C&C Industries Inc.’s expansion into China Introduction China is today the world’s fastest growing economy. The country has been growing at the rate of 10% annually for the last three decades and is expected to overtake the American economy within a few decades (Tse, 2009)…
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By 2009 it was holding the largest foreign currency reserves amounting to $2 trillion and was also the largest holder of US treasury bonds (Tse, 2009). It has also become a world leader in international trade with import export forming 60% of its GDP (Tse, 2009). 1.3 billion Population of the country represents a huge market potential which no company can afford to ignore. Economy Based on the development level, the country is divided into three economic regions which are eastern, middle and western regions (Ma and Li, 2004). Eastern region is most advanced with good infrastructure, advanced cities, good management and administration (Ma and Li, 2004). Special economic zones have been setup by the government in this region to provide better development opportunities. The middle region is not as well developed as the Eastern. However, it has well developed industry and is the main region which produces grain, edible oils and cotton (Ma and Li, 2004). The Western region is still underdeveloped but has huge development potential for trade because it is the passage to other countries (Ma and Li 2004). Industry forms 46.8% of the GDP and industrial production growth rate stood at 11% as per 2010 estimates (cia.gov, 2011). Culture Because of the country’s socialist background, its culture is highly influenced by this ideology. The Chinese put a great emphasis on relationships than transactions and power distance in an organization (secureonlineorder.net, n. d). The Confucian philosophy which they follow focuses on collectivism rather than individualism. They believe in what they call “Guanxi” that refers to a “network of relationships among groups that cooperate and support one another” (secureonlineorder.net, n. d). This is considered as legally valid and not bribery and is indicative of personal closeness through exchanging of gifts and frequent contacts with retailers, suppliers, local government officials and banks. Chinese are not too keen to focus on detail and technical expertise with their leader’s autocratic behavior being accepted in return for security and harmony. Their communication is also less verbal and more through body language. They are never direct at saying “no” to things and rather express it through facial expressions and other roundabout ways (legacee.com, n. d). They feel that business relationships are the foundation of businesses and not any written agreements. Language problem is a barrier to exchange of ideas with the western organizations. Analysis of findings Facility location After having analyzed the economy and culture of China we need to first look at the location of the new facility. As seen earlier, Eastern China is the most developed area hence; there would be stiff competition for resources there. The Western area is now the new focus area for the government hence the new facility should be located there. The region accounts for 71% of China’s total land area and 29% of China’s total population with ready availability of labor force (Tan, 2010). Facility cost here is 50% less than the Eastern region while warehousing, construction and office lease is as low as one third to three quarter of the cost (Reinhardt, 2005). Thus providing facilities to the employees like housing will not be a major issue with respect to cost or availability in any of the Western towns or cities. There will be some problems as infrastructure and communications network are not as well developed
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