Establishing Business In China Report

Establishing a business in any particular country requires in-depth research on the country and the odds of the country being a perfect environment for starting a business. This session talks about establishing a business in China. There are a lot of lessons learned from the sessions on the dynamics involved if one wants to start a company in China. There are a number of considerations on whether China is a good environment for business. First, one has to establish whether China is a good market for the products and services. Once established that it is a good market, one should ascertain the entry strategies used. Thirdly, due diligence should be stressed when thinking about investing in China. When entering the Chinese market, there are three levels of analysis when considering opportunities versus risks. The three consists of: Macro level-which can be analyzed using the PEST analysis; industry level-analyzed by the Porter’s Five-Force Analysis Framework; company level-analyzed by determining the strengths and weaknesses of the company.
The Chinese economy has characteristics that will determine whether it is suitable or otherwise to the entry of a company. First, there is bureaucracy which is a structure of administration where most significant judgments are made by government bureaucrats instead of elected representatives. The Chinese market is also characterized by ever changing rules and regulations which makes it a flexible economy. In addition, the market is currently on a slow-down economic growth which is a demerit for any company that would like to enter the market. The worst of it all is the level of corruption in the Chinese administration which couples with the Guanxi. Outright fraud is another characteristic of the market which bars many investors from investing in the country. There is a shortage of labor in the country due to a high percentage of the ageing population. Finally, the market is characterized by high levels of piracy and intellectual property violation.
When determining whether the Chinese market is strategically important, there are two important factors that come in: the market potential and the learning potential. The two variables are directly proportional in that the higher the market potential the higher the learning potential. When it comes to the market potential, there are two factors to consider: the current market size and the growth expectations. Currently, the Chinese market is the second largest economy and therefore good for entry of new companies. In terms of the growth expectations, the market growth has slowed down but it still has a higher growth rate. When considering he learning potential of the Chinese market, there are two factors to consider: the sophistication and demands of customers and the speed at which pertinent technologies are developing in the market. Customers in China are demanding and force service providers to meet sturdy values for products and services. Further, the country has local research centers which ensure that the economy adopts the latest technologies.
Before any company enters the Chinese market, it should consider the ease of entry. The entry barriers are lower if dictatorial restrictions on trade and venture do not exist. Also, the barriers are lower if the new market is culturally, geographically, and linguistically adjacent to the Chinese market. The barriers are also lower if the amount of competition is lower. There are various ways of entering a target market, say the Chinese market. They comprise: joint ventures, exporting, wholly owned operations, and licensing/franchising. It is of much significance that a company selects the best mode of entry into the target market. The mode should ensure that there are minimum risks involved in the process.