International Marketing

Analysis of China

Group Members-

Jetal Gandhi

Ankit Pathak

Shahbaaz Ahmed

Sundram Sinha

Aanchal

Introduction

• Largest business market in the planet.

• 3rd Largest country in the world (Land Area- 9.56 mn sq.km)

• Populataion sparsely inhabited in sections of Northern,

Western Sections and Tibet.

• Population growing at the rate of 0.9% per year.

• Immense diversity, variety, Complexity & Competitive intensity.

• Dominant race- Hans (91.9% of population)

• 55 ethnic minorities.

• Official standard language- Mandarin

• Major religious groups- Daoist & Buddhists.

Cultural Environment

• Norms & Aesthetics- ( Chopsticks for eating, Lucky colour-

Red)

• Customs- (Gifts- Coffee table books, ties, pens)

• Languages- (Coca cola renamed as “Ko-kou-ko-Le” which

means “Happiness in mouth”)

• Religion- (Interior decoration according to Fen Shui)

• Diffused Culture

• Ascription Culture

• High Context Culture

• Relationship Focussed culture

• Formal Culture

• Monochronic Culture

Economic Policies & Growth

• Economic reforms initiated in 1978 with agricultural reforms

• Aims at minimum boom burst cycle, controlling inflation &

maintaining growth.

• 1981- Industrial products were liberalized & Pvt. Enterprises

were allowed to setup factories in rural areas

• 1984- Formation of Town Village Enterprise (TVE) to absorb

surplus rural labor

• 2004- Wholly owned subsidiaries were allowed

• SEZ to encourage FDI (Shenzhen, Zhuhai, Shantou, Xiamen)

Challenges in Economy

• Highest savings rate (40%) channelized to fund SOE via state

owned banks.

• Imbalance with rural agricultural sector due to boom in urban &

industrialised sector

• Rising power shortages, food imports & Income imbalances

International Business Relations

• Power Center of Asia who believes in multi polar world.

• Foreign policy dominated by territorial & political integrity

(Cause of Taiwan issue with US)

• Strong military force to avoid domination by US

• Need for Oil is driving relations with Vietnam, Africa, & Middle

East.

• Friendly relations with alternate power centers (India, Japan,

Australia)

Political & Legal Environment

• Centralized Unitary Govt. (Not federal)

• Single party with 1 legislative house.

• CCP- Communist party controls law making and parliament.

• All national legislative power is vested with parliament.

• President is the head of CCP, national legislature & Army.

Distribution & Logistics

• Traditional Distribution System- (3 tier)-

1. Distributors located in Beijing, Shanghai, Tianjin, and

Guangzhou

2. Wholesalers in the provincial capitals and medium-sized cities

3. Wholesalers in smaller cities and towns

• Current Distribution System-

1. Cluster Model (Eg.- OMRON, Mc Donalds)

2. Non-Chinese 3PL Model (Eg.- UPS, Royal Dutch Shell)

3. Localization Model

Distribution & Logistics

• a. Wholly owned Supply chain- (Eg.- Intel, Nokia, Siemens)

• b. Local Outsourcing (Eg.- Sinotrans & COSCO, Motorola)

• Logistics Issues-

1. Booming Economy- (High demand for improvement in

quality & services)

2. Effect of WTO Entrance - (Ease of restrictions, Greater

market access )

3. Advent of E- Commerce - (Immature infrastructure & less

confidence among people for transactions)

Distribution & Logistics

Promotional Strategies used

• Good products at wholesale prices

• Seasonal promotional products- Varsatile in nature (Umbrellas)

• Elegant & bold look to attract more visitors

• Types-

Outdoor items

Desk & Office items

Eco friendly items

Travel items

Overview of Brands in Chinese Markets

• World’s largest luxury consumer market by 2015

• Online shopping market- 18 million Yuan (2.86 trillion $ USD)

• Consumer class represents- 19 % of national population

• Urban household income will double between 2010 & 2020

• Emergence of ‘Buy Now Mentality’

• People travelling overseas to purchase luxury goods

• High energy brand experiences targeted at young consumers

• Personal One to One experiences for Ultra Premium market

• 40% Internet users shop online in tier 1 cities.

• Largest internet search engine.

• Offers instant messaging, online music, blogs, gaming etc.

• Global Strategies-

• Target – Younger and higher educated

• Focus on sales & marketing ( Ability to retain customers)

• Core competencies- Software & Brand value

• Superior understanding of Chinese market

• Considerable investor confidence

• Diversification by expanding its mobile internet operations

• Most frequently-used internet service portal. ( 400m Chinese

using its WeChat messaging app)

• Its first mobile game, downloaded by 20m people in the first

three days.

• Signed up Argentinian football superstar Lionel Messi to front a

new campaign for WeChat.

• Global Strategies-

1. Free services for users to join the community. (QQ IM)

2. Personalization & value added services ( e- cards, magazines)

3. Emphasis on Interactivity (QQ.com Forums, Virtual currencies)

Popular Global Brands in China

• KFC- (owned by Yum Brands) opted to expand by wholly owned outlets.

• Walmart-

1. Slow growth in 1996-2004 (underdeveloped infrastructure & less

adaptability to Chinese markets)

2. Fast Growth after 2004, due to decentralised management & open Govt.

policies

• Starbucks-

1. Ideal 3rd place serving localized foods

2. Lower prices in 2nd tier cities

3. Maintain image of coffee culture (Interactive marketing events)

4. More extensive training

• Porsche- Luxury brand catering to casual motoring fan to hardcore

enthusiast

• Chinese MNC computer technology company

headquartered in Beijing, China

• Current CEO- Yang Yuanqing

Marketing Strategies in China- Market Entry Strategies in India-

1. Relationship Model

2. Transactional Model

1. Relationship & Transactional Model

2. China Based Supply Chain Model

3. Picked entry-level SME and mainstream

products from the China stable and launched

them in India.

4. Won the trust of channel partners & increase

exclusive stores

• MNC specialized in the production of home appliances

and consumer electronics.

• Founded in 1984 by Zhang Ruimin

Marketing Strategies in China- Market Entry Strategies in India-

1. Known for high quality products &

brand reputation

2. Very good distribution network, with

Haier Logistics

3. Better after-sales service than

competitors

4. Cheaper staff than competitors

Joint Venture with multinational brands

(1990s)

1. In 1999 Joint Venture with Indian

appliance firm (Fedder Lloye Corp.)

2. Established refrigerator and R&D Center

3. 2004 alliance with Whirlpool and Voltas to

produce refrigerator and Air Conditioner

Examples of Joint Ventures