. In this sector, new firms requires huge of capital and establish in this sector. Even though, the government of China is helping new players in this sector by providing funds. However, a new firm has to build a strong relationship and trust with population of China, it only be possible with good supply chain management. Conclusion: The E-Commerce industry in China’ market has huge craze among the population. The population of China and government are in favour of e-commerce industry. From PEST analysis the result can be drawn, political conditions and quick economic development has made the e-commerce industry in China attractive to investors and the increasing awareness of environment protection additionally promote the method for e-commerce as it creates less contamination and damage to the environment; secondly, there are likewise dangers, for example, absence of trust, stable and secured online payment systems and absence of legal protection that create challenges and uncertainties to the players in the business. Most importantly, in order to keep the leadership position, technological advancement is essential for Taobao. Taobao may concentrate on persistent improvement of its online payment system, which is additionally one of its strengths, especially in the aspect of transactions (ought to be transactions, without apostrophe) reliability and security. Moreover, website capacities, Internet soundness and rapid access to websites are additionally essential in giving a better user experience, which may help to pull in more customers. To whole up, it is undeniable that the future of online shopping market in China is encouraging. It will enhance the economic condition of China and provide lots of employment to the people. It will also contribute in GDP of China. Reference: Bradsher, K., 2012. ‘Social Risk’ Test Ordered by China for Big Projects. The New York Times. [online] Available at: http://www.nytimes.com/2012/11/13/world/asia/china-mandates-social-risk-reviews-for-big-projects.html?_r=0. [Accessed 18 Jun. 2014]. Gelfand, M., Spurlock, D., Sniezek, J. and Shao, L., 2000. Culture and Social Prediction The Role of Information in Enhancing Confidence in Social Predictions in the United States and China. Journal of Cross-Cultural Psychology, 31(4), pp.498--516. Haley, G., 2002. E-commerce in China: Changing business as we know it. Industrial Marketing Management, 31(2), pp.119--124. Hempel, P. and Kwong, Y., 2001. B2B e-Commerce in emerging economies: i-metal. coms non-ferrous metals exchange in China. The Journal of Strategic Information Systems, 10(4), pp.335--355. Jie, Z. and others, 2010. Research onthe Integrated Evaluation of Competitiveness for C2C E-commerce Websites——Taking www. taobao. com as an Example [J]. Journal of Intelligence, 3, p.014. Jin-yan, M., 2008. Insufficient Social Security: A Factor Analysis of Households Saving Growth in China [J].Journal of Shandong University (Philosophy and Social Sciences), 3, p.016. Jixin, T. and Dan, F., 2009. Analysis on Effect of Institutional Factor on Technological Innovation Output: Based on Panel Data about Five Provinces in Eastern of China [J]. Technology Economics, 5, p.006. Li, D., Li, J. and Lin, Z., 2008. Online consumer-to-consumer market in China--a comparative study of Taobao and eBay. Electronic Commerce Research and Applications, 7(1), pp.55--67. Li, Q. and Liu, Z., 2007. Research on chinese C2C e-business institutional trust mechanism: case study on taobao and ebay (cn). pp.3787--3790. Lili, M., 2011. The Analysis of the Legal Origin and Problems about University Information Disclosure Policy of China [J]. Journal of Modern Information, 3, p.002. Phan, P., 2005. Clinical Legal Education in China: In Pursuit of a Culture of Law and a Mission of Social Justice. Yale Hum. Rts. \& Dev. LJ, 8, p.117. Ralston, D., Holt, D., Terpstra, R. and Kai-Cheng, Y., 1997. The impact of national culture and economic ideology on managerial work values: A study of the United States, Russia, Japan, and China. Journal of International Business Studies, pp.177--207. Tao, M., 2009. How to Improve the Policies and Legal Systems of China Logistics Industry [J]. Logistics Technology, 9, p.003. Wong, C., Heady, C., Woo, W. and others, 1995. Fiscal management and economic reform in the Peoples Republic of China. Asian Development Bank. Ye, Q., Li, Y., Kiang, M. and Wu, W., 2009. The impact of seller reputation on the performance of online sales: evidence from taobao buy-it-now (bin) data. ACM SIGMIS Database, 40(1), pp.12--19. YUAN, X., ZHANG, B. and YANG, W., 2009. The Total Factor Energy Efficiency Measurement of China Based on Environmental Pollution [J]. China Industrial Economics, 2, pp.76--86. Read More