China

Description

A-Levels Business Studies A2 Mind Map on China, created by Beccabee on 04/23/2014.
Beccabee
Mind Map by Beccabee, updated more than 1 year ago
Beccabee
Created by Beccabee almost 11 years ago
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Resource summary

China
  1. Opportunities and Threats
    1. China - GDP Growth Rate: 7.8% (2012)
      1. Average wage in China: £1,353 (2012)
        1. Outsourcing production to improve labour costs
          1. Huge production capacity
        2. $12.61 trillion GDP (2012)
          1. People getting richer
            1. High demand for luxury goods e.g. Rolls-Royce
              1. In 2011, China overtook the US for sales
            2. April 2013 - UK exports to China reached £1 billion
              1. By 2030 estimates say 38% of the world's middle class will live in China
                1. In 2008, Chinese government injected $586 billion into improving infrastructure and investing in businesses
                  1. Costs of production, especially in low-skilled, labour-intensive markets like mass-produced goods are cheaper
                    1. e.g. Indorama Venture PLC's PET plastics factory in Cumbria was due to be closed in August 2013 due to the global oversupply of PET Plastics leading to a fall in price (mainly from China) and the significantly lower costs offered in China
                      1. Compete by investing in more technology to lower costs though this damages cash flow
                    2. China desires to invest overseas, significantly in the African mining industry, also bought out British luxury yacht maker Sunseeker
                    3. Risks and Rewards
                      1. China is the 91st easiest country to do business with, the UK is 7th and the US is 4th
                        1. China is rated so low due to corruption and bureaucracy, also IPR are not enforced rigorously
                          1. Chinese company set up fake Apple stores
                        2. Another barrier is that many of the larger Chinese businesses have links to the government
                          1. e.g. Wahaha
                          2. Size of China in terms of population, GDP, potential political influence and growth in GDP
                            1. Competition from China - cheaper
                            2. Rate of growth is slowing to 7.5%
                              1. Dealing with the environmental problems will push costs up so starting a business in China to take advantage of weaker labour and environmental regulations may be a short term benefit and risks higher costs in the future
                                1. High level of hidden unemployment - migrant workers are not considered in official figures
                                  1. Cultural risks - Chinese people tend to save more of their income - 35%
                                    1. Wages are rising
                                      1. Inflation at 2.7%
                                        1. Increasing property prices
                                          1. Property asset bubble - like Wall Street Crash and before the recession
                                            1. Abandoned New South China Mall as well as others
                                              1. Possible political instability - not a democracy
                                              2. Factors which affect success or failure
                                                1. 7 major differences between business cultures in the West and in China
                                                  1. Relationship based (China) VS Transaction based
                                                    1. Face to face interactions VS Doing business without meeting in person
                                                      1. Negotiate and haggle (China)
                                                        1. Entertaining is part of the business (China)
                                                          1. The perception of 'a deal' - start of negotiations not end
                                                            1. Communication style - Chinese meetings are more structured, quieter and politer
                                                              1. Gifting - Bribes?
                                                              2. Hofstede dimensions of national culture
                                                                1. Power distance
                                                                  1. How people within a national culture expect that power is distributed
                                                                  2. Individualism VS Collectivism
                                                                    1. Individual or as a collective
                                                                    2. Masculinity VS Femininity
                                                                      1. Masculinity - achievement, heroism, assertiveness and material reward for success
                                                                        1. Femininity - co-operation, modesty, caring for the weak and quality of life
                                                                        2. Uncertainty avoidance
                                                                          1. how tolerant a particular society is of uncertainty in the future or how 'risk adverse' they are
                                                                          2. Long-term VS Short-term orientation
                                                                            1. Short-term - seeking facts, more scientific, save less for the future and focus on achieving quick results
                                                                              1. Long-term - save, persevere more and invest
                                                                            2. Difficult to predict the future, implementation may prove far more difficult than imagined, business may not have the resources to see the plan through
                                                                            3. Advantages and disadvantages of ways of setting up in China
                                                                              1. Exporting
                                                                                1. Easy to say you're going to export, no guarantee the people will like the product
                                                                                  1. Cultural differences
                                                                                    1. Different currency - adds costs in terms of exchange rate, value changes over time
                                                                                      1. Cost of transporting and lead time
                                                                                        1. Time difference
                                                                                          1. Political intervention - protectionism = local businesses are favoured
                                                                                          2. Joint ventures
                                                                                            1. Goals and values may not be the same between the two companies
                                                                                              1. E.g. GlaxoSmithKline
                                                                                              2. Joining a large, established business
                                                                                                1. Safeguarding IP
                                                                                                  1. Precautions
                                                                                                    1. Only use older technology, don't assemble state-of-the-art equipment and don't share blueprints
                                                                                                  2. Taking charge and managing talent
                                                                                                    1. May need new management and to employ the right staff - not just existing staff
                                                                                                    2. Need to be able to respond to change
                                                                                                    3. Mergers and takeovers
                                                                                                      1. Integration
                                                                                                        1. Merger e.g. Chrysler and Daimler-Benz
                                                                                                          1. Takeover e.g. Geely Holding Group took over Volvo 2010
                                                                                                          2. Setting up production/Outsourcing
                                                                                                            1. Lower costs
                                                                                                              1. Potential for IP theft
                                                                                                                1. Increased transport costs and lead time
                                                                                                                  1. Exchange rate
                                                                                                                    1. Quality, delivery time and customer relations
                                                                                                                    2. Sales outlets
                                                                                                                      1. IP theft
                                                                                                                        1. Cultural incentive to save not spend
                                                                                                                          1. e.g. New South China Mall
                                                                                                                            1. Brand recongnition
                                                                                                                              1. e.g. Google vs Baidu
                                                                                                                              2. e.g. Starbucks
                                                                                                                            2. Ethical and Environmental issues
                                                                                                                              1. Not a democracy
                                                                                                                                1. Tibet
                                                                                                                                  1. Poor working conditions
                                                                                                                                    1. Pollution
                                                                                                                                      1. Lead poisioning
                                                                                                                                        1. Air
                                                                                                                                          1. Water
                                                                                                                                            1. 1.2 million deaths in 2010
                                                                                                                                            2. Bribes
                                                                                                                                            3. How business strategy might be affected
                                                                                                                                              1. KFC as an example
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