Doing Business in China: Opportunities and

Challenges www.ePowerPoint.com

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China: Astonishing Numbers and Changes Foreign trade volume: $3.87 trillion USD in 2012 Foreign exchange reserve: $4 trillion USD in Mar

2014 GDP : $9.24 trillion in 2013. GDP increased 10.4% in 2010; 9.3% in 2011;

7.7% in 2012, 2013 2001 WTO membership, 2008 Beijing Olympics Game 2010 World Expo in Shanghai

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The China Opportunity Tremendous opportunities in various

industries High growth rate A large population Growth of middle class and rich Backward technologies Unmet consumer demand Cheap labor and raw materials

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Challenges of Doing Business in China

Inefficient distribution Lack of transparency Fast changing consumption patterns Strong competition Contract sanctity Over supply/capacity Protecting intellectual property rights (IPR) Corruption Bureaucracy

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Misconceptions about China’s Market “If every Chinese buys a piece of my

products, my production could last many years.”

“China has a large population. Even if a small percentage of Chinese buys my products, that would constitute a very large market.”

“Chinese consumers always prefer foreign made products.”

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Course Frame Part 1: Recognizing the Bases

for Marketing Management

Part 2: Assessing Market Orientation and Customer Value

Part 4: Offering, Delivering, and Communicating value(Product/Pricing/Placing/Promotion strategy)

Part 3: Choosing Value(Market segmentation

targeting & positioning)

Marketing EnvironmentCustomer Value/Relationship

Consumer BehaviorBusiness Market

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The marketing conceptand the development marketing in China

Part 1: Recognizing the Bases for Marketing Management

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AMA defines Marketing as an organization function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

What is Marketing ?

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Market System

Industry(a collection

of sellers)

Market(a collection

of Buyers)

Goods/services

Money

Communication

Information

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The Production-Oriented

The Product-Oriented

The Selling-Oriented

The Marketing-Oriented

Consumers prefer products that are widely available and inexpensive

Consumers favor products that

offer the most quality, performance,

or innovative featuresConsumers will buy products only if

the company aggressivelypromotes/sells these products

Focuses on creating, delivering, and communicating

superior customer value to target markets

Marketing Philosophy

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The development of the market system in China since 1949 1949-1979: A central-command economy

Marketing: politically as 'decadence' or economically as 'unnecessary and useless'.

1980-1991: urban industrial reform started (reducing mandatory plans and replacing them with guidance plan) Marketing: enthusiasm tempered by nervousness

1992-: 'Socialist Market Economy‘ Separation of government bureau from the control of

enterprises Development of new markets (commodities, finance and

capital, labor and technology) Marketing: gradually accepted

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Historical Development of Marketing Thoughts in China

Market Research 1923 U.S. —> 1988 China Marketing Conception 1957 U.S. —> 1982 China Market Segmentation 1956 U.S. —> 1992 China Consumer Behavior 1967 U.S. —> 1995 China Service Marketing 1980 U.S. —> 1998 China Relation Marketing 1983 U.S. —> 1998 China Global Marketing 1983 U.S. —> 1996 China Brand Equity 1989 U.S. —> 1994 China Customer Satisfaction 1989 U.S. —> 1995 China Marketing Communication 1993 U.S. —> 1996 China Internet Marketing 1990’s U.S. —> 1996 China Customer Relationship Management 1996 U.S. —> 1998

China

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Marketing : extensively used in all aspects of life. Advertising: preliminary indication of marketing. Growth of Market Research Industries Development of Product Quality and Quantity Product innovation Branding Service Marketing Consumer Satisfaction Internet Marketing Guanxi Marketing Logistic System Competition Growth of Private Sectors Globalization of Chinese companies

New Trends of Marketing in China

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Developing Market Strategy

3 characteristics of Core Competence: • significant contribution to perceived consumer

benefits; • can be applied in a wide variety of market; • difficult to imitate.

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Strategic Planning, Implementation, and Control Process

Measuringresults

Diagnosingresults

Takingcorrective

action

ImplementationPlanning

Corporateplanning

Divisionplanning

Businessplanning

Productplanning

Organizing

Implementing

Control

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Corporate strategic planning

Definingthe Corporate

Mission

A corporate mission should address the questions:

What is our business? Who is the customer?What is of value to the customer?What will/should our business be?

: “We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers”.

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Corporate strategic planning

Definingthe Corporate

Mission

Establishing Strategic Business

Units (SBUs)

AssessingGrowth

Opportunities

A SBU: 1. Can be planned separately;2. Has its own competitors;3. Has a manager responsible for

strategic planning.

: Beauty and grooming, household care

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Intensive Growth Strategies: Ansoff’s Product/Market Expansion Grid

4. Diversification2. Marketdevelopment

NewMarkets

1. Marketpenetration

Existingmarkets

Existingproducts

3. Productdevelopment

Newproducts

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Business Unit Strategic Planning

Business

missionGoal

formulation

Strategy formulati

on

Feedback and

control

Program formulation

and implementatio

n

External environment (opportunity

& threat analysis)

Internal environment (strengths/weaknesses analysis)

SWOT analysis

• Cost leadership• Differentiation• Focus

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SWOT Analysis of P & G’s Business in China

StrengthLeading market positionStrong brand portfolioSignificant R&D and marketing investmentRobust cash productivity

WeaknessIncreasing instances of product recallsExcessive dependent on major supermarket chainsHigher product pricesLack of China’s market insights and reluctance to change

Opportunities Urbanization and growth of rural marketThe growth of middle classIncreased investment in manufacturing capacities in ChinaAcquisition to expand portfolio

Threat Counterfeit goods Low consumption of household products per familyStrong competition : Unilever and Hengan Rise of private labels Commodity cost , currency exchange rate

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SWOT analysis

Assignment 1: Baby-first

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