Over the past few years multinational businesses have emerged and are doing business at nearly every corner of the world. Numerous businesses involved in consumer products and services in, particular financial and management services, have taken advantage of globalization to build huge business empires. Technology coupled with the success of globalization has allowed business to have investment all over the world. However, business leaders have the toll order of deciding the best investment frontier for their businesses. Each country has employed different investment ideals and incentives that set apart such investment destination. The first part of the paper shall review an international business corporation that could pursue international expansion. The second part reviews the investment option of China. Finally, the paper will present an antithesis argument for investing in China.
Introduction
The Peoples Republic of China is one of the nations that have stunned in the manner in which it has attracted huge businesses. China is now one of the few nations that operate with a surplus on their budgets and is reporting double-digit economic growth . In addition, it was not hard hit by the recent economic crisis that rocked the world economy in the wake of credit crunch that hit the west. Big multinational corporations in almost every sector of the economy are shifting to open operation in China and make use of the good economic environment created in the country. The Chinese government is making use of the good business image that the country portrays and uses it to increase their marketing strategy. This exodus of companies and reports of great success from the east compels other companies to follow suit. For instances, all manufacturing firms are actively setting up firms in China with increasing returns to shareholder investments. CEOs have the challenge of making the decision to investing in China. However, before such a CEO arrives at the conclusion that it is worthwhile to invest in China, it is upon the CEO to critically evaluate the factors that make investment in China a business milestone. This research reviews the factors that could lead to the investment of the fashion house Dolce & Gabbana in the Chinese market.
History of the Company
Dolce & Gabbana is a fashion house company with a pedigree of providing high end designer and couture. This Italian company was formed about 30 years ago by two associates Domenico Dolce and Stefano Gabbana when they worked in the same designer consulting studio in Sicily Italy. Since presenting the first female collection in 1985, the company has grown into a large corporation with presence in more than fifty countries. By the year 2010, the company turnover had exceeded $ 800 million and was set to increase over the next few years . With these results, the company was looking to expand its operations in the world stage. This need to expand has been directed by the need to improve the company profit levels. Additionally, the company finances have been inconsistent due to the tough economic conditions that prevail in the western economies. Thus investing in China might be a sure way of ensuring consistency in balance sheet of the company.
China and Investment
One of the greatest advantages that the China market presence to Dolce & Gabbana is the demographics that prevail in China. Vivanco, (2011) asserts that, Dolce & Gabbana is concerned with providing consumers with products that of quality and social status. This nature of consumer behavior, where a population grouping is attempting to go beyond basic requirement has a great influence on the spending nature of the same population.
Every nation has diverse demographics with regard to the age, gender and economic status of a population. The United States for instance has a middle class as the most of the population and is the main driver of the economy. Similarly, the Chinese population has a comparable population distribution . According to LI (2010), China has had its population demographics shift to a middle class population that is making money and looking to spend the same.
The impact of a mushrooming middle class in a population has a significant effect on the country’s economy. As the middle class population continues to increase in numbers, the consumption of luxury goods is set to rise. For instance the middles class Chinese population started to purchase goods such as private vehicles, electronic goods, pianos and other luxury goods. The encouraging and steady expansion of the middle class population provides some sought of social security. This social security shifts the population from a saving society to a spending one. This new wave of spending is giving middle class populations a new feeling of self worth and such population begins to spend on luxury goods.
Dolce & Gabbana could take advantage of the spending population and provide the Chinese middle class population with couture. A middle class composed of affluent members provides a good ground for product such as those marketed by Dolce & Gabbana.
Doing Business
The World Bank publishes regular reports called ‘Doing Business’ that investigates the regulations and efforts taken by countries towards improving the business environment in the country. This annual report is used by many potential investors in reviewing the investment options in deciding international investments alternatives. This report reviewed 180 countries spanning all the continents and regional blocks in the world. Different countries where found to adopt different policies and regulation in order to improve business performance.
Over the past few years, China has reported deliberate measures to reduce the protocols and procedures for foreign direct investment (FDI) and also reduced energy costs and labor costs. Additionally, China has one of the most efficient physical infrastructures such as roads and railings. In fact, the rate at which the government is investing in infrastructures in perhaps the highest in the world . China boasts of huge sea ports, big airports and the best road network. Similar technology has been given propriety and the necessary resources that are required to make it world class service.
For these reasons, China’s absorption of FDI has been increasing at a monumental rate. Over the past few years, several multinational firms have set up shop in China due to its low energy and labor costs.. Several multinational corporations have since taken advantage of these incentives and heavily invested in China . This has been noted by the report and highly recommends big firms to have investments in China.
China has also made key reforms on the procedures of registering new businesses in the investment sector. One of the key reforms that the country looked to implement was to have a government body that facilitates foreign direct investment in the country. In this case international businesses would only have to deal with one organ of the government to facilitate full registration. This reduced the procedures for registration from about 12 to just 2 procedures .
However, China fashion industry is perhaps one of the most difficult investment frontiers. This is due to two main reasons. First, China is one of the most reserved cultures in the world, especially when it comes to fashion and dressing. The Chinese population is very concerned about their culture thus several companies have to adhere to these issues. Dolce & Gabbana has the toll order of marketing aggressively to a restrained society to shift their dressing culture to a new kind. Secondly, China has many investments in these industries. Each firm is adopting a rather aggressive investment strategy and therefore the competition in very stiff.
Antithesis
One of the greatest challenges of investing of China is problem associated with patent and copyrights. Several business leaders have termed China as the ‘copy-cats’ of the world . Chinese products have been to found be imitation of other products around the world. Additionally, international laws on patents and copyrights have rather weak conditions and application in China. Thus businesses have the challenge of competing with other products that may have similar branding or product features. Similarly Dolce & Gabbana, famously known for their brand name G&D, will have issues with competing with several products with the same brand. The challenge will therefore shift to indentifying the stores that deal with genuine products. The consumers have to find a means by which they can discern genuine products from cheap imitations.
Conclusion
The twenty first century has seen massive improvement in information and technology making the world such a small ‘village’. Big multinational corporations have expanded their businesses to diverse geographical locations to improve their balance sheet assets and profits as well. China presents one of the best locations of doing business. China’s population is now composed of an affluent middle class that could provide the best clientele for such businesses as Dolce and Gabbana. The government of the Peoples Republic of China has also taken conceited measures towards ensuring a free business environment. However, Dolce & Gabbana has the challenge of addressing the patent issue that prevails in China. In general though, China presents one of the best environments for doing business.
References
Ball, D. A. (2006). International business: the challenge of global competition. New Jersey: McGraw-Hill/Irwin.
Li, Z. (2010). In Search of Paradise: Middle-Class Living in a Chinese Metropolis. Ithaca: Cornell University Press.
The World Bank. (2011). Doing Business 2011. Washington : The World Bank Press.
Vivanco, M. (2011). Dolce & Gabbana Uomini. New York : Rizzoli International Publications, Incorporated.
Wei, W. H. (2004). Foreign Direct Investment in China,” Doctoral Dissertation,. London: Lancaster University Management School.
