Proposal for Extending Business in Chinese Market
Ice cream is a kind of classic dessert in America. Almost, 87 percent Americans have ice cream in their refrigerator. To satisfy the need for ice cream, there are more new ice cream brands in America. Plenty of new ice cream brands give us more competition in the market, and it is harder for us to gain more market share. Also, it is a major concern for our business that profits from the business have started falling.
Since our company has been established, we have maintained good product quality and positive word of mouth in the market. Therefore, our revenue increased significantly and we managed to generate profits during early business years. In the American market, we have a stable and important position. On the other hand, the market is saturated, so it is difficult for us to further business our business in the American market. We already have at least one store in each big city of America. If we keep adding new stores, these new stores will take away sales from the old stores. We need to invest in an efficient and profitable project.
Expending our business in foreign countries is a good project, and China should be our first target market. China has the biggest consumer base in the world. It is important because we need a large market to extend our business. In China, there are few foreign ice cream brands, so we do not have fierce competition. Dairy Queen is very famous and successful in the Chinese market. We can take them as a good example to analyze profit. In China, the foreign brands are always more expensive and Chinese customers prefer to buy them because of the product’s better quality. At Dairy Queen, they can sell a cup of ice cream for 30 Yuan (￥). For every￥30 cup of ice cream, the cost is only 5￥, because the cost of rent, labor and raw materials are cheap in China. The net profit is five times the amount of cost. We can make a lot of money in the Chinese market.
China is a big country, and it has 661 cities. Basing on Dairy Queen’s finance report, 70 percent of the total profits are coming from first tier Chinese cities. A￥30 ice cream is a luxury product for people with￥3,000 monthly salary, but a￥30 ice cream becomes a daily desert for people with over￥10,000 monthly salary. Therefore, we can sell our product easily to customers with purchasing power and interest in ice cream in the first tier cities. Our market research reveals that major Chinese cities such Beijing, Shanghai and Shenzhen are the best markets for us to open stores. After opening stores in these big cities, the next step is to open our online store. Over 47 percent of the Chinese customers are shopping online, so it is another market for us to extend our business. Customers will place order on our website and we will deliver them ice cream at their doorstep.
DESCRIPTION OF THE PROJECT
Goal of Extending Business in China
The goal of extending business in China is to open at least two stores in Beijing, Shanghai and Shenzhen, and to have an online store. We plan to generate net profit that would be at least four times the amount of cost.
First objective: Build brand Awareness in China
Brand awareness is the most important element of our business while entering a new market. Therefore, building brand awareness is the first thing that we need to do in China. We are a high profile brand in America, so it is easy for Chinese consumers to believe that we are a big and good company. In Beijing, Shanghai and Shenzhen, there are many American who are working and living there. We should target them as our first group of consumers because they are familiar with our brand. They may introduce our product to their friends, colleagues and families. Then we have to advertise our goods for sale. We will advertise our ice cream on TV, targeting children. Children are a big part of our main consumers, and it is easy to grab their attention. Chinese consumers would like to try new and free product, and we could take advantage their characters. We plan to offer product samples at shopping malls for free. After trying our product, we believe that they will love our ice cream and wait for our stores. In the end, many business review and social networking sites such as yelp will be helpful to promote our ice cream. People always look at these websites for products with high rating. If we put our ice cream on these websites and our product has high rating, then we will have plentiful consumers.
Second Objective: Market Research
Conducting market research is the next step which is also important before opening stores. There is a difference in the choice of flavors and food culture of Chinese and American customers. We need to figure out how we should adjust our product to suit the needs of Chinese customers. We also need to create new products for Chinese customers, and add new ice cream flavors that are Chinese favorites. Finding the right position for our new stores is another part of market research. Our ice cream is a high-end product; therefore, we need to open our stores near high-end consumer groups. The best options are luxury shopping malls and advanced office buildings. People who come to these places usually earn over￥10,000 monthly salary, and their purchasing power is suitable for the quality and price of our product. Finally, we should avoid competing with our own stores. We should not have more than two stores for each city.
Third Objective: Open new stores
After achieving the first two objectives, we can start to open new stores. At first, we should have a China sales manager from our company who is charge of opening stores in China. The Chinese sales manager will make sure all stores in China have the same interior and equipment. The Chinese sales manager will also train each store manager, as we need to ensure that all our stores are of highest standards. Guaranteeing that all our stores have same quality level is the reason that we need to choose a Chinese sales manager from our head office in America. We have to choose the position of stores and the type of product that will be sold in China before opening the stores, to ensure operating the stores is easy. The last important thing is finding safe and stable supplier for our daily operation. When the third objective is completed, we would be in position to open stores in China.
Fourth Objective: Open online stores
After opening the physical stores, we need to set up our online store. Shopping online is the most popular method for the Chinese customers. There are almost 200 million consumers shopping online. We should take advantage of this opportunity and extend our business to the Chinese online shopping market. In fact, opening online store costs less than opening a physical store. We do not need to rent a storefront and hire staff. The only thing we need to do is hiring customer service executives and selecting a suitable location and cooperative factory staff. The customer service staff will record the online orders and send orders to the factory. The cooperative factory staff will help us to process our online order, pack our products, and deliver the products to customers. It cost less for us to open an online store, but it will make more profit.
Timeline
All our physical stores and the online store are expected to be fully operational within two years of launch. This will help us to serve our target market in major Chinese cities and ensure we grow our business in the Chinese market perpetually.
PROJECT DEVELOPING PLAN
We need to hire many locals to operate our stores, as locals can work for lower salary. At the same time, we also need to assign staff from our head office, who will assist and supervise the operation of Chinese stores.
Project Staff Positions and Consultants
Chinese Sales Manager: Will train and manage all store managers in China.
Store manager: Will open and operate the store; train the staff; make sure of the product quality; and report financial situation to the Chinese sales manager.
Store staff: Will take orders, collect money and process the products.
Customer service staff: Will record online orders; solve customers’ problems and complaints; and send orders to the factory.
Project Budget
CONCLUSION
The American ice cream market is saturated. Therefore, it is not our best option to invest more in a saturated market. Extending our business in China will bring us huge profits. After fully advertising our company and completing the market research, we can make sure that our ice cream product will sell very well in the Chinese market. After operating our physical and online stores for two years, we will experience the return on our investment and efforts. The whole proposal is just a start of entering and extending our business in the Chinese market, because the market shows a great potential. After completing the proposal, we have our first foundation in the Chinese market. In the end, we have ability to invest more stores, slice off the ice cream market shares and make more profits.
