Maple Springs Case Study: External Opportunities and Threats in China

Maple Springs Case Study: External Opportunities and Threats in China

Opportunities

Government factors: A certain degree of regional and local autonomy exists within the nation providing possibilities in development of relationship-based remedies to regulatory and departmental red tape. Attraction of FDI and global investment remains competitive.

Economic factors: The top 10% income earners represent nearly 35% of consumption nationally. This would be a favourable group to target for premium bottled water consumption and would represent higher and upper-middle classes.

Technological factors: While overall figures suggest a lagging position in terms of innovation the top 10% of the market consumer profile may exhibit global leading statistics in the area of possible media channels of marketing in mobile phone and Internet usage.

Ecological factors: Asia in general possesses a consumer interest in green or eco-friendly products despite environmental conditions for example termed the well-being movement here in Korea.

Cultural factors: While nearly 93% of the population is Han Chinese a further 8.5% of minorities in terms of languages and customs will need potential consideration dependent upon regional or provincial market area of choice.

Threats:

Government factors: Multiple levels of government bureaucracy and corruption will ensure difficult conditions which will stifle or make a joint-venture with a Chinese company invariably unprofitable for a foreign partner. Import duties and tariffs remain high despite improvement in these areas in recent years. Regular delays in delivery of customs cleared goods also occur making export readiness of any joint venture subject to target country inventory stocking.

Economic factors: Exchange rates, share volumes and prices, commodities prices and investor rights are virtually all centrally controlled in this Communist State. Furthermore the government remains unable to manage high rates of unemployment due to massive closures of unprofitable state run enterprises (of which the potential Chinese joint venture partner may be one of them).

Technological factors: The overall position of China in terms of technological advancement is medium to poor. Such factors would limit overall market share if inadequate media are available to match desired growth targets.

Ecological factors: A horrendous record of environmental destruction has resulted from uncontrolled economic growth in China. As in a majority of developing nations, sustainability has taken a back seat to profits (as it did during the industrial revolution).

Cultural factors: The regional and cultural differences across China due to ethnic differences and localities will make it difficult to have anything but a regional and provincially based consumer market area. While this may be ideal for a small company like MSMW similar growth might be more easily found in other nations.

What is your expert opinion?

Caveat empor! Proceed extremely carefully in any contract negotiations in China as the legislative arbitration of disputes or settlements almost invariably favours the Chinese partner. Seek short terms of renewable mutual consent clauses (every three months for the first year possibly) and continuously monitor accounting. Ensure that a Canadian Chinese member of a global chartered accountants association is given full access to all invoices, accounts, records and enormous responsibility to ensure Chinese partner is not double booking finances. Treat every accounting document handed over by Chinese partner as a potential justification for dissolution of contract. Recommend Korean partner over Chinese one.

Conclusion: Continue to define, gather information, update business plan, implement changes, evaluate and revise assumptions concerning any joint-venture partnership in China. Always have the opportunity to run away quickly with rock-solid exit clauses and agree to invest nothing but the product to reduce any possible losses based on distribution or marketing in China which should be the Chinese partner's full responsibility. It might be a better idea to find a pure source of water in China for direct export to Canadian market dissolving Canadian operating costs overnight.

Sources: CIA Factbook and World Economic Forum China