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Understanding the Chinese market

Discuss About the compatibility between corporate strategic and functional management policies.

Card Factory has been selling gifts and cards for special and important occasions. They deal with occasions from birthdays to special festival occasions. The company also provides their customers with balloons along with cards as well. The company generates major sales revenue from their own stores in UK. This revenue arises from products that include their three flagship products and comprise 95% of the sales figures. The revenue is generated through 800+ odd stores across the country. Now this company is trying to move overseas. The issue with moving overseas is based on the fact that the laws with every country is different. There are varying laws of real estate and there are several emerging challenges and opening restrictions for the company.

After a lot of study China was chosen as a potential market and there have always been unavoidable advantages for this market. China has managed growth over the last several decades. This unprecedented double digit growth is the reason why it is lucrative market. China is now the second largest economy in the world and is very important for the western countries to enter Chinese markets laterally and gain benefit from this.

The main objective of this thesis is to establish Card Factory in the Chinese market. A detailed research is conducted on Chinese market external and internal factors so that one can figure out the challenges and opportunities of business in the market after understanding the competition of the Chinese market.

This company is primarily into retail business and hence they have huge overheads. If they want to establish an outlet in China they must understand the laws governing cross border movement as well as the shopping and cultural habits in the country. Although the business of card factory is going strong in UK it will have to set-up a base in the Chinese market which is totally new to this company. The Card Factory has not established itself as a brand there. The issue also lies in the understanding of the consumer base in China.

Card Factory is a new brand to Chinese people therefore they do not recognize and value the brand. This whole strategy can be followed by four approaches. Card factory can either enter into a joint venture or own its individual store either it can use a franchisee in order to peep the whole sale route.

Card Factory product analysis and changes with respect to Chinese market

These cards are made individually for every day occasions such as congratulatory cards, get well soon cards wedding cards ,birthday cards, anniversary cards  while others are generated for seasonal occasions such as mother and father's day ,Christmas celebration, thank you cards etc. Now if we take a look at market history of china in terms of greeting card there is entirely different people and world out there except for cards used in everyday occasions the seasonal card market is totally different in Chinese market. For this let us first study the main festivals in china.

  • Chinese New Year
  • Dragon Boat Festival
  • China's Lantern Festival. ...
  • Qingming Festival. ...
  • Double Seventh Day —  China's Valentine's Day. ...
  • The 24 solar terms.
  • Winter Solstice. ...
  • The Double Ninth Festival.

As we acknowledge the above list; we get to know that most of the festivals celebrated in China have different meaning and approach therefore to compete in the Chinese markets companies such as card factory should hire a group of Chinese experts who can provide us some efficient knowledge about such Chinese festivals and who have good command over the Chinese languages and their culture as well. After a brief knowledge of this information card factory can make cards entirely based on market research done by the Chinese experts.

Card factory can also look into the option of e-commerce since it will lead to usage of the reach of internet in China and the large number of users that are increasing in double digits. In case the company sells the cards directly the company will look at establishing the factory in China and distribute products by reselling the goods in China.

There are drastic diversification changes in Chinese markets due to demographic and incomes and population changes. The list of all factors that have changed and influenced business in China is the growth of western businesses and the adoption of Western system of gifting and invitation.

The Chinese population is more than 1.5 billion and land area is greater than the United States. Therefore there are different markets than the Chinese market. The competition to establish itself and remains a challenge in the lack of overall understanding of the application. Thus the market is huge and driven by a number of factors like premiumization and capturing the cultural context of the market.

There are several ways in which other multinationals prefer the location in China, the issue also lies around Tier 1 cities and these include Shanghai, Beijing and Guangzhou. These areas of dense population are extremely above average annual income based. Choosing a city among the list of all these cities will help to reduce risk for Card Factory but at the same time the company faced increase in competition and operational cost.

International Strategy of Card Factory

Staff hiring is another challenge in Chinese market and it is major factor which can lead to success of any company within the market. Often the quality of the organization is judged by the human resource employees working there thus we did not compromise while hiring experts in this sector.

China is an emerging economy that offers lot of market opportunities for foreign investment. Although the country has a huge potential for economic growth offering access to a large market and considerable savings in labor costs, caution must be used due to differences in the political and cultural environment that create risk and pose uncertainty for foreign investors. This paper examines the economic, political, and cultural factors that influence business practices in China.

The main political factors are all related to the Chinese government being supporter of internal Chinese companies over multinationals. This should become an issue with the company when it tries to enter China (Mellahi and Frynas, 2015). There is also a culture of bribery and gifting for government officials in case the company wants to open a base in China. An efficient management team should be set up which must include people with diverse network of experiences of Chinese market and have good expertise over retail business (Shuen, 2010). The Chinese population comprises of people from rich to poor segment.

China is the major participant among the other countries to encourage FDI. The accounts of FDI contribute to 27% of production value, 4.1% of tax revenue in nation and further increases 58% of foreign trade (Mellahi and Frynas, 2015). Approximately 190 countries in the world invest in China and these are 450 fortune lists of companies. Thus it can further states that China has a attractive market which attracts  the companies to invest .Although the market is complex in terms of business still Card Factory will be able to make profit if invests here in right manner( UK essays , 2015)

Earlier the approximate population of China was 1.3 billion and it was estimated to grow at the rate of 0.494%; but at the same time the country became very cautious about population .Hence they introduced laws regarding child restriction i.e. one child policy law. This also indicates that China will be able to provide good and cheap workforce for card factory (UK essays, 2015)

China have reached heights in the fields of technology including majorly in computer science and biotechnology .Further a dense network Trans Pacific  was create to build US relation with China. The country supports technology to a huge extent thus it can be assumed that Card Factory can take this opportunity in order to develop its products. It is a well-known fact this company manufactures toys and other items hence if technology introduced while producing then it can benefit the company to innovate them to a large extent. (UK essays , 2015)

Market Identification

China is currently facing issues with environmental pollution and it has been listed as one the most polluted country by WTO. Thus it is trying to reduce its emission to a large extent. Card factory do not produce materials which can be harmful to nature or can cause pollution thus the entrance of this company in Chinese market can be somewhat easier (UK essays , 2015)

China always encourages foreign investment thus The Republic of China on Chinese-Foreign Equity Joint Ventures published about the operation, establishment, liquidation and foreign invested enterprises which stated that the laws are being simplified in order to attract foreign investors ( UK essays , 2015)

This reflects a step by step process in order to analyze the external environment. These factors may have positive and negative impacts on the business itself (Porter 2008)

Porter’s Analysis

Identify the competition

Every business more or less has competitors and in the same manner Card Factory will also have to face its competitors after entering the Chinese market. Thus it needs to realize the customer’s need of that particular area and design the cards and products according to Chinese mentality so that they win over the market competition.

Identify substitutes for product or service

The products offered by card factory are cards, toys, bows, balloon etc thus the company need to develop toys which can more hygienic for the kids and people .Apart from that the paper and other raw materials should be more organic so that people can do not think twice in China while purchasing the products for their kids or someone special.

Buyer’s power

The prices of the items should be decided in such a manner which may not charge them more as Card Factory has miscellaneous items and customer usually do not spend much on these thus they should decide the prices of the items keeping in mind customer income in China A thorough market study should be done in china after which the company can invest on its production and warehousing infrastructure and major locations (Norton, 2016).

Power of Suppliers

The company should select local suppliers in order to get raw materials for their products apart from that they should try to negotiate a lot in terms of raw materials as the raw materials will be available in China at much cheaper rates than Britain.

Arrival of New Competitors

Like every other business Card Factory also faces threat against its other competitors as there are  several other companies involved in same business thus the company need to ensure that it diversify from its basic products so that it top the list of its competitors. Non –card items is basically a separate product category which customers have a high tendency to buy for their loved ones (Hesterly, 2015).

Card factory is a valuable UK’s leading retailer. It has big and flexible greeting card market associated with different types of gifts  for occasions, festivals and party product further it also provides wide range of cards such gift card in different sizes ,attractive gift bags , fashionable gift wrap, colorful ribbon, bows, balloons , attractive small gift and gift dressing even more at reasonable prices (Morden, 2016).

Card factory basically deals with printing business. But it gradually implemented its thought to do something more than ink and tonner on paper. They printed their thoughts, ideas and views to succeed their dreams and further they aspire to expand the business worldwide with good quality products at affordable price (Subramanian, 2010).

Its target was to become a skillful retailer in big and tough UK greeting card market and further adding value to establish single card market .Company focused to maintain the card value with the majority of card less than £1 for the interest of the customers. By implementing the same strategy and adding some more factors it wants to grow and capture Chinese market (Eisner, 2014).

Favorable

Unfavorable

Internal

Strengths

All over UK at least 400 stores are established and it is targeting to expand its business throughout the world especially in China (Regassa & Corradino 2011).

Weakness

It is a seasonable base business and its business depends on occasion such as wedding, birthday party etc.

External

Opportunities

Development of western culture helps to increase the country’s social and economic condition. Geographically expansion helps to reduce the seasonal festival of each country for a fix range of time and develop healthy culture (John, 2013).

Threats

Nowadays electronic message is growing popularity instead of traditional greeting cards (Morden 2016)

Card factory basically deals with printing business. But it gradually implemented its thought to do something more than ink and tonner on paper. They printed their thoughts, ideas and views to succeed their dreams and further they aspire to expand the business worldwide with good quality products at affordable price (Zentes, 2015). Hence the niche is through printing materials created and other developments like the auditable solution monitoring procedure. In order to supply products relevant to local customer base Card Factory need to provide autonomy to local managers but at the same time everything should not be decentralized. It is a seasonable base business and its business depends on occasion such as wedding, birthday party etc (Zentes, 2015).

Location Choice

The printing price must be cost effective to ensure the availability of all the resources. It must include all overhead costs as well. The pricing must also keep seasonal variations in mind and must take care of the issues that concern the overall profitability. The price must be set accordingly. The Chinese festival calendar can be helpful here in deciding the price based changes (Qian, 2013).

To design cards and gift items with respect to Chinese culture and festivals the company must establish and well-developed Warehouse network in major locations of the country. They are thus stepping into a country where there is more growth and expansion. Also as far as culture is concerned cards are still a norm in Chinese culture and dynamics for invitations (Gassmann, 2012)

Since last 20 years company it is the leading retailer of card business in UK .Now it is the perfect time to establish card factory in China within coming time. The promotions must be aligned to the Chinese calendar and ensure full compatibility with it.

In order to succeed on global scale Card factory requires introducing corporate culture which will be reflecting the diversity of customer operations and base. A more eminent work force can be created in following ways:

  • Card Factory should recruit manager with experiences of Chinese market
  • Reducing reliance on expatriate workers
  • To generate talent management programs globally so that it ensures the talent flow.

Conclusion

In order to supply products relevant to local customer base Card Factory need to provide autonomy to local managers but at the same time everything should not be decentralized. Card factory requires thinking about where they are get economies of scale without compromising local relevance. A possible platform can be created for the services and products which are locally delivered. This polices will the company to establish itself in Chinese market.

References

Subramanian, R., 2010. Strategic management: Formulation, implementation, and control. Chicago, Illinois: Irwin.

Shuen, A., 2010. Dynamic capabilities and strategic management. Strategic management journal, pp.509-533.

Norton, D.P., 2016. Using the balanced scorecard as a strategic management system.

Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Peppard, J., 2016. The Strategic Management of Information Systems: Building a Digital Strategy. John Wiley & Sons.

Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.

Mellahi, K. and Frynas, G., 2015. Global strategic management. Oxford University Press.

Helfat, C. and Mitchell, W., 2015. Qualitative empirical research in strategic management. Strategic Management Journal, 36(5), pp.637-639.

Hesterly, W., 2015. Strategic management and competitive advantage concepts and cases. Pearson.

Eisner, A.B., 2014. Strategic Management: Text and Cases.

Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.

Campbell, D., 2012. Strategic management for travel and tourism. Taylor & Francis.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. pearson.

John, C.H.S., 2013. Foundations in strategic management. Cengage Learning.

Baum, J.A., 2014. Introduction: Economics meets sociology in strategic management. Advances in strategic management, 17.

Morden, T., 2016. Principles of strategic management. Routledge.

Ward, K., 2012. Strategic management accounting. Routledge.

Zentes, J., 2015. Strategic international management. Springer.

Qian, L., 2013. Market frictions as building blocks of an organizational economics approach to strategic management. Strategic Management Journal, 34(9), pp.1019-1041.

Gassmann, O., 2012. The strategic management of innovation: A systematic review and paths for future research. International Journal of Management Reviews, 14(4), pp.367-390.

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