China Market

PESTLE-analysis

。Political                         。Economic                 。Social/cultural

。Technological                 。Legal                        。Environmental

The influences of cultural roles in Chinese market

1. Hofstede’ cultural dimensions in Chinese market

1.1 Collectivism

Individuals are integrated into groups and form their judgments based on group.

1) Interdependent natures and obligations to the group

2) Group preferences and group harmony

3) 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 distance

People accept a higher or lower degree of unequally distributed power.

1.3 Uncertainty avoidance

The members of a culture feel threatened by unknown situations

Created beliefs and institutions that try to avoid these

→ Influences consumers’ preference for purchasing behaviors

1.4 Femininity

Stands 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 Orientation

Value for the future; emphasis on future goal; sacrifice current entertainment to achieve future success

Comparison of consumption mindset Chinese customers: saving

Applying 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

• Distribution

• Shedding 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 issue

Regional concepts in China

Companies 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 characteristic

• Company 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 content

Companies 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 communication

Go 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 coast

HBR 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 longer

irresistible 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 centre

• Deep understanding of the consumers’ taste and demography
• Better allocation of resources

• Develop business models to overcome key obstacles //hurdle of licensing

• The 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 players

• Deploy 部署the latest technology //同airline,hotel 合作

• Core competence of production: low cost and high quality

• Take advantage of low cost labor and train staff in house //bicycle collect payment

• Focus Media: outdoor advertising
• Employees refresh and service all LCD screens by bicycle

• Scale up quickly //nation network

• Economies of scale (e.g., Goodbaby has 35 companies)
• Expansion through M＆A

• Invest in talents to sustain rapid growth //defeat expedia

• Appointing CEOs with work experience in MNC

Investigating the relationship between lifestyles and consumption patterns

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