1. Analyse and demonstrate an understanding of the external environment and industry competition in the Chinese market.
2. Identify the company`s resources and competencies; and determine the potential of the company`s competencies in terms of a competitive advantage in the Chinese market.
3. Critically evaluate if the company can continue withe the current vision and mission statements in the market. Re frame the vision statement and mission statement of the company for the new strategic business unit in China if needed.
In this competitive world, formulating strategies for overseas expansion is the most necessary step for almost every company. Companies want to attain success, which pushes them to expand their business into a foreign shore. Business strategy is crucial for any overseas expansion. Card Factory is a gift and greeting card store based in the United Kingdom. It is one of the leading retailers of gifts, gift dressings, party products and greeting cards. Currently, it boasts and operates in about 850 stores across the nation. They print and produce their cards and items. It is one of the most popular card stores of the United Kingdom (CardFactory.co.uk, 2017). This report analyses and demonstrates the understanding of the external environment and industry competition in the Chinese market. It also tries to identify the resources and the competencies of the company. It goes on to determining the potential of the competencies of the company in terms of competitive advantage in the Chinese market. It critically analyses whether the company, Card Factory, can continue with the existing mission and vision statements in the market. It tries to reframe the existing mission and vision of the company in order to adjust and reframe it to suit the new business strategic unit in China. It also constructs a SWOT analysis of the company and recommends a strategy for the international business scene and for an entry into the new market.
A strategy is an important aspect for the success, development and failure of all kinds for all kinds of organization, from multinational to entrepreneurial start-ups. Strategy involves discussing and formulating the key issues of a company, dealing with the issues and finding out a solution for the problem. It is the long-term decision of an organization. It involves a more comprehensive view of the workings of a company (Li and Liu 2014). According to Alfred D. Chandler, strategy is the determination of the long-run objectives and goals of an organization and the adoption of courses of action and the allocation of resources that are necessary for carrying out these goals. The companies chalk out different strategies to formulate a plan for expanding its business in overseas countries.
For any organization to achieve a successful business expansion, it needs to focus on the external environment. It needs to focus on and analyze the industry competition of the company in the market in which it is expanding. The external environment is important to assess the situation of the market in which the company is expanding. The external environment of a company is the factors outside the organization that affect the ability of the company to perform to the optimum level. Some of the factors can be manipulated by marketing strategy of the company while other factors require some adjustments (Bao, Chen and Zhou 2012).
It depicts the political, economic, social, technological, environmental and legal factors of a specific market. In this case the PESTEL analysis of the Chinese market shows the set-up of the market in China and helps to analyze whether it would be feasible to invest in the country or not.
External environment and industry competition
China is a developing country that boasts of a large population, which can be both beneficial as well as non-beneficial to the country. The macro environment of the country is broadly divided into four categories. They are political factors, social factors, technological factors and economic factors. The analysis of the macro environment of a country helps the management of a business organization to analyze whether or not to invest in the country.
Political factor: China is one of the most attractive markets in the world for any business. It boasts of a large population with a spending capacity. The country has also become one of the strong powers of the world. This made the country all the more suitable for any kind of international business. The government in China has both informal and formal rules, which the businesses must abide by. China follows a socialist system in their procedure of decision-making. The Communist Party of China is the only political party that rules China. The government of China is a stable one. The involvement of citizens in politics is quite low and the workings of the government are not publicized by the media or the press. It has an effective set of policies and regulations. The freedom of business in China was tight previously as it restricted businesses to come in. However, recently, the Chinese government opened their gate to the world allowing businesses to come into the country. The government opened market to foreign multinational companies. The country has now loosened their trade policy especially in the export, import and trading industry. China has a lower corporate tax that encourages new businesses to enter the market.
Economic factor: The GDP of China is $11.39 trillion with a purchasing power parity of $21.27 trillion. The disposable income of the country is high and is thus suitable for other offshore businesses to invest in the country (Stats.gov.cn, 2017). The unemployment rate of the country is only 4%. This makes it easy for offshore companies to invest in China There was introduced a stimulus package of about USD 585 billion as an attempt to protect the country form the negative effects of the economic crisis. This stimulus propelled economic growth mainly through immense investment projects. (Armstrong and Taylor 2014).
Social factor: The population of China is 1.357 billion. The lifestyle and the attitude of the country are different from that of the western world. However, with the increasing globalization, the country is now open to a lot of western culture and attitude. The population growth rate of China is 0.47% as of 2009. The literacy rate is about 91%. The labor laws in China are not that tight which means that high level of encouragement is given to the labor class in the country. The companies need to have a prior discussion with the labor union and bureau before firing any employee from work. The corruption level in China is widespread. It affects sectors like finance, banking, and construct intensely (Mion and Zhu 2013).
Technological factor: The achievement of technological superiority of China is quite high. However, the online system of business in China is not that adequate. The online payment system is also not up to the mark and lacks the security that is essential. The use of credit card in the Chinese market is not that widespread. The government of China has introduced programs to support and nurture research and development program. The Torch Program and the Scaling Heights Program are examples of two such programs.
The environmental factors of China are important for Card Factory to analyze the suitability and affordability of expanding into China. The government of China takes the cause of environment seriously and has many laws and regulations in place for protecting, controlling and preventing industrial pollution and thus helping the urban environment to improve.
The legal side of analysis is one of the most important parts in analyzing the feasibility of investing in China. The main legal issue of China is the labor regulations of the country which act as a hindrance in the overall development of the nation. It impedes the employment rate and the rate of productivity in China.
The analysis of the five forces of porter of the greeting card market in China is necessary to help the British company, Card Factory to analyze and interpret the feasibility of investment in the market.
- Competitive rivalry: Businesses all over the world have to monitor its competition in order to chalk out a plan which can help the company deal with its competitors. It is important for any business to keep a note of the competitors as it can help in assessing and finding out the markets in which the business can expand or it can help the business to directly take on the competitors in the target market The competition that exists in the country is mainly in the form of greeting card companies that receive bulk orders. The customers do not get a chance to place personalized order for any gift. (Navarro-García,Arenas-Gaitán and Rondán-Cataluña 2014).
- Bargaining power of suppliers: The bargaining power of suppliers is an important item in the market scenario. The suppliers hold a large amount of power as they are in charge of supplying the raw materials, labor, components and services. Since China has a large population, there are many suppliers, thus they have a high bargaining power (Liang, Lu and Wang 2012).
- Bargaining power of customers: The bargaining power of the customers is high as there is a lot of competition. The customers usually have many options to choose from. The customers can go to different manufacturers if they do not find the appropriate goods and services from a manufacturer.
- Threat of new entrants: This factor is extremely high in China. Since the country has a growing economy, manufacturers try to find alternative ways to be innovative in bringing in new products in the market (Grant 2016). .
- Threat of substitute products: The Chinese market is deprived of any kind of online greeting card and gift store. Apart from bulk orders, the Chinese market does not have any other website that offers products like Card Factory (Huang and Renyong 2014). The Card Factory offers one of the most exclusive gift options and greeting cards. The products offered by the company are very exclusive and lack in the Chinese market. The customers require a company like Card Factory to bring to them the quality of the products offered by the company.
Industry competition is the competition between companies that produce the same type of products in a market situation. There is not much competition to the Card Factory. China does not have any greeting card and gift company that has an online presence. Few websites are there which offer bulk shipments of greeting cards but not personalized, individual greeting cards (Königová, Urbancova and Fejfar 2012).
The resources and competencies of a company are two important points when discussing about strategies and strategic management of a company. The resources of the company help to take the company forward. One of the most important resources of the company is that it is the leading specialist retailer in the greetings card market in the United Kingdom. The company operates from almost over 850 stores across the country. One third of the sales of the company come from the gift wrapping, party products and small gifts. It has a market of about £1-2 billion. The company boasts of around 6,500 employees in the UK market along with seasonal staff of 6,000. The company enjoys immense popularity in the UK market. Competencies of a company denote the processes and activities by which a company arranges its resources effectively (Stokes and Oiry 2012).
The core competency of Card Factory lies in the effective pricing and the quality of products provided by the company to its customers. The company has a unique way of merchandising the product that it sells. It offers exclusivity to the design of the products. Card Factory has a management team with enriched experiences and expertise that operate in an efficient manner. The competencies of the company ensure that the company gets a competitive advantage in the Chinese market (Ramamurti 2012). The company has a strong set of illustrators, packaging specialists, verse writers, designers, editorial and technical constructors. It has a total of 1,200 stores across the United Kingdom and Republic of Ireland, which indicates its popularity. It provides an extensive range of non-card as well as card products. One of the main positive aspects of the company is the transparent pricing that helps the firm to build a relationship of trust with the customers. Card Factory enjoys a complimentary area of growth in the online sector. The Chinese market lacks a strong company that offers greeting cards and gifts like the British company (Contractor 2013).
The macro environment of China
The mission statement of the company is to achieve excellence in whatever it does. It aims to enrich the lives of people through the products and services. It aims to keep the creativity and the quality of the products superiorly unmatched which is essential to the success of the company. The vision statement of Card Factory is to create a world that is emotionally connected by making an actual difference in each life, each day. The mission and vision statements of the company are essential in the progress of the company and also for understanding the motives and thoughts of the company. Since the mission and vision statement of the company more or less encompasses the very essence of the purpose that the company is about to serve, it can be safely said that mission and vision statement of the company does not require a huge amount of change. However, there is a scope for a small amount of change in the statements of the company if at all it is absolutely needed (Abraham 2013). It can be said that the mission statement of the company can majorly remain unchanged as it aptly expresses the thought and purpose of the company. However, the revised mission statement can state that the company aims to fulfill the emotional gap of the ever busy population. It aims to enrich the lives of people through the products and services. It aims to keep the creativity and the quality of the products superiorly unmatched which is essential to the success of the company. The vision statement, however, can remain unchanged as it is.
SWOT analysis is a study that is undertaken by an organization in order to identify the internal weaknesses and strengths of the company. It also helps to analyze the external threats and opportunities that the company might face. Card Factory is a company specializing in the manufacturing of greeting cards and gifts. The parent company of this organization is Sportswift Limited. One of the main advantages of this company is that it has kept the price of the products constant for the last ten years.
The strength of the company mainly lies in the quality of the product provided by the company at an affordable price. There are many other strength of the company too which can be considered. They are: One of the main advantages of the company is the sheer number of employees. It has over 6500 staffs and also a group of 6000 seasonal employees. The company has a strong and robust management with the capability of making good decisions which are efficient. The company also sells its products through an online store on a website named gettingpersonal.co.uk. It sells a variety of products from engraved champagne glasses to chocolates. It has a huge number of networks of valued store. Card Factory enjoys a high competence in management and does not rely much on suppliers. The company designs, prints and sources their own cards (CardFactory.co.uk, 2017).
Keeping the price range same for ten years on one hand is strength for the company, on the other hand it proves to be a weakness too. Since the price range has remained the same for about ten years, it has led to the company being stuck with the old ways and designs of its products. The company lacks a rapid adjustment to the change that is happening in the greeting card and gift industry. It has a limited range of cards that are available on the online platform (Holtbrügge and Baron 2013).
Porter 5 forces
Card Factory, like any other company, enjoys some opportunities. One of the first opportunities for Card Factory is that has a scope for growth in the United Kingdom as well as in other countries. Since there is an increase in the market for online cards, it can be benefited from this trend. The company can increase the variety of products that it sells across the stores. It can combine the online marketing with proper marketing to get maximum returns on their products (Greitemann 2014).
With the advent of technology and the boost in the online industry, Card Factory faces serious threats in the upcoming future. Since the British market for greeting cards is not growing, it does not indicate a positive trait for the company. The online sellers of are increasing rapidly. The rising charges for delivery of gifts and greeting cards also act as a hindrance for the company (Rothaermel 2015).
In the line of business strategy, it can be inferred that in order to expand its business to China, Card Factory will have to keep a few things in mind. Since China has a large population, after opening first few flagship stores across the country, the aim should be making the online presence of the company in China very strong. Card Factory has to assess the competition that might be preexisting in the target country. The company should collaborate with a pre-existing online card company. Companies like Shuangxin Greeting Cards Factory can be a good alternative to collaborate with (Hktdc.com, 2017). Since the website only offer greeting cards that has to be bought in bulk orders, and not any personalized gift items, which is offered by Card Factory. It can help in the expansion of the industry. The company can recruit the optimum number of people in the company which can be beneficial for the company. The price range can be set keeping in mind the needs of the time of today, although initial low pricing of products is appreciated. The collaboration with the online website mentioned above can prove to be beneficial for Card Factory (Verbeke 2013). Card Factory should keep in mind the economic scenario before investing. It can initially take the help of a local advisor to understand the details of the market and the perceptions of the consumers.
In the competitive world of today, every company wants to be ahead of the competition. To achieve this, the companies adopt many innovative and traditional practices to achieve the desired result. Companies that are relatively well established in their home country aim for an overseas expansion to achieve the competitive advantage. The competition in the world market pushes the companies to move out of its home country and explore the marketing opportunities in the overseas market. Therefore, it can be conclusively said that the Card Factory had taken a good decision in deciding to expand in the markets of China. Since China has a large number of population, the company can explore a lot of marketing potential in the country which ultimately might be beneficial for the company.
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