Market Strategy for U.S. and China

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Running head: DOING BUSINESS WITH CHINA

Market Strategy for U.S. and China

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DOING BUSINESS WITH CHINA

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Table of Contents

Abstract………………………………………………………………………………………..3 Statement of the problem……..………………………………………………………………4 References…............................................................................................................................15 Appendix 1………….………………………………………………………………………..17 Appendix 2……………………………………………………………………………………18 Appendix 3……………………………………………………………………………………19 Appendix 4……………………………………………………………………………………20 Appendix 5……………………………………………………………………………………21

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Abstract
In this paper I have discussed the differences in the business and consumer markets of China and United States. China has a vast middle class consumer base. But entering the Chinese market is a complex task. It is more difficult than entering market s in developed economies. Understanding of Chinese demographic, geographic differences and business culture is crucial for success. For B2B aspirants personal relationships and connections of business partner with local government officials and regulators is important. The local government plays an active role in business community; dealing with the bureaucracy could sometime become frustrating.

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Statement of the problem
Prepare a "White Paper (report/proposal) presenting the Major Differences in Consumer and Business Markets between China and the United States as the Company is developing its strategy and operational plans for the Global Markets.

I will begin this paper with a question to ponder upon. Why companies in United States and the rest of the developed world are so eager to understand the Chinese consumer? Why every multinational corporation wants to court China either its consumers or its businesses? The answer lays in the middle class of China – the famous potential driver of world economy. The famous Chinese middle class which did not exist 10 years back is predicted to be bigger than twice the total population of United States in next one to two decades. They all have same dreams and hopes, as is the middle class in the developed world, of having better life style, providing even better life to their children, have more opportunities to grow, and share a world with family and friends which is large enough for all of us. Income distribution in China is expanding fast and mainly in highly concentrated urban households. The middle class in China, which are the lower and upper aspirants in Figure 1, will account for two third of the Chinese household spending power by 2025 (McKinsey Global Institute 2011).

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Figure 1: China consumer demand model.
Source: MGI China consumer demand model
The income distribution of this middle class is huge. Earlier before 1985 China was mainly poor but egalitarian nation with spike distribution of income. As China continues to develop and grow the income distribution has changed and continues to change dramatically with wider distribution which spreads out to middle and wealthy households. By 2025 majority of the distribution is expected to spread across middle class (Figure 2).

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Figure 2: Urban Household Distribution 1985-2012
Source: MGI China Consumer Demand Model
In past two decades the production side of the Chinese economy has grown at an astounding rate of over 10%. In the same period the consumer side has not grown so significantly. In fact the share of consumption in the GDP has shrunk from 47% in 1995 to 37% by 2005 (Lardy, 2006). The Chinese economy is at the threshol d of a significant change, the Chinese consumers are going to take their place in the world economy. Analyzing C hinese

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microeconomic and demographic variables in conjunction with the income distribution and consumption behavior of the people by 2025 the Chinese economy...
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