Country Risk and Strategic Planning Analysis
Direct export access to China used to be difficult due to the complexity and slowness of the country's customs rules and regulations. But with the relaxation in regulatory restrictions and the opening of its markets to foreign investors, China could become the next successful market for cognac and champagne importers. The elimination of tariffs in the wake of China's accession to the World Trade Organization may encourage more cognac and champagne importers to the mainland, thereby skewing cognac/champagne import statistics in the near future. Last year, China ranked 20th in terms of cognac imports, with 1.2 million bottles (Export.gov). Since China became a member of the World Trade Organization, there are less technical and tax obstacles for imports. The Chinese people now have stronger buying power. This paper details a risk analysis on China and discusses how a division of LVMH plans to manage these risks. Country Risks
When entering into negotiations it is important to demonstrate dedication to working toward a fair deal and approach negotiations from the standpoint of long-term business involvement. One of the most important aspects of doing business in China is understanding some of the cultural differences between China and western countries. Another aspect is researching tactics used by Chinese business negotiators and being prepared for our own negotiations. While researching their culture and how the Chinese handle business LVMH decided it would be wise to control the schedule and location of any meetings, be prepared to quote competitors prices, present gifts in hopes of gaining friendships, but not being afraid to state that we may do business elsewhere. There are many political, legal and regulatory risks involved when dealing with other countries. Therefore, it would be for the best for LVMH to join the USCCC (America-China Chamber of Commerce). This organization strives to provide its members and the general public with information that is current and important in making critical business decisions. US-China Chamber of Commerce continuously identifies the timely topics in this ever-changing globalized digital economy and seeks business executives and professionals with first hand experience to address them from different perspectives. Being a member of this organization has many advantages such as having access to services that are essential to conducting Cross Border Business, access to important contacts, gives the company visibility as players in the US-China trade and investment activities, and helps get companies involved in a close network of companies and professionals just to mention a few great reasons. Being involved with this organization should help us work out all the laws and risks. When doing business in other countries businesses need to consider the repatriation of funds. Many foreign investors do not properly register foreign loans with the Foreign Exchange Bureau in time. Failure to do so will jeopardize the WFOE’s ability to obtain foreign exchange approval for the remittance of funds for the loan repayment. When foreign investors use loans to finance investments in China, they must properly register the foreign loans so that loan repayments can be effected with minimal problems. It is also prudent to have proper loan documentation to evidence the existence of the foreign loan. Such documentation can be used as additional support when requesting approval of the Foreign Exchange Bureau for repatriation of funds. With any risk analysis, an identification of competitors is needed. Pernod Ricard and Remy Cointreau are LVMH’s top competitors. Remy Cointreau is spending more in Asia to distribute its products after announcing its departure from a joint distribution venture with Fortune Brands, Edrington Group and Sweden's V&S. Cointreau will leave the joint venture, known as "Maxxium," in 2009, and until then is investing in parallel distribution...
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