China’s International Market & Political System

We at ACME manufacture goods like from Steam Iron to Electric and Diesel generators based in Europe. We cater to wide range of consumer goods from household items to cosmetics with commanding presence in European markets. With global recession hitting large markets, especially U.S. and Europe, market size has shrunk significantly. Therefore, ACME International is looking for markets in emerging second world countries like China, India and Brazil, to expand our base. First, we are studying China as our next potential market. China is a country of 1.3 billion people, China’s spectacular economic growth-averaging 8% or more annually over the past two decades and most of the vast market mostly untapped. China naturally becomes the best choice. (Garnaut, 2007)

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Before going into any international market, one of the basic steps that need to be taken before beginning of international marketing is the analyzing the international marketing environment. In the first step, it needs to analyze the marketing environment, which includes both macro, and microenvironment. A PEST (Political Economic Socio-cultural Technological) or STEP analysis needs to be accomplished on the market before ACME enters China, to assess the fact whether it is advisable or not. Then SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis needs to be taken. In more refined way POWER SWOT (P = Personal experience, O = Order – strengths or weaknesses, opportunities or threats, W = Weighting, E = Emphasize detail, R = Rank and prioritize) is a better idea. At last but not the least ‘Five Forces Analysis’ is a very effective tool. This includes the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes and competitive rivalry. Another most important criterion is tariff and non-tariff barriers. Tariff barriers include number of fences that ACME needs to plan and cross, when starting international marketing. They are charges imposed upon imports, including taxation and import barriers or laws. Non-tariff barriers are difficult to guess as it might include Governments favoritism of its own domestic industries. Bureaucracy or red tape is one such hurdle. (Kynge, 2006)

ACME management is looking into the Political Factors affecting the company before it goes into China. Politics has very important influence in doing business out side the native country of origin. As in foreign country with different culture, different values, different judicial system etc plays an important role in setting up industry or services. It is important to analyze It is also important to analyze the spending power of consumers and other businesses. Few points for consideration would include stability of the political environment; government policy of influencing laws regulates tax or business and government’s position on marketing ethics. There would be consideration on government’s policy on the economy (open or closed), government’s view on culture and religion, government’s involvement in trading agreements such as EU, NAFTA, ASEAN, or others, the type of political and legal system the country follows, free elections or one party government, effectively of the legal system and its impartiality etc. (Garnaut, 2007)

China’s government is a single party socialist republic government. Therefore, the view’s of other party or alternate views are non-existent. It is a pyramid shaped structure. At the top of this pyramid sits the President, currently Hu Jintao. The role of the Presidency is essentially to provide vision and general guidance in policymaking. Below is the State Council, headed by the Premier, currently Wen Jiabao. The laws are passed by the National People’s Congress, known as China’s parliament. Since China is a single party country, ACME can reap the benefit single window clearance and with present system China has got the reputation for the fastest clearance for setting up of the business in its SEZ’s, so less hassles for acquiring land and starting business. In addition, China is moving towards a full market economy, good new for ACME. (Kynge, 2006)

Chinese resolutions of international disputes are taken care by China Economic and Trade Arbitration Commission (CIETAC). This is quite popular and this has mixed reputation among foreign business community; some charge it for lack of sophistication and biasness towards Chinese party and failure of awarding verdicts.

Chinese law is build up on the civil law model. Unlike the British law system, judicial decisions in China generally have no force of law. Chinese legislation on overseas venture is made at numerous levels of government and by different bodies. Setting up a business in China has a number of legal environments, beginning with obtaining approved business license. Then is nine more government agencies (depending on location and the business) with which ACME must register with different locations having differing government policies taking take between three and 12 months to set up. It depends on the business extent and the type of investment. This time might look very high, its actually low if considered to setting up of business in the region like that of India. Even after so many levels clearance, it is fairly well defined and well guided. (Garnaut, 2007)

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References

Garnaut, R. (2007). China: Linking Markets for Growth. Hong Kong: ANU E Press and Asia Pacific Press.

Kynge, J. (2006). China Shakes the World: A Titan’s Rise and Troubled Future and the Challenge for America. New York: Houghton Mifflin.

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