China Market
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PESTLE-analysis。Political 。Economic 。Social/cultural。Technological 。Legal 。EnvironmentalThe influences of cultural roles in Chinese marketHofstede’ cultural dimensions in Chinese market1.1 CollectivismIndividuals are integrated into groups and form their judgments based on group.1) Interdependent natures and obligations to the group2) Group preferences and group harmony3) Impacted by public voice; care a lot about the other people’s opinion about them.4) An important distinction is made between “insiders” and “outsiders.”5) To be the same or similar with others in the group; preventing anyone from“losing face.”1.2 Power distancePeople accept a higher or lower degree of unequally distributed power.1.3 Uncertainty avoidanceThe members of a culture feel threatened by unknown situations Created beliefs and institutions that try to avoid these→ Influences consumers’ preference for purchasing behaviors1.4 FemininityStands for a preference for cooperation, modesty, caring for the weak and quality of life. Society at large is more consensus-oriented (共識)1.5 Long Term OrientationValue for the future; emphasis on future goal; sacrifice current entertainment to achieve future successComparison of consumption mindset Chinese customers: savingApplying socio-cultural analysis• Consumer characteristics Providing abundant information about consumer’s features • Market segmentation: Specifying and dividing more precisely on the target segments and defining more clearly on the strategic position • Product: Influencing customer’s taste and preference and guiding the process of product localization • Communication Defining the type and nature of appeals in advertising • DistributionShedding light in the consumption habits and thus provide better distribution method. • Cultural change Identifying new business opportunities caused by a cultural change, e.g. aging population issueRegional concepts in ChinaCompanies adopting a national market strategy• Market characteristics Market is newly created Business is monopolized High price elasticity requires low cost and therefore economy of scale of production, i.e. product standardization is the key successful factor • Strategic characteristicCompany is ambitious and financially strong –Company requires central government’s support • Customers’ characteristics Needs are the same throughout country • Products’ characteristics
Products have a strong brand name Products have high value relative to weight/size and very low local contentCompanies adopting numerous regional markets strategy • Political factors: China reform begins with a decentralization which means local governments can offer generously to FDI beyond the central policies Strong local protectionism and trade barriers derived from the desires to maintain local revenues and employment. • Strategic factor:FDI or local companies enter selected regional markets at stages and plan for expansion when competences develop Company is conservative or limited by financial strength • Marketing factors: Local taste and preference is critical to product offerings Local adaptation is paramount, e.g. availability of natural gas in the west for power generator Limited regional coverage of distribution and communicationGo West→ Opportunities of the west • Natural resources • Low labor cost • Many densely populated urban cities Challenges of the west • Inexperienced in national and global trade • Local protectionism and levies • Low average purchasing power, esp. in second tier cities and rural towns Improvement of investment environment in the west • State’s actions: Appointing external top officials who have extensive east coast management experience Investing directly in key projects which upgrade infrastructure remarkably• Investors’ actions: Entry of new capital and entrepreneurship to explore natural resources• People’s actions: – Return of locally born small investors and skillful labor who work in east coastHBR Journal• Domestic companies are more than holding their own in the face of foreign competition Daily use of Baidu is 4 (7.8 in Nov 2012) times greater than Google QQ from instant message leader Tencent is ahead of MSN Messenger Yahoo and eBay have pulled out of China NEC and Panasonic have withdrawn from the Chinese mobile phones market • MNC’s survivors drop premium price substantially as they are no longerirresistible to consumers and unbeatable by local companies Esprit prices competitively in China Samsung launches low-price phone model Competition in china →Six part strategy of local firms Creates customized products or services //有call centreDeep understanding of the consumers’ taste and demography Better allocation of resourcesDevelop business models to overcome key obstacles //hurdle of licensingThe global leaders in video game, such as Microsoft and Sony haven’t made much headway in China because of software piracy. Shanda overcome software piracy obstacles by offering an online role playing game that link many playersDeploy 部署the latest technology //同airline,hotel 合作Core competence of production: low cost and high qualityTake advantage of low cost labor and train staff in house //bicycle collect paymentFocus Media: outdoor advertisingEmployees refresh and service all LCD screens by bicycleScale up quickly //nation networkEconomies of scale (e.g., Goodbaby has 35 companies)Expansion through M＆AInvest in talents to sustain rapid growth //defeat expediaAppointing CEOs with work experience in MNCneed for uniqueness:price consciousnesspublic-interest orientationneed for achievementneed for respectBrand preferencesBrand discriminationcared lesscared less++Local brand+++－－Foreign brand+++Not enoughAttitudes toward counterfeiting brands++－Attitudes toward innovative products+Not interested+++Luxury consumption+little practical valuelittle practical value－+Word of mouthSeeking for others’ opinions++Sharing consumption experiences－++Impulse buying++－－Investigating the relationship between lifestyles and consumption patterns