Slides in this set
To what extent does China create opportunities and threats
for British businesses?
· World's largest economy and growing faster than · Time consuming and costly to establish a profitable
developed economies. market position within China.
· 1.4billion potential target population · Growing and intense local competition.
· Increasing disposable income and rising middle class. · Chinese companies owned by the state are given
· Managed economy Joint Ventures with state owned subsidies by the bank, whereas foreign businesses do
companies (less risk). not. Competition isn't fair.
· Cheap labour. · High failure rate (48% of foreign businesses fail within
· Large exporter import cheap Chinese materials & large the first 2 years). Tesco failed due to lack of market
profits to be made. research and culture differences. Google is quitting as
· Strong demand for luxury, niche market brands. China they expected a higher market share than 31%.
accounts for 20% of global demand for luxury products. · China is known for poor quality. Demands may fall if
· Good for car manufacturers (e.g. JLR and VW Group). quality declines.
China is now the world's largest auto market. Car sales · Changes to labour laws: increase in wages, no more
have risen 12%. cheap China. Rising production costs markets become
· Large e-commerce opportunity. China has over more mature.
500million internet users. (Dominated by one firm, · High pollution rates: may be seen as encouraging
Alibaba) pollution if businesses trade in China. Air pollution kills
· Contingency planning: China may go through industrial over 1m per year.
revolution. · High on sweatshops: Ethical issues.
· Relaxation of trade barriers. · Risk of loss of intellectual property. (Protectionism)
· World's largest investor in renewable energy. · Ageing population: fewer young people, restricting
· Still a source of low-cost, high quality supply, despite supply to workforce.
rising wage costs. · China's economic transformation has been financed
· Rapidly emerging market segments. through debt.
· Massive public investment in infrastructure, but now
looking to rebalance in favour of more consumption.…read more
Examples of businesses who succeeded
A. Perry Hinges, the UK's largest Apple products being
distributor of hinges, has benefited produced in China by
from both production of hinges in Foxcom
China and selling them in the
Chinese market, as the construction
boom has led to an increase in
demand for hinges
The Chinese middle and upper classes have shown a
preference for established luxury brands from
around the world and this has been beneficial for UK
firms such as Burberry, Jaguar Land Rover (JLR).
Ikea succeeded by
adapting their strategy
to suit the Chinese
Coca-cola to invest more than $4bn in
China from 2015-2017 due to increasing
demand and to counter rising levels of
Examples of businesses who've failed
Tesco: failed due to lack of
in China Google: Withdrawing
market research and from Chinese market
cultural differences. because market share
Now starting up JV with wasn't as high as they'd
Chinese company instead. hoped (31%).
Nike's sales fell consecutively for 5 quarters. Nike's
products rose everywhere except for China and
Japan. This is due to cultural differences and strong
competition, e.g. Adidas.
Argos exited China after
just 4months following a
strategic review. eBay failed in China due to
They have invested £10m large rival, Alibaba
in a joint venture with dominated Chinese e-
Chinese company Haier commerce market.
Evaluate the risk and rewards involved in trading with or
operating in China
· Revenue and profit growth. Emerging markets · Risk of loss: significant investment is required, if
(including China) offer the prospect of much firms fail, they sustain substantial losses.
faster growth. Many multinationals are · Reputational risk: Being unethical (using
concerned that their businesses are too reliant sweatshops), breaching CSR standards.
on revenues from slow-growing, mature Encouraging pollution (contributing to it maybe).
economies. · Competitive risk: Exposes foreign firms to
· High quality, low cost supply. Factory of the significant domestic competition.
world with significant and highly flexible · Financial risks: Banks provide financial help to
production facilities. domestic firms, but not foreign firms. Unfair
· Base for further international expansion. competition.
· Cheaper labour than operating in the EU. Keeps · Failure risk: 48% of foreign businesses fail within
costs low. 2 years.
· China is expected to be the biggest market in 5- · Risk of loss of intellectual property.
10years. It's currently the world's largest · China's economic transformation has been
economy at the moment. financed through debt.
· Foreign brands are popular luxury products in · Poor quality products standards may decline.
the niche market increase in demand Demand may decline due to this.
increase in revenues and profits.
· E-commerce opportunities 500million online
users. (Dominated by Alibaba)…read more
Examples of business who have been
rewarded in China
Yum! Brands: Now
on Chinese P&G: Revenue has grown
generates more than
suppliers to be 50% in last 3 years. 1bn
50% of global revenue
able to supply people use P&G products.
and 35% of profits from
Starbucks: By 2014, China will be
BMW: China is now
Starbucks' 2nd largest market, after
BMW's largest market
and aims to sell 2million
cars in 2014.
JLR: China overtook the UK to
Samsung: Revenue from China become JLR's leading market in
surged 80% to $25.7bn in 2013. 2013…read more
Examples of businesses who have
failed because of the risks in China.
Nestle: Accused of price-
GSK: Caught up in fixing in Chinese baby-
allegations of milk market. Highly
corruption in Chinese damaging.
KFC Impact of quality problems and
bird-flue has damaged a successful
business in China.
Tesco: 9years of
losses as it struggled
to build scale
eventually forced to
sell business into
joint venture.…read more