Chinas Online Retail Marketing - Case Study Example

Logistic management Student’s name Institution Date of submission China is one of the largest world’s export thrust in the arena of business. China’s online retail marketing is swiftly developing although highly fragmented. The online retail stores in China offer such prospects as e-commerce as well as drug retailing. There is a recent radical change towards the lines of growth in trade between china and other countries of the world including Australia and US. Apart from this growth, China is also creating regional trading partners like Japan and Singapore. These countries consume billions of Chinese’s products every year. Over the past decade, Australian retail market has been aggravated by this anticipated cost benefit on importation from China which takes priority over local procurement. Definitely due to open policies in China trade unions, there will be an extensive entry of other global traders into the World Trade Organization (WTO) thus it will in turn boost foreign trade investment of china. However, Australian firms are faced by logistical problems that affect the flow of information which will in turn affect procurement activities. 140 000 retail businesses as stated by Australian government report reflect a significant 4.2% Gross Domestic Product of the country and has been declining over the past time reflecting slower growth of Australian economy. The products received from China by retail industries are diverse. It covers several departments including furniture, electrical and electronic products, attires and foot wares. The supply chain management for these products has not been well managed since there is an emergent of harsh trading environment for the retail industry that is formed by the inefficient logistical methods which brings structural changes in economy at the same time affects consumer behavior. As argued by Graham Earnshaw (2006), strategic sourcing that develops long term affiliation with suppliers is very important in enhancing firm’s performance. The strategic sourcing choices should not only base operational activities such as cost, quality and delivery but also it is very vital to incorporate different aspects of management like quality management practices, cost reduction capabilities as well as management practices. These attributes will develop key elements that will enhance long term strategic relationship among the suppliers in supply chain management (Graham Earnshaw, 2006 ). Supplier selection depends on either existing relationship or a developed relationship in the supply chain. Analytical hierarchy process (AHP) model is used to describe the relative importance of each criterion in ranking the suppliers in the two countries (China and Australia). The model (AHP) considers political, social, economic and environmental heights in the related countries. It also checks on changes in exchange rates, international trade policies and cultural differences that may exist in the related countries. Several literature studies cite benefits of internationalization in supplier selection as it reduces cost prices hence gaining better access to goods and services (Monczka and Trent, 2010), advancing to new markets, optimizing financial benefits and improving communication infrastructure (transportation) (Neureiterand Nunnenkamp, 2010). Australia retail traders thus uses analytical hierarchy model in procuring at the seam time sourcing a long-term international relationship from China enterprises. Analytical hierarchy process (AHP) model The chart above describes analytical hierarchy model. From this model therefore, it will be easier for retail traders in Australia to identify their suppliers and as well come up with the main goal since the type of trade existing between the two countries is a bilateral. Australia has experienced an average annual growth of about 22% while using this strategy (DFAT, 2004). The model has kept the relationship very consistence over the past years of trading partnership. However, we cannot measure the a relative significant due to empirical complexities but rather Balassa (1965) revealed that the advantage is realized from in depth analysis of trade patterns that would lead to goods and services reflecting relative costs disparities in factor strengths. For instance, if Australia takes pleasure in plentiful mineral resources per person relative to China, then this is where comparative advantage exists. Therefore from the above model, Australian retailers should reflect on the overall cost of acquiring the product. Total logistics costs criterion engrosses price of the product, import duties ordering costs as stated by Jack W. Plunkett (2007). This will apparently affect the final cost of the product procured and thus the consumer should take into account all theses expenses before procurement are made. Analytical hierarchy process model also plays a vital role in evaluation and procurement of the product. Correct evaluation of a product leads to low cost of acquiring since place and time utility is being considered during evaluation. China is globally located a few miles from Australia unlike other trading partners like US and Canada. For this reason therefore, goods will be delivered to the retail business units in Australia within short time possible at a favorable price costs. The low price is due to short distance through which goods pass from the supplier in China to the retailer in Australia. Logistic management will evaluate the relevant transport needed for the product to reach the consumer and implement if it is cost efficient. This will depend on the urgency and state of the product. Many Australian retail businesses located in the major cities like Sydney and Canberra have benefited greatly from the supply intelligent created by successful relationship between the two bilateral online stores (online retail stores in China and those in Australia) (Jack W. Plunkett, 2007). However, there is sometimes emergence of logistic failure to meet the demands of some industries. The failure may be as a result of inflexibility of the electronic data interchange that is found in a certain product (Jack W. Plunkett, 2007). Logistic management department use analytical hierarchy model to determine the obsolete procurement method that may have been intruded into the data system. Time and place utility vividly contributes to efficient production, supply and consumption processes. For instance, place utility takes care of consumers needs in the market whereby the supplier evaluates the benefits he gets when he offers such need to the prospective consumer. Before any procurement process is made by the retail traders in Australia, there should be a comprehensive analysis of logistical methods so as to capitalize on cost benefit. Delivery of invoices and orders from the prospective suppliers and retailers by the company should undergo logistical department so as to comprehend which transportation mode is economical at the same time secure for the products being transported. Enterprise logistic integration is a management tool that enhances success when it comes to internationalization of retail businesses. As expressed by Jack (2007), its domains include transportation, warehousing, purchasing and distribution. Thus we can use the four domains in evaluating the cost incurred by the Australia retailers while procuring their products. A successful enterprise therefore will consider logistical integration that will lengthen outside the periphery of the individual company. How can we realize an efficient logistical tool for management for the Australian retail enterprises? In order to set up an efficient and environmental-friendly global logistics networks that adds value and exhibit low costs, collaborative studies across various regions as well as identification of problems are needed to be understood (Patricia, 1990). These studies cover range viewpoints of the firm, national cohesion, social optimization (consumers and shippers) government perspective and logistic service providers. If we consider the case of OECD TRILOG project that was established across Asia-pacific region and reflect it with China-Australia context, different aspects of efficient logistical tool has been realized. First, cost efficient of different mode of transport, beneath road to air transport has been analyzed for the purpose of two utilities (time and place) that add value to the product. This program identify critical issues that are associated with intermodal linkages then compare or rather recommend possible solutions that will facilitate efficient transport logistics (Patricia, 1990). Australia has demonstrated a good example of an efficient logistical tool by reshaping transport activities and initiating new integrated policy framework that tends to achieve broader socio-economic objectives. China on the other hand has formulated a cohesive policy of specialized logistics knowledge that sustains diversified cultural backgrounds (Neureiterand & Nunnenkamp, 2010). This modern policy (intermodal transport) has diversified in the two countries (China and Australia) thus developing a strong supply chain for consumers and producers. More so, ICT tends to strengthen the development of intermodal transport existing in the two countries. Exports and import regulations is controlled by Australian Customs and Border service Administrators which comprise of government agencies, Australian Federal police Department of defense and Australian Quarantine and Inspection services (Andrew Vincent, 2010 ). The clearance procedures involve a series of duties like goods that are imported by sea or air cargo and a value lower than 250 dollars is cleared through informal clearance document (ICD). While on the other hand, goods that value above 250 dollars imported by air or sea cargo are cleared through licensed custom brokers. Licensed brokers are formal customs thus they have standardized custom duty. For this case therefore, retail traders in Australia prefer the informal clearance rather than formal one because they will enjoy a comparative advantage in the supply chain management when it comes to cost sufficiency in logistics ground. Sea cargo clearance is also done through Australian Quarantine and Inspection Service (AQIS).This clearance requires a merchandise to possess a visa to get thighs easy way. Fines will be imposed to the retailers without visa and this may raise the value of the product being imported. For a retailer to enjoy legitimate procedures at low cost that leads to reduced overall cost of the product, he should understand challenges that may lead to extra cost during clearance of goods at level of agency. Recently, the Australian Government has realized the significance of freight logistics industry to domestic retailers as well as international suppliers. The government has come up with Australia Freight councils Network which governs all the transport strategies within the state of Australia (Chopra and Meindl 2001). The council is supported and funded by Australian Logistics Industry and it tends to improve Australian’s local and city logistics supply chain performance which will add value to the products being supplied. The main agenda for this collaboration is to create opportunities for the upcoming retailers in Australia. Toll’s logistic company report (2011) depicts an advanced strategy in transport logistic industries. Toll is a company located in Australia with the core goal of providing merchants with transport facilities. It has merely attracted both the consumers and international suppliers in Australia since there is a remarkable entrepreneur approaches in the services offered to the clients. Among these initiatives is acquisition of independent management structure of transport logistics that pronounces all the three facets of logistic value-added logistic strategy (how does it add value, it adds value where and value has been added to what) (Toll report, 2011). This industry has created an open insertion to the products that are imported to Australia by retail traders. For this case, there is an IT department that deal with the online procurement thus most merchants prefer this mode since it reduce time for order. The industry has also enhanced integration (Chopra and Meindl 2001). There is a start up industry in Cambodia that is meant to reduce the operations of the Australian Government (legal frameworks of clearance and inspection of sea and air cargo). The formed strategy has increased the revenue of the company by 3% giving a real accounting figure of $1,357.3 million dollars. The company (Toll) has also capture dominance in the market by controlling critical aspects as security and thus pulling out value from other competitors in the same supply chain. This has been achieved in the company by continual improvement of its performance and investment on impacting new leadership training skills to the senior executives of the company (Chopra and Meindl2001). As a result, most of the companies in Australia which partner together for the purpose of logistic activities, adopts diverse strategies that will later add value to the product. The industry involved into logistic partnership enjoys a comparative advantage in the supply chain over the others which are not involved (Neureiterand & Nunnenkamp, 2010). Logistic strategy adds value at ports, gateways and port cities. At this point, industry with an efficient logistic strategy will enjoy the low cost possible. How is this benefit experienced? First, an innovative strategy identifies a route of low cost. Secondly, clustered strategy comprehends very important aspects of specialization, diversification and advance skills in the industry thus it will be easier to identify low cost route also (Jack W. Plunkett, 2007). Balassa (1965) pointed out that logistic strategy adds value to the industry itself. This argument has been embraced by Toll Logistic Industry in Australia by focusing on its scale of operation. The report of the company (2011) clearly states that the vast of the benefits are produced by their logistics activities and on behalf of the consumers they enjoy more plain value. With many hypothetical and experiential investigations on logistic management, the current study has developed an advance methodological restraint. This is from a trial of sample managers in Australia and China. On the other hand, it is not an easy task to access logistic managers in different industries thus this contribute to deficit in imminent to be analyzed. Otherwise, in most cases on analysis of logistic management strategies, the results always reimburse practitioners with insight in a competitive global market. Reference Andrew, V., Y., Chang, Y. & Andrew, T. (2010). A legal guide to doing business in the Asia-Pacific. Australia: American Bar Association. Balassa, A., B. (1965). Economic Development and Integration. Brazil: Centro de Estudios Monetarios Latinoamericanos. Chopra, S. and Meindl, P. (2001). Supply Chain Management: Strategy, Planning and Operation. New Jersey: Prentice-Hall. Graham, E. (2006). China Business Guide. China: China Economic Review Publishing. Jack, W., P. (2007). Plunkett's Transportation, Supply Chain and Logistics Industry Almanac. United States: Plunkett Research, Ltd. Monczka, R., M., Handfield, R., B., Guinipero, L., C. & Patterson, J., L. (2010). Purchasing and Supply Chain Management. United Kingdom: Cengage Learning EMEA. Neureiterand, M. & Nunnenkamp, P. (2010). Modes of International Sourcing and the Competitiveness of Firms: An Analysis of European Survey Data (1558).Vol. 64 Iss 3. Pennsylvania State University: Wiley publishers. Patricia, J., D. (1990). Organizational structure and logistics service innovation; International Journal of Logistics Management. Vol. 22 Iss: 1, pp 26-51. United States: Emerald Group Publishing Limited. Horsburgh, R., AM. (2011). Toll 2011 Annual Report, Australia: Toll Holdings Limited. http://www.gateway-corridor.com/cgreenworkshop. Read More