Business Opportunities for Doing Business in China - Case Study Example

Business Орроrtunitiеs in Сhinа Name Business Орроrtunitiеs in Сhinа Course: Tutor: Institution: Date: Executive Summary This report is an analysis of the business opportunities available in the Chinese market. In this case, the report aim is to analyze the business ventures, as well as their merits and potential execution challenges. In order to lay a background on the specific business ventures in China, the report evaluates key Chinese market competencies despite the economic crisis. As such, it discusses competencies with respect to government policies and a large population. Further, the report identifies the viable business opportunities in the market as ventures in the luxury products market segment, health care industry for senior citizen care, and in the renewable energy sector. However, the report argues that success in these ventures is likely to face challenges with respect to environmental pollution and population stagnation. Nevertheless, it offers potential recommendations for these challenges as sustainable production measures and use of expatriates as organizational workforce. Table of Contents Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Background on the Chinese Economic Business Climate 5 3.0 Business Opportunities 7 3.1 The luxury Market 7 3.2 E-Business and Internet Marketing 8 3.3 Health Care Industry 10 3.4 Energy Industry 12 4.0 Challenges 14 4.1 Pollution Challenges 14 4.2 Population Stagnation 16 5.0 Conclusion 17 References 20 1.0 Introduction The global market presents a range of opportunities and challenges for organizations and investors. On one hand, the market presents increased competition for local investors who have to compete with foreign investors in their own local markets, of which they previously held control. Resultantly, such developed competition is both fair and unfair. Fair competition involves when corporations in the market justifiable use their respective competitive edges to gain market influence and the subsequent control. On its part, unfair competition incorporates the use of business competitiveness in the market to oust competitors off business. In such a case, organizations not only strive to gain market control, but also strive to ensure their competitors’ eventual collapse. Such unfair competition leads to unethical practices in the foreign market. A case study of international competition both fair and unfair is the Chinese market. The market, an emerging market, has in the last two decades encountered increased growth and development. Government incentives for foreign investors under the Chinese foreign direct investment (FDI) policies. Moreover, the increased Chinese economy investment in technological development and its vast population that presented both labour and consumption contributed towards its increased strategies in the market. Thus, the market presented foreign investors with increased market avenue (Wei and Balasubramanyam, 2004, p.55). Unfair competition in the market led to the Chinese economic crises. In this case, corporations in a bid to finance and fund their operations in the market as well as launch strategies to outdo competitors, engaged in excessive borrowing. As such, the economy in its economic crisis faced increased external borrowing that impacted on its financial market. Nevertheless, the market despite its increased stock value deflationary impacts presents a range of economic business opportunities to enable reverberate it. Such venture includes businesses that seek to reduce on external borrowing through self-reliance; use of internal inputs as well as increasing the overall economic income to enable it offset its borrowing. This report develops and discusses a list of business opportunities available in China. In enumerating these opportunities, the report lays a background on the reasons why such opportunities are viable in the market through a summary background analysis on the Chinese market. Further, the report, after discussing the available opportunities, lists the possible challenges anticipated for such ventures in the market. Finally, the report offers recommendations on overcoming such challenges, as well as a summary of its findings. 2.0 Background on the Chinese Economic Business Climate The Chinese market has emerged as a strong foreign investment destination. In this case, the market has increased its contribution into the world economy. A study conducted by Hanson (2003, p.55) on transparency and the contributions of the emerging markets in the global economics, revealed this concept. In its analysis, the study developed a hypothesis that the global market was increasingly benefiting from the contributions of the markets. In an affirmation, the study established that indeed, the emerging markets were increasingly influencing the global economics with China as one among such influential emerging markets. These impacts can be ascertained in the recent developed nations meeting. In the forum, the leaders argued that the emerging economies, with their increased influence in the world, should be subjected to definite pre-determined contributions into the global market a break from the tradition where such nations only contributed upon their own free goodwill. Such emerging global resolutions depict an increased market value for the global influence by these markets. However, the lingering question among global economic observers today remains, why now? This question though vast can be dressed in the Chinese market through a listing of factors. One is the increased Chinese population. Over the last decade, the Chinese population was rapidly on the rise, until the government instituted the population control strategies. In this case, the government forecasted an eminent resource strains in the market, thus restraining the birth rates. Chandra (2003, p.268) argues that an increased population is a viable factor in economic development and an investment stimulant. In this case, the authors argue that an increased population serves at both ends of the supply chain, both as production facilitators and as the product market. In this regard, a large population represents labour availability as a factor of production, as well as increased customer base for the produced products. Therefore, despite its economic challenges, the Chinese market, due to its vast population remains a viable market for diverse business opportunities. Additionally, the Chinese market forms a viable business venture platform due to its government contribution into the economy through regulations and policy formulations. In this regard, the government has over the years developed policies serving as incentives to foreign investors. Among such policies are the FDI policies. Jiang (2005, p.23) conducted a study to establish the role played by the Chinese FDI policies towards its increased market contribution in the pharmaceutical global market as well as its increased attraction for the foreign investors. In this regard, the study established that the Chinese FDI policies served as an investor’s incentive. In this case, the policies such as tax exemptions and tax holidays encouraged foreign investors due to their impacts on reduced overall organisational production costs. As such, despite its challenges in the economic crises, the country remains attractive for a range of business opportunities. 3.0 Business Opportunities 3.1 The luxury Market The Chinese market has increasingly outgrown with increased revenue in the market. In this case, the market has generated revenues for the economy. As such, over the years, the market has developed a class of wealthy individuals. Guo and Hao (2013, p.133) conducted a study on the nature of the market conditions and per capita income in the Chinese market to establish the economic achievements. The study revealed that the market consisted of increased per capita income. Such an increase implies that the market has increased individual earnings over the years. However, these increased earnings pose an economic challenge. As discussed earlier in this study, the Chinese market is facing a range of economic challenges and an eminent economic crisis. In this economic crisis, the financial stocks in the market have in the recent past increased their deflationary value. As such, the market is unwilling to invest their funds in the stock market. Moreover, the crisis has resulted into an estimated increased estimation rate in Chinese market inflation rates. In this regard, the study sought to establish the nature of preferential spending in the market. In this case, the study established that the market was hesitant to store earned value as liquid cash or as stocks. Consequently, Guo and Hao (2013, p.136) established that the market sought avenues to store the earned values in assets that would not only earn them value, but also act as a store of value at reduced inflation impacts. In this case, luxury products business opportunities arise. This business venture decision can be backed by claims and studies conducted in the Arabian market. Such studies include the study conducted by Guo and Hao (2013, p.138) on the Middle East region. In this case, the study established that the market was increasingly growing with increased revenue. As such, the study sought to profile business ventures with respect to their customer base as well as the profitability rates, as well as the investors’ willingness. In this case, the study they established that the luxury products market was increasingly growing in the region. In its analysis, the study analyzed that the increased venture into this business was because of the increased earnings and need to store such earnings in assets that besides acting as a store of value serve as society status parameters. In the analysis of this study, a few issues come into play. It is apparent that the Chinese market has a range of similarities with the Middle East Market in that both markets are emerging and that they are both susceptible to impending increased inflation rates. Thus, the approach towards savings and investments in the two economies is congruent. This implies that there exists an ideal luxury products business opportunities in China. As such, business opportunities such as the supply of expensive motor vehicles and setting up of five star hotels. This can be validated by recent studies that depict the Chinese market as an increased consumer of lucrative products in the global market 3.2 E-Business and Internet Marketing The global market has adopted the concept of technological advancements in order to establish and retain competitiveness in the respective foreign markets. Huesemann, M, and Huesemann, A (2008, p.789) conducted a study to establish the extent to which the adoption of modern technology has enhanced increased global business. The study evaluated the role of technology in the global market. In this case, it established that the global market heavily relied on technological advancements in order to propel growth. For instance, the study revealed that the global market relied on technology gadgets in the market to enhance communication. As such, the study established that the development and establishment of the internet technology have enhanced marketing and promotional activities in the global market. To this effect, it revealed that the internet has increasingly taken over the global market as a marketing tool. In its analysis, the study revealed that the internet has replaced the traditional advertisement media. This establishment can be referenced to the case of increased use of electronic gadgets in an economy. Today electronic gadgets such as phones, I pads and laptops are all internet enabled. Technological development has created platforms through which such gadgets access the internet. Therefore, internet marketing is unlimited in its reach, unlike the traditional marketing media. In this case, investment on internet and electronic marketing is a viable business opportunity globally. Bailey (2011, p.27) argues that, in the wake of the electronic revolution and increased internet uses, the market presents a range of business opportunities for investment in this industry. As such, the study established there exist a market deficiency in relation to the existence of business opportunities in this field. China is a viable market for this business type and thus presents a viable opportunity in the market. A study in the Chinese market reveals that the Chinese market has increasingly invested in the electronic industry. As such, the market enjoys increased market share. Resultantly, the Chinese market is saturated with electronics whose possession is high. Moreover, foreign direct investments in the market have increased multinational corporations in the market. Thus, this implies that, on one hand, the market has potential online advertisers. On the other hand, the market has a wide customer base as a majority of the population accesses this market. Therefore, the starting of online marketing agency enterprises would benefit the companies. An online business in the market would enhance reduce on the cost of advertising in the market which would consequently enhance, reduced production costs translating into increased profit margins. In this regard, such an enterprise would attract a large customer base. Through the existence of cheap electronic devices, the organizations clientele will considerably increase. Thus, the availability of both a market and potential agency customers presents the online marketing agencies as viable business opportunities in China. 3.3 Health Care Industry Global markets are fuelled by the activities of the factors of production in the market. In this case, the markets in such economies depend on optimum interplay of the factors of production. These include factors such as land, capital, and labour. In this case, labour and entrepreneurship activities enhance increased economic performance. As such, Brenos (2006, p.73) argues that the economic performance is reliant on the social well being and health care facilities in an economy. In this regard, the case argues, that health care facilities are an important economic facilitators. In a study to establish the health care markets in emerging markets. The study established that the health care industry enhanced increased performance. Moreover, in analysis of the target population in the health care industry was the aging population that comprised of individuals over the productive age of 55 years. In this regard, it is apparent that such a population is susceptible to a range of health hazards. A study by Goddard, Davidson, Daly and Mackey (2008, p.407) revealed that an ageing population is vulnerable to a range of diseases. This, as the study argued, is due to an increased immunity decrease that decreases as age progresses. Immunity reduction leads to increased vulnerability necessitating health care services and attention to such a target population. In addition, a working middle-aged community is associated with the need to developed ageing people health care facilities. Traditionally, the society had developed a system through which it catered for its aged and senior citizens. The young generations in the society catered for the aged and the society cycle continued as successive generations repeated the home based care services. In such a system, there was no need for the development of health care services for the ageing population. However, this social structures have been altered with increased globalization and existing marketing challenges. In this case, individuals have received formal employment. As such, they have reduced social activities time. The increased commercialized market activities reduced opportunities for catering for the senior students. Further, increased economic constraints lead to increased need for employment opportunities seeking. To this effect, individuals seek double employment opportunities to increase their incomes in order to cater for the increased economic expenditures. Based on this analysis, China forms an ideal market for the health care facilities and services for the aged. An analysis on the Chinese population and market reveal a number of factors making health care services for the aged a challenge. In this case, the Chinese market, as already discussed, comprises of an ageing population. As such, the market will in the future comprise a highly aged population. Consequently, such a population will in the long run create a market opportunity for health care services to this population. Moreover, the economic crisis in the economy creates her active working middle class. As such, the young generation is increasingly dedicated to working rather than providing health care services to senior citizens. This creates a market opportunity for the market. Consequently, the Chinese market presents a viable opportunity for health care service business in the market. 3.4 Energy Industry Developing markets and economies rely on the availability and acquisition costs of a number of factors. These factors are the basic drivers in an economy development. Traditionally, economic drivers were classified under the factors of production. In this case, labour, land, capital, and entrepreneurship were listed as key among economic drivers in any economy. In this regard, capitalist economists under the Marxism school of thought argued that economies relied on the optimal functioning of these factors in order to necessitate the development. However, this was on the assumption that the market systems were efficient. In analysis on the market requirements for efficient functioning, OECD (2006, p.176) argued that traditionally, the market had abundance allocation of all other resources such as ready availability of raw materials and unrestricted market access. This is not the case in the current market, which faces increased government regulations; stakeholders increased concerns, as well as an ever-growing inputs shortage. This has expanded the factors required for an efficient market functioning to incorporate other factors such as governments’ regulations, inputs availability, and energy. The government and nature respectively control government regulations and inputs availability. As such, both present no viable business opportunity. On the contrary, energy as a new factor of production is not a reserve of a single group control and thus opens up opportunities for investment in its provision. Unlike other business opportunities where such products of provision are produced, the energy provision business is different. On its part, investors engage in the process of harnessing energy form its raw form into useful forms such as the use of crude oil to produce electricity and the conversion of energy from one form into another such as the conversion of solar energy into electric energy. In this regard, no new energy is produced rather businesses seek to convert existing energy forms. Jussi Heinimö, Ojanen and Tuomo Kässi (2008, p.549) argued that the energy is a vital requirement for economic growth. In this case, the authors argued that for any economy to develop, organizations to run, production and distribution to occur, energy provision was a necessity. Without enough energy supply, such activities would stall. A further analysis on the functioning of the emerging markets revealed that they serve as the global largest energy consumers. In this case, China is among such emerging markets. The economy has registered increased multinational corporations presence as well as increased activities. Consequently, China is a large energy consumer as one among the largest emerging markets. This presents a viable business opportunity for energy provision. Energy is on two fronts both renewable and non-renewable. Non-renewable energy is natural energy acquired directly from the environment. Such include crude oil and natural gas. On this form of energy, the nature control over its supply and the only presented business venture is provision and supply of such in the economy. However, this form of energy used has received increased critic in the recent past. In this case, critics and environmental conservists argue that the use of non-renewable energy leads to environmental pollution and degradation. Consequently, government regulations have been implemented to regulate the use of this form of energy. Thus, this sector presents no viable business opportunities. On the contrary, the renewable energy industry presents a range of business opportunities. China as a nation faces an economic crisis due to environmental degradation and the eminent future raw material shortage. Consequently, this has opened up business opportunities. The cost of investing in this industry presents a challenge for multinational enterprises in the industry that form a viable large customer base. In this regard, corporations in the energy industry and with the capacity to produce renewable energy enjoy an increased market. This business opportunity receives increased market due to its role in harnessing and reducing energy costs. Reduced energy costs translate into reduced costs of production that will enable the economy reduce on its expenses thus reducing need for external borrowing in the economy (Marcos, 2010, p.476). 4.0 Challenges The implementation of the above-discussed business opportunities in China can amount to increased earnings for the nation that would in turn translate into reduced external spending. In this regard, the opportunity stands to benefit. However, the execution of these policies faces a number of market challenges. In this case, the market and the opportunities such as pollution challenge as well as population stagnation. 4.1 Pollution Challenges In a study to investigate the functioning of the global market, Morgera (2006, p.762) established that such global organizations presented a range of environmental impacts. In this case, the study enumerated that, among other factors, the organizations raised the issue of environmental, natural resource exhaustion. Such natural resources include energy and other raw materials. Increased use of the natural resources risks their extinction. Abdeen (2002, p.355) in an evaluation of the Sudan oil industry implications argued that non-renewable resources in emerging markets are not sustainable used. In this regard, although governments encourage foreign investments and stimulate economic development in their respective markets, they fail to institute appropriate mechanisms to enhance sustainable production and business activities. In a study specific to the Asian markets, of which China belongs, a study by Lima, Ramos, Bambace and Rosa (2008, p.196) in an evaluation of the effects and impacts of emissions such as methane gas, revealed that in general these markets lacked appropriate market control on environmental impacts. In this regard, the study revealed that, despite their institution and development of policies, the market lacked proper execution of such policies. In this case, the study advocated that, through such negligence, the markets risked environmental degradation. In its conclusion, the study forecasted an impending catastrophe if appropriate corrective measures are not instituted proactively. In this case, business ventures operating in the region risk exposure to environmental pollution impacts. Such exposures would lead to depletion of raw materials serving as production inputs. This poses a great investment challenge as it negates the concept of business continuity and their profitability in the end. As such, these factors need consideration prior to instituting the above discussed business ventures in China. In this case, business ventures and investors seeking to establish the above listed ventures into the market should conduct a market feasibility study analysis. Such a feasibility test should seek to establish the manner extent and natural of the used raw material and the possibility of such depleting in the future and the implications of such an occurrence. As such, the organization should establish if alternative inputs source exists in the market. Brunnschweiler (2010, p.243) argued that the environmental pollution and resources exhaustion in the global marketing can be resolved through the enactment of proactive measures. In this case, the author recommended the adoption of sustainable production methods in which organizations utilize renewable resources that can be replaced and replenished in the long run to ensure ecological balance and business continuity. 4.2 Population Stagnation Among the major identified Chinese merits and major competitiveness is its large population base. As discussed under the background section in the study, the large population enhances increased labour as a factor of production as well as a large customer base for produced goods and services. As such, the market is attractive for large-scale market investors. In this regard, organization is investing in the market hedges their success levels on this major competitiveness. However, in this case, the Chinese government has initiated strategies and mechanisms to regulate and control their population. In a study to evaluate the current Chinese population and the future trends, Hou (2011, p.72) established that, despite its high population, the rate of population increase in the economy has significantly reduced. In this regard, the study established that the birth rate in China has significantly reduced and was almost at par with the death rate in the economy. The study attributed this to a range of factors. On one hand, the study established that the market had increasingly adopted the foreign culture. Due to increased multinational corporations’ presence in the market, the society had integrated its local culture to that of its foreign markets. In particular, the market adopted the western culture. As Ogden (1999, p.621) notes, the western culture has minimal regard for large families and advocates for reduced cohesive nuclear families. The presence of multinational expatriates in the Chinese markets has over the years led to the adoption of this culture in the market. Consequently, the adoption of this culture has resulted to a perception shift in the market resulting to increased reduction in the nuclear family size for individuals in the middle working class that constitutes to the major productive group in the economy. In addition, the study established and forecasted a reduction in the market population. In particular, the study forecasted that the population was likely to stagnate in the future. The study eluded this to increased government efforts to reduce on the rate of population growth in order to restrain constraints on the available natural resources. The government through regulations, as Lee and Zhang (2013, p.286) notes has initiated ways through which to restrain population growth. Hus the Chinese population is likely to retard and eventually decrease. A major concern in the population is the fact that the current workforce is ageing. This is evidenced by the current population structure that represents majority demography of an ageing population. Consequently, this poses a challenge in the market, as the market will in the future lose its competitive advantage on its workforce. Thus, the business opportunities face a risk of reduced workforce diversity. In this case, Cottle and Keys (2010, p.273) argues that the international organizations face labour crises in the market. As such, the author recommends the development and introduction of expatriate system programs in order to bridge the gap. 5.0 Conclusion Summarily, this report in its aim to establish the business opportunities in China establishes and reveals a number of factors surrounding the ventures validity. In this regard, the report through an analytical literature review of the Chinese market reveals that the market has an increased market population that provides a ready market for its products. In this case, the report establishes that the population plays to significant roles in the market. O one hand, the large population serves as a source of available labour that serves a production driving force. On the other hand, the large population presents the multinational corporations in the market with increase markets for their produced goods. Moreover, the report identifies government policies as key among factors facilitating business ventures viability in the Chinese market. To this effect, it develops an argument that the Chinese government, through its FDI regulations encourages ventures and setting up of businesses in the market. Based on this background, the report reveals that the backdrop in the economic crisis in China, presents an opportunity for increased business ventures. As such, it reveals that stock deflationary rates increase, and inflation speculation, warrant cash storage in assets rather than as liquid cash in the economy. Consequently, the study identifies business opportunities such as in the luxury industry, energy sector as well as in the health care industry. In this regard, the study argues that the luxury sector such as expensive motor vehicles will serve as an asset store of value for the market earnings that making it attractive. On the other hand, it argues that increased reduction on non-renewable energy use enhances a shift to renewable energy usage. As such, the report identifies a potential market niche in the industry that poses great future expansion opportunities. Finally, the report argues that the Chinese population demography presents a business opportunity in the health care industry. In particular, the report singles out health care services provision for the elderly as key among such opportunities. In this regard, through a societal analysis, the report reveals that an increased ageing population as well as increased economic activities, leaves the senior citizens with few or no family members to take care of them. Thus, the establishment of such health care services would not only enhance economic development, but also offer the senior citizens their required social care as well as humanitarian needs. Despite the identified opportunities, the report offers an argument on the potential challenges investors into the market are likely to encounter. In this regard, the report identifies environmental pollution and population stagnation as key among the challenges. On one hand, the report argues that the market faces increased environmental pollution. As such, ventures risk exposure to impacts of environmental pollution such as ill health and reduced inputs supply. Moreover, the report argues that government policies in curtailing population growth act as a challenge. In this case, Chinas population is ageing and thus in the future enterprises will face a labour and market shortage as the older population s phased out. In this case, China will loosen its competitive advantage currently based on these two factors. 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