Macro Forces for International Marketing of China - Term Paper Example

Macro Forces Analysis in China Macro forces analysis of China The unprecedented rate at which markets are currently growing has given rise to a huge demand among the consumers. Corporations and firms are thus staking advantage of the many opportunities to create a market niche for themselves, and in the process, the value of competition has greatly increased. Different markets have different success and development chances and thus, before one makes a choice on the most suitable place for investment, it is pertinent to carry out a detailed analysis of the many factors that affect the success chances in a particular country (Chern, 40). This report provides a macro analysis of China, one of the fastest growing markets in the world and which provides a suitable platform for a business to invest. Political environment of China One of the many admirable factors about China is its political stability. This gives businesses the confidence of establishing and expanding their businesses as they are assured of enhanced security. China is a single party state which is governed and controlled by the Communist Party. The single party aspect reduces the chances of political wrangles and further reduces the chances of politicians interfering with the business operations (Hale and Long, 80). Though the tariffs in China are high, they have been drastically reducing over the past few years. However, the government still has a lot to do when dealing with e-commerce businesses. The legal framework adopted for e-commerce insufficiently addresses intellectual property, and consumer rights are yet to be satisfactorily addressed (Hartman and Brown, 2013). Even with the few challenges, the political environment in China provides a healthy platform for businesses to operate. Economic environment The economic environment is the second most important factor (after political) in determining whether a business shall succeed in a country. China’s economic environment has continued to be favourable to businesses, especially with the increasing demand. Based on nominal GDP and the purchasing power parity, China is ranked second, with the first position being America (InvestinChina, 2014). It has constantly experienced an increase and growth in GDP by about 7 %, and it’s GDP, by 2013 stood at 9.82% (Shao and Gui, 2014). This depicts the promising market in China, and businesses that invest here have high chances of succeeding. In addition, the inflation in China is lower as compared to many other developed countries, having a 2.5% inflation rate (InvestinChina, 2014) and an unemployment rate of 4.1%. The growth in GDP is as depicted in the diagram below. The country has already been experiencing high quality prices and even higher rates at the banks. This has made it tough for small businesses to acquire loans from the banks, but the government is putting up efforts to see that the rates become affordable (Hale and Long, 132). Figure 1: Growth in China’s GDP from 2006 to 2011. Competitive environment China has an overly competitive environment. Businesses, especially those that sell closely related and substitutable products have austere competition between them. The competition force in China is both internal and external, with businesses adopting brawny strategies to ensure that they remain at the top of the markets (Hartman and Brown, 2013). As seen from the diagram below, strict competition is also felt from the US and also from private investors. The public sectors are the least in the competition environment. Figure 2: Major competitors in China Social cultural environment That China is home to about 20% of the world’s population is an amazing fact which portrays the high demand and market available in China (Shao and Gui, 2014). It is recorded as the second largest country in the world and has a population of over 1.38 billion people (InvestinChina, 2014). The male to female population ratio in China is 51:48 and the literacy levels stands at about 90% (Hartman and Brown, 2013). Urbanization, therefore, has greatly expanded in China and this has significantly led to momentous growth. In addition, the one child per family policy has greatly contributed to the growth of the country among the major cities, and this has further expanded the markets. The Chinese populace is a highly religious one and this further increases the safety of businesses as the religions condemn theft, burglary, and forgery among other vices. Gender relations are also highly respected and observed and hence, businesses ensure that gender representation is observed in employment. Values are also campaigned for and behavior, etiquette and respectable values are encouraged in businesses. Social stratification in China is less pronounced as compared to America, but the common thing between the two is that the middle class is the where the greatest consumption falls (Chern, 138). Technological environment China is one of the countries which are currently experiencing a robust growth in the development, adoption and use of technology. This technology has greatly been applied in the shopping, construction, transport and production activities. The technology has greatly boosted the security of businesses and greatly enhanced the transport and communication in China. For example, China’s telecom serves more than 60 million subscribers in the country alone (Hartman and Brown, 2012). In addition, China unveiled the prototype train three years ago, a move which boosted the infrastructure of the country. In addition, China has almost$ 1 billion users of the internet and this has greatly promoted the use of online and e-commerce business (Shao and Gui, 2014). However, the countries online payment systems are still unsecured, especially for B2C businesses. Opportunities One of the opportunities that businesses should and are taking in China is the increase in online shopping. This therefore means that businesses which are interested in investing in China should give a careful consideration to e-commerce. The populace here has adopted the use of technology and online shopping has introduced a wave that is strongly rising. Statistics reveal that the frequency of online shopping among the Chinese is four times higher than that of the European and the American populace (Chern, 168). Wind and solar energy is also being developed by the government and this makes it environmentally friendly and cheaper for businesses that will require power for effectiveness in their operations. The growing economic freedom in China and the high boom being experienced in China provides more chances and opportunities for businesses which are interested in international investments (Shao and Gui, 2014). Many businesses that have adopted or incorporated online shopping have witnessed to the momentous growth and increase. However, if one decides to incorporate online shopping in their businesses, they should ensure that the payment system, if done electronically, remains safe. Threats Even with all the opportunities and chances that China presents to businesses, there are many threats that countries face in the country. To begin with, copy cats in China are countless and the trend of imitation for original products grows every day. This has been a great challenge to businesses as the copycats sell their prices at lower prices as compared to the original products. In addition, the US feels threatened by the economic prowess of China and as a result, some trade restrictions have been introduced by the latter (Hale and Long, 200). This has further hindered the expansion chances and the marketing volumes for the Chinese products in America. What’s more, China has been branded as a country that produces less durable and low quality products and this has further reduced the potential market in many areas (Chern, 158). The aging population in China is also a threat to the Chinese businesses as the amount of labor available has reduced, albeit by a small margin. The population of China is as represented diagrammatically below. Figure 3: Age distribution structure in China. The threats also extend to the lack of clean water and the increasing pollution and environmental degradation. China has of late had its reputation ingrained as accusations of the high frequency of workers strikes and numerous cases of academic misconduct continue to rise (Hale and Long, 168). This has further shunned away potential investors and employers. Recommendations China has many cities and all offer different chances and opportunities for businesses. For the new investors, Suzhou city, one of the most economically opened to business is suggested as an appropriate place to invest in. The city is currently experiencing a robust growth in population and demand, and is also a major tourist attraction. It has supporting enterprises, sufficient skilled and unskilled labour and other numerous advantages (Chern, 190). An analysis on China shows that the construction industry, the service provision industry, the healthcare industry, equipment industry and the supply of raw materials are among the topmost performing sectors in China (InvestinChina, 2014). Daily investments are being made in this areas yet the demand from the consumers has still not been met. Currently, service provision is the best sector for new investors to invest in and later, in their expansion plans, they can consider production. For the service provision, new investors can set up a security firm. With the increased construction and urbanization happening in China, provision of security is paramount and hence any business can take advantage of this. Works Cited Chern, Chunlai. Foreign direct investment in China: Location determinants, investor behavior and economic impact. New York: Edward Edgar Publishing. 2011. Print. Hale, Galina., and Long, Cheryl. Direct Investment in China: Winners and Losers. Beijing: Scientific publishers. 2012. Print. Hartman, David., and Brown, George. China’s future competitive environment. InvestinChina.org, 24th December 2013. Web. 20TH March 2014. InvestinChina.gov. Investment in China. Investinchina.org, 18th January 2014. Web. 20th March 2014. Shao, Xiaoyi., and Gui, Koh. China Plans to speed up investment, stabilise demand. Reuters.UK, 20th March 2014. Web. 20th March 2014. Read More