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Discussion On Vege Chips Market Entry In China

Question

Task: This challenging assessment provides you with real world experience through an applied and innovative task. Firstly, you need to choose one of the following companies that has recently hired you:
1. Vege Chip Company (http://www.vegechips.com)
OR
2. Liddells Dairy Company (https://www.liddells.com.au)
The CEO of your chosen company has decided to investigate market opportunities for the potential international promotion and sale of their products to one of the following countries:
China
Japan
Singapore
Canada
Secondly, you need to select one of the above countries and write a report evaluating the potential opportunities and threats that may influence market entry into that country. This requires you to conduct a strategic analysis of the environmental factors, including: economic and financial; political and legal; social and cultural; and technological of the chosen country.

Answer

Executive Summary
The main purpose of the report is to evaluate the potential threats and opportunities through which the Vege Chips market entry into Chinese market is influenced. This report will analyse the economic, financial, political, legal, social, culture, and technological environment of China that will impact the potential international marketing campaign in that country.

After the analysis of all the environmental factors, it is recommended to Vege Chips Company that technological development of the country should be utilized for the reduction of costs levels involved in the production of products. Moreover, the marketing professionals of China should also be appointed for undertaking the marketing campaigns in the country as they have prior knowledge of various social and cultural aspects of the nation.

Introduction
The report is focused on explaining the concept of Vege Chips market entry and the aspects related to it. Global marketing can be defined as marketing undertaken on a global scale for the purpose of taking the commercial benefit of global opportunities, similarities and operational differences for meeting the global objectives. The focus of this report is on Vege Chips Company which is an Australian based organization and is a market leader in the production of plant based gluten free chips across the country. The company maintains strict food safety and quality standards in order to ensure satisfaction of the customers. The products offered by the Vege Chips Company include vege chips and deli crisps which are available in a number of flavours such as natural, chicken style, barbeque, sweet and sour, salt and vinegar, rice crackers, cheese max, and chicken max (Vege Chips Company, 2020) (Appendix 1). The country selected for taking the benefit of international market opportunities is China. China is on the second rank in the list of largest economies of the world and is developing rapidly thereby presenting the international business environment for the companies.

The key purpose of the report is to make the assessment of the potential threats and opportunities through which the Vege Chips market entry into Chinese market is influenced. This report will analyse the economic, financial, political, legal, social, culture, and technological environment of China that will impact the prospective global marketing campaign in that country.

Analysis of Economic and Financial Environment
The economy of China has witnessed huge growth in the past few decades that led it towards the second position among the largest economies of the world. According to The World Bank (2019 (a)), the GDP of China for the year 2018 was USD 9.7 trillion. The GDP has constantly increased in the past few decades thereby presenting a number of opportunities to the businesses along with increased spending by the customers on the goods and services. Also, the current population of China is 1.393 billion which will increase the availability of workers in the country for Vege Chips Company for the production and promotion of its products to the customers in China.

Moreover, the development of infrastructure have always been the topmost priority for the government of China as it recognizes that reliable rails and roads along with telecommunications and electricity form the basis of a modern economy. The total fixed asset investment by China in transport infrastructure amounted to USD 327.77 billion in the year 2018 (Reuters, 2018). Therefore, it has improved energy resources, transportation and communication resources (Appendix 2). However, this economic development have resulted in various challenges for China such as environmental damages, rapid urbanization and high inequality which are required to be dealt on timely basis for the purpose of maintaining economic sustainability (Heggelund, 2017). The corporate income tax rate in China is currently 25% but it can reduced by the Chinese government to 15%. Such reduction is provided for the eligible businesses which functions in the industries which are given support by the government (PWC China, 2020).

As far as the financial environment of China is concerned, it is dominated by banks with the direct control of state on most of the banking system. The non- financial corporate debt have increased to $ 1.5 trillion which was non- existent a decade ago. However, the study of Vege Chips market entry signifies that there is great improvement in the financial markets but there are still some gaps in achieving the liquid debt markets. The lending rate of interest as ascertained by the People’s Bank of China for the year 2018 is 4.35% which has not changed from the year 2015 (The World Bank, 2019 (b)). Moreover, China is making efforts to facilitate the foreign businesses to start their operations locally by providing loans at stable interest rates. Therefore, Vege Chips Company can also obtain loans from China for the purpose of facilitating the marketing promotion of their products in the country.

The organization of international marketing campaign in China by Vege Chips Company will offer it excellent opportunity to increase sales and gain leads from the country. The analysis further provides that the economic and financial conditions are favourable for the business for entering this market. The constantly increasing population also provides a larger market for the company in China.

Analysis of Political and Legal Environment in regards with Vege Chips market entry
China is regarded as one of the most commanding countries in the world. The Communist Party of China is the dominant political party of China. Moreover, the political background of China is steady but the absence of political autonomy is the major area which creates problem. This absence of openness existing in the political system of China has also been questioned my various analysts. Cheap labour, steady political environment and improved substructure have made China an attractive target for FDI (Foreign Direct Investment). The FDI in China amounted to $ 135 billion in the year 2018 (Reuters, 2018). China is also a major player when it comes to overseas investment. The foreign direct investment by China have reached various countries in the past years such as Australia, United Kingdom, United States, Bangladesh, Pakistan, Angola, Argentina, Venezuela, United Arab Emirates, Indonesia, Niger and Chad (Heberer & Schubert, 2017).

However, Vege Chips Company is expected to face some threats related to the Vege Chips market entry as a result of the legal factors which impact the economy of China. This is due to the fact that there are various differences in the regulations which govern the businesses in Australia and China. Severe penalties can result from the inability of the business to comply with the applicable legal regulations on timely basis. There are a variety of laws, rules and regulations which govern the employment practices and businesses in China (Xia, Cao & Chan, 2017). For example, employee compensation and welfares, labour standards, labour disputes and other associated subjects are governed by the PRC Labour Contract Law 2007, The PRC Labour Law 1995 and certain other administrative regulations. The Foreign Direct Investment in China is synchronized by The Catalogue of Industries for Guiding Foreign Investment. The division of FDI is made by the aforesaid Catalogue in four categories i.e. prohibited, encouraged, permitted and restricted. The number of industries included in the encouraged industry are 384 and involves vegetable and fruit drink manufacturing, manufacturing of agricultural machinery, etc. On the other hand, 35 industries are included in the restricted category and 28 industries have been specified in the prohibited category. Moreover, all the industries which do not fall under the rest of the categories are considered in the permitted category. Also, there are no such major regulations which govern the appreciation of digital signatures, confidentiality, authentication of electronic contracts and consumer rights which may create hurdles for the Vege Chips Company while undertaking various activities relating to the business (Zhang, Zhang & Liu, 2017).

Therefore, the analysis on Vege Chips market entry provides that the stable political environment of China is an opportunity for Vege Chips Company to establish its business there. The marketing promotions will also be carried out smoothly as there is not much political interference from the local government. However, due consideration is required to be given to the legal aspects such that the company do not fall under the applicability of penal provisions.

Analysis of Social and Cultural Environment in regards with Vege Chips market entry
China is the utmost populated nation in the globe as it has the population of 1.393 billion as per the latest data provided by the World Bank (The World Bank (2019 (a)). The large population of the country makes it a massive market for different types of consumer products. Average spending by the consumers have significantly increased due to the increase in GDP and therefore, with the growth in the average pay amount of the workers. With the passage of time, the needs and expectations of the consumers from the products and services offered by the businesses have significantly changed. They have started to expect value of the money paid by them and therefore, they demand quality products and services from the customers (Song & Wang, 2018). In other words, brand positioning and brand awareness play an important role for the customers while making a purchase of a product. Consumer decision making process is an important marketing concept for the Vege Chips market entry which will impact the purchase of products offered by Vege Chips Company. Moreover, they are ready to pay a little higher for the expected quality. The increased spending by the customers of China and their increased longing for status symbols have created great opportunities both foreign and domestic firms (Gan, et. al. 2016).

The literacy rate of China is 96.8% as per the latest data provided by the World Bank. The high level of literacy in China allows the people to gain proper knowledge about the products before they consume them. Such knowledge is acquired in respect of their price as compared to that of the competitors, the ingredients, and the impact of the products on the health of the individuals. With the increase in the literacy rate over a period of time, China has also witnessed a significant reduction in the poverty experienced by the people. However, some of the social challenges experienced by the Chinese economy include the ageing population and the demand for labour (Zhu & Sarkis, 2016).

As far as the culture of China is concerned in respect of business, the major factor which must be kept in mind is that Chinese business etiquette prohibits gifts. This is due to the fact that this gesture is regarded as bribery which is illegal in China. The culture of China comprise of its traditions and customs which makes it different from other parts of the world. Presently, there are only five religions in China i.e. Catholicism, Islam, Taoism, Protestantism and Buddhism. Putonghua is the official language of China which is a type of Mandarin majorly spoken in Beijing. However, there are a number of Chinese who are also fluent in English. The cuisine of China is also influenced by ethnic diversity and geography. Therefore, it is important for the Vege Chips market entry that contextual marketing is taken into consideration by the company which is a marketing term that defines a strategy which is guided by conditions and behaviours that surrounds the marketing efforts in order to ensure that the content is relevant for the person who receives it (Li, Shi, Liu & Wang, 2016).

Analysis of Technological Environment
China has set the vision to attain the position of a global leader in terms of science and technology. For attaining this vision, China also prompted the launching of Mass Entrepreneurship and Innovation Programme in the year 2015. This programme intended to spread entrepreneurship in different regions of China. Another purpose of the programme is to assist the country in moving towards innovation driven economy from a labour intensive economy. Therefore, this programme offers a number of opportunities to both the international and foreign companies due to its science and technology related activities (Yao, Wu & Long, 2016). However, the encouragement to entrepreneurship in the economy may result in a threat to Vege Chips Company as it will develop strong competition within the local economy.

About 828.5 million individuals in China are having access to internet and are connected to the rest of the world by making the efficient use of this technology. This offers another opportunity to the company to attain the objectives of marketing promotion of its products because the major part of promotion is conducted over the internet and social media these days. It will also reduce the customer acquisition cost (CAC) i.e. the marketing expenses incurred by the company in converting the leads into a customer. The major tech giants of the country are Alibaba, Baidu and Tencent. The tech companies of China are so powerful that there are a number of foreign companies which gave failed in establishing their names in China in terms of technology. Moreover, the technology is available to be utilized at low costs which is another benefit that attracts the Vege Chips market entry in China. The Chinese industries are moving towards technological frontier in various areas such as automobiles, machinery, electronics, aviation and high speed railways along with driving technological innovations in advanced nuclear energy, supercomputers and big data, new generation telecommunication technologies, robotics, artificial intelligence, e- commerce, space technology and renewable energy (Guo, Wang, Li & Zhou, 2016). With the passage of time, China has also surpassed United States in terms of its capabilities relating to research and development (R & D). The advanced technological levels of China will allow the Vege Chips Company to produce its products with the help of advanced technology at lower prices and in less time which will reduce the cost levels of the company and will significantly improve its profits (Walcott, 2017).

This implies that the digital forms of marketing promotions can be effectively utilized by the Vege Chips Company in China as a significant segment of population makes the use of internet as a part of their daily routine. Digital marketing is a marketing term which defines a form of communication that aims to influence the target customers to make the purchase of a good or service that takes place with the help of specific forms of digital devices. The digital forms of marketing such as social media and website promotion are more effective this days due to the increased use of internet and greater reliance on the opinions of the people present in the online world.

Recommendations and Conclusion
It is recommended that the Vege Chips Company should establish its operations in China and make the use of its favourable political, legal, social, cultural, economic and financial environment. It is further recommended on the basis of Vege Chips market entry that the technological development of the country should be utilized for reducing the costs levels involved in the production of products. Furthermore, the benefit of increased literacy levels and increased use of internet by the population should be attained for the marketing promotion of the products on various social media platforms by the company. Moreover, the marketing professionals from China can be employed as they are aware regarding how to attract the local population towards the product. Moreover, customer segmentation theory of marketing should be taken into consideration while making the selection of the target market.

Therefore, it can be concluded that the selection of China as the target market for the marketing promotions by Vege Chips Company appears to be a beneficial option. This report evaluated various threats and opportunities through which the Vege Chips market entry into Chinese market is influenced. It further analysed the economic, financial, political, legal, social, culture, and technological environment of China that will impact the prospective international marketing campaign in that country. The overall evaluation provides that the marketing promotion of the product will be able to capture a larger market due to large population of China. Moreover, the stable political environment and higher level of technology will further increase the benefits for the company. However, the company faces threat from the diverse legal regulations of China which, if not complied on timely basis, may result in the applicability of severe penalties on the company.

References
Gan, X., Zuo, J., Ye, K., Li, D., Chang, R., & Zillante, G. (2016). Vege Chips market entry Are migrant workers satisfied with public rental housing? A study in Chongqing, China. Habitat International, 56, 96-102.

Guo, P., Wang, T., Li, D., & Zhou, X. (2016). How energy technology innovation affects transition of coal resource-based economy in China. Energy Policy, 92, 1-6.

Heberer, T., & Schubert, G. (2017). Political reform and regime legitimacy in contemporary China. In Critical Readings on Communist Party of China (pp. 978-997). BRILL.

Heggelund, G. (2017). Environment and resettlement politics in China: the Three Gorges Project. Vege Chips market entry Routledge.

Li, P., Shi, J., Liu, X., & Wang, H. (2016). The theory of planned behavior and competitive driving in China. Procedia engineering, 137, 362-371.

PWC China. (2020). Overview of PRC Taxation System, Retrieved from https://www.pwccn.com/en/services/tax/accounting-and-payroll/overview-of-prc-taxation-system.html

Reuters. (2018). China spends $328 billion on transport infrastructure from January to September: ministry, Retrieved from https://www.reuters.com/article/us-china-investment-transportation/china-spends-328-billion-on-transport-infrastructure-from-january-to-september-ministry-idUSKCN1N00UL

Song, M., & Wang, S. (2018). Market competition, green technology progress and comparative advantages in China. Management Decision, 56(1), 188-203.

The World Bank. (2019 (a)). GDP per capita (current US$) – China, Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=CN

The World Bank. (2019 (b). Vege Chips market entry Lending interest rate (%) – China, Retrieved from https://data.worldbank.org/indicator/FR.INR.LEND?locations=CN&view=chart

Vege Chips Company. (2020). Vege Chips market entry Vege Chips Natural, Retrieved from http://www.vegechips.com/vegechips-natural

Walcott, S. M. (2017). Chinese science and technology industrial parks. Routledge.

Xia, C., Cao, C., & Chan, K. C. (2017). Social trust environment and firm tax avoidance: Evidence from China. The North American Journal of Economics and Finance, 42, 374-392.

Yao, X., Wu, X., & Long, D. (2016). University students’ entrepreneurial tendency in China: effect of students’ perceived entrepreneurial environment. Journal of Entrepreneurship in Emerging Economies, 8(1), 60-81.

Zhang, J., Zhang, Q., & Liu, Z. (2017). The political logic of partial reform of China’s state-owned enterprises. Asian Survey, 57(3), 395-415.

Zhu, Q., & Sarkis, J. (2016). Green marketing and consumerism as social change in China: Analyzing the literature. Vege Chips market entry International Journal of Production Economics, 181, 289-302.

Appendices

  1. The Vege Chips Company offers the products to the customers with the rights quantity of subtle flavours that increase the satisfaction level of the customers from the product. The products have such flavours such that it can be consumed with any dip. The website of the company further provides information that the products are gluten free, vegan friendly and are plant based. Furthermore, there are no artificial preservatives or artificial flavours included in the product. Moreover, the packets of the products are available in different product sizes of 21 gram, 50 gram and 100 gram. The products are also available in the stores of Coles and Woolworths in the snack or health section.
  2. There is a great improvement due to economic growth and reforms in China in the lives of millions of people as it has expanded the scope of the level of their personal freedom and have increase social mobility since the year 1978. Therefore, now people have greater freedom in terms of employment opportunities, travel, cultural and educational pursuits, housing and job choices and in access to information. Also, new civil and criminal laws have passed in China that offers additional safeguard to the people who are the citizens of China.
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