TITLE
OBJECTIVES
MANAGEMENT SUMMARY
PROBLEM STATEMENT
CHINA
X
INDIA
X
SWOT of the company
General Information
X
X
X
X
X
X
MACROECONOMIC
GDP
GDP per Capita
GDP growth rate
Unemployment
Trade Balance
X
X
X
x
X
X
X
X
X
X
MICROECONOMIC
Socio Economic Classes
Concentration of wealth
Intercultural behavior
Spread between TV and GDP x capita
Income
Tobias-ShanShan
Tobias
ShanShan
Andres
Tobias
Vinit
ShanShan
Andes
Tobias
PROBLEM SOLVING APPROACH
COMPETITORS
CUSTOMERS
ENTRANCE STRATEGY
REGULATIONS
TOPIC
Tv industry analysis
Forecast
Distribution System Structure
Who is in the market
Communication Strategies of the competitors
B&O
Customer Behavior
Consumption structure
Analysis of the customer
X
X
Meifang
X
Meifang
Sirma
Vinit
Sirma
X
X
X
B-to-B
General
Import - Export
Vinit
Vinit
Vinit
Vinit
Nesli
Nesli
EUROPE
X
X
X
X
TABLE OF CONTENT
TABLE OF CONTENT....................................................................................................................... 2
OBJECTIVES.................................................................................................................................... 3
MAIN OBJECTIVE ....................................................................................................................... 3
SPECIFIC OBJECTIVES ................................................................................................................. 3
MANAGEMENT SUMMARY ........................................................................................................... 4
PROBLEM STATEMENT .................................................................................................................. 5
PROBLEM SOLVING APPROACH .................................................................................................... 6
SWOT ANALYSIS OF THE COMPANY .......................................................................................... 6
GENERAL INFORMATION........................................................................................................... 7
CHINA ...................................................................................................................................... 10
OVERVIEW OF CONSUMER PRODUCT BRANDS IN CHINA .................................................. 10
BRAND DEVELOPMENT OF CONSUMER PRODUCTS IN CHINA ........................................... 10
BRAND FEATURES OF CHINESE CONSUMER PRODUCTS ..................................................... 11
TV INDUSTRY ANALYSIS IN CHINA ....................................................................................... 11
CONSUMER BEHAVIOR........................................................................................................ 14
ANALYSIS OF CHINESE CONSUMER MARKET ...................................................................... 17
TECHNOLOGICAL ASPECTS AND CURRENT MARKET TREND IN CHINA ............................... 18
RISK ANALYSIS IN CHINA ..................................................................................................... 18
BENEFITS TO ESTABLISH BRAND IMAGE IN CHINA ............................................................. 19
METROPOLITAN CITIES IN CHINA ........................................................................................ 20
COST ANALYSIS IN CHINA .................................................................................................... 20
SETTING UP THE BUSINESS IN CHINA .................................................................................. 20
INDIA ....................................................................................................................................... 20
RULES AND REGULATIONS IN INDIA.................................................................................... 21
TV INDUSTRY ANALYSIS FOR INDIA ..................................................................................... 21
COMPETITOR BAHAVIOR IN INDIA ...................................................................................... 21
TECHNOLOGICAL ASPECTS AND CURRENT MARKET TREND IN INDIA ................................ 21
RISK ANALYSIS IN INDIA....................................................................................................... 21
METROPOLITAN CITIES IN INDIA ......................................................................................... 22
2
COST ANALYSIS IN INDIA ..................................................................................................... 22
SETTING UP THE BUSINESS IN INDIA ................................................................................... 22
CONCLUSIONS ............................................................................................................................. 23
RECOMENDATIONS ..................................................................................................................... 23
LIMITATIONS ............................................................................................................................... 23
OBJECTIVES
MAIN OBJECTIVE
To evaluate the possibilities of expanding the business for Loewe AG in the most
growing markets, China and India.
SPECIFIC OBJECTIVES
 Analyze the Chinese and Indian consumer Behavior.
 Evaluate the TV Industry in both the countries.
 To determine the involved risk in investing in mentioned countries.
 Analyze the competitor strategies in these markets.
 Evaluate the metropolitan strategy.
 To develop an expansion process for Loewe AG.
 To find out some key existing factors that may affect Loewe AG in these
markets.
3
MANAGEMENT SUMMARY
4
PROBLEM STATEMENT
In the world of globalization and new economic development of global economies it is
becoming important for all companies to find better markets to achieve its short term
and long term goals. It’s becoming more and more important to save cost and be more
efficient in producing quality products with updated technology.
Loewe AG is a Medium-size company founded in 1923 in Berlin, specialized in
producing high-quality television, DVD recorders and Hi-Fi systems that are also
available as complete home cinema system solutions. In the European countries, the
whole market share of Loewe is 3.3% in all technologies, and in LCD technologies is 4%.
Loewe has a stable market share in Germany, Netherlands and Belgium, and have
potential growth in UK (1%), Spain (5%), France (2%), Italy (1%) and Portugal (1%).
Loewe wants to achieve 5% market share in 2 years in these countries. Germany is
Loewe’s most important market having 11.3% of market share in LCD-TV. In 2005,
about 80% of the company's profit was earned through flat screen TVs. Loewe also
manufactures LCD television sets for Sharp Corporation, which owns a 29% stake in the
company.
At Loewe AG, the challenges faced are not different. It becomes very critical and
strategic issue to find the most suitable economy in long term perspective, where it
can get its potential target market with a potential future growth. Further it becomes
important for the company where and how to start its operations in the selected
suitable countries. To analyze the involved risk in those countries keeping in
perspective its brand image for a long term successful operations, the challenge is to
understand the consumer behavior and competition in the new market. So that the
company can run its operations successfully keeping its goals in mind without affecting
the society’s interests.
5
According to this, what important aspects of these countries make them interesting for
Loewe to invest in them?, does Loewe have an opportunity to gain market share in the
Chinese and Indian Markets?, if yes, how can Loewe enter to compete in these
markets.
PROBLEM SOLVING APPROACH
SWOT ANALYSIS OF THE COMPANY
The SWOT analysis is a tool that help the companies to identify the positive and negative
critical points inside and outside their business. It is very helpful when it is used during a
decision making process, because it identifies the aspects that are running good and the ones
that they have to improve in order to achieve the objectives, as well as the environmental or
external aspects that are in favor of the business or against it. It is interesting if it is compared
with the strategic objectives of the company and the specific objectives of the decision that
will be made. For the LOEWE’s Market Entry Strategy in Chinese and Indian markets, we can
describe the SWOT analysis as it follows:
POSITIVE
•
•
•
•
INSIDE
FACTORS
•
•
•
•
•
•
•
•
•
OUTSIDE
FACTORS
•
•
•
Strengths
Brand is all-important.
Good reputation among customers
Right products, quality and
reliability.
Superior product performance vs
competitors.
Better product life and durability.
Spare manufacturing capacity.
Direct delivery capability.
Product innovations ongoing.
Can serve from existing sites.
Management is committed and
confident.
Productivity, capacity utilization
Control over suppliers &
distributors.
Opportunities
Exploration of big potential target
market.
Chinese and Indian economies are in
a good moment.
Could develop new suitable
products.
Local players have comparatively
less competent products and
NEGATIVE
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Weakness
Customer lists not available.
Lack of knowledge of new markets.
To start with Loewe will be a new
and smaller player.
Lack of local knowledgeable work
force.
No pilot survey done yet.
Lack of Market research.
Existing core business distribution
risk.
Could distract from core business.
Possible negative publicity by
customers because its high price
high cost structure.
Threats
Major competitor like B&O
Legislation could impact.
Existing core business distribution
risk.
No idea about the new market
reaction for the product
acceptability.
Country and currency risk.
6
services.
End-users positive response to new
product.
Could seek better selling price for
better quality.
Some local competitors have poor
products in china
Profit margins will be good.
Can surprise competitors.
•
•
•
•
•
•
•
Market demand .
Environmental effects would favor
larger competitors.
Market demand very seasonal.
Retention of key staff critical.
Vulnerable to reactive attack by
major competitors.
Market demand very seasonal.
Retention of key staff critical.
Vulnerable to reactive attack by
major competitors.
•
•
•
•
•
•
Table 1 SWOT Analysis
After analyzing the SWOT of LOEWE in the Chinese and Indian markets, then we can mix it
together in the SWOT Matrix, that is a combination of the Strengths, Opportunities,
Weaknesses and Threats, in which is possible to develop some strategies. From these matrix is
possible to develop strategies for the short and long term decisions for a specific project. In
the case of LOEWE, Developing a Market Entry Strategy to China and India, we find this tool
useful to analyze the market.
STHRENGTHS
•
OPPORTUNITIES
•
•
•
THREATS
•
•
S-O Strategies
Fully using LOEWE’s Strengths,
grasping its opportunities when it
get into Chinese market.
Focusing on its luxury people, its
target market should be the high
income people in china.
Learning from China local TV
producer, absorbing some
successful.
S-t Strategies
Identify ways that the LOEWE can
use its strengths to reduce its
vulnerability to external threats.
Focus on young and luxury
customers.
Walk differently ways from its
competitors to get into Chinese
market.
WEAKNESSES
•
•
•
•
W-O Strategies
LOEWE should overcome
weaknesses to pursue
opportunities.
Employing expertise worker design
some kind of TV model which is
suitable to Chinese luxury person
taste .
Using high quality advertisement
strategy to introduce itself.
W-T Strategies
Establish a defensive plan to
prevent the firm's weaknesses
from making it highly susceptible
to external threats.
Table 2 SWOT Matrix
GENERAL INFORMATION
China and India are, in population, the two biggest countries of the world, having 2.700 million
people, almost one quarter of the whole world’s population. During the last 10 or 15 years,
these two economies have been increasingly growing, improving the life quality of their
people, decreasing the unemployment rates, and generating more wealth for the community
in general. The general behavior of the GDP and GDP per capita of China and India is the
following:
7
GDP (USD bn)
GDP per capita USD
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
CHINA
INDIA
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
EURO ZONE
CHINA
INDIA
EURO ZONE
Image 1 GDP and GDP per capita of China, India and E.U.
As we can see in the graphs, the Chinese and Indian economies had followed the same trend
as the developed economies like the Euro Zone, following the same growing trend of real
income for the people. We can also compare the real growth of the GDP per year, and we can
find some similarities, which means that these two economies are following the same pattern
of growth and are working in a similar way.
GDP Growth Rate (real)
12%
10%
8%
6%
4%
2%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
CHINA
INDIA
EURO ZONE
Image 2 GDP Growth (real) of China, India and E.U.
According to the real growth of the GDP, we can observe that from the year 2001 the behavior
of these three economies has been similar, with a constant and growing rate.
Trade Balance (USD bn)
250
200
150
100
50
0
-50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-100
CHINA
INDIA
Image 3 Trade Balance of China and India
8
Chinese and Indian trade balance show have a different structure, in which China is increasing
the amount of USD exported in relation with the imports. India has the opposite behavior, the
imports exceed the exports in USD, which makes the trade balance increasingly negative
during the last years.
Exchange Rate India
Exchange Rate China
60
8,4
8,3
50
8,2
40
8,1
8
30
7,9
20
7,8
7,7
10
7,6
0
7,5
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Image 4 Exchange Rate of USD
International Reserves USD bn
1.200
1.000
800
600
400
200
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
CHINA
INDIA
Image 5 International Reserve of China and India
Inflation Rates
20
15
10
5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-5
CHINA
INDIA
Image 6 Inflation Rate of China and India
9
CHINA
Officially the People’s Republic of China is the world largest country in population, and located
in East Asia is one of the largest in size, which represents a great market opportunity for any
enterprise who wants to open markets abroad.
China has the one-fifth of the world’s population, 1,300 million people spread in 9,598,086 sq
kilometers, which represents a population density of 140 people per sq km. It’s borders are by
the east with North Korea and the East China Sea; Russia, Mongolia, Kazakhstan, and
Kyrgyzstan on the north; Tajikistan, Afghanistan, and Pakistan on the west; and India, Nepal,
Bhutan, Myanmar (Burma), Laos, Vietnam, and the South China Sea on the south.
China’s cities have a long and important tradition as centers of ceremonial and administrative
power. Over the centuries they have evolved into multifunctional commercial and trade
centers, and more recently into industrial centers. China has more than 60 cities in which the
population of the contiguous built-up urban area exceeds 1 million. (Administratively, many
cities also include substantial agricultural land.) China’s major cities include Shanghai, the
country’s largest urban area and a major port; Beijing, the capital and cultural center of China;
Hong Kong, an island metropolis administered by Britain until 1997; Tianjin, a port city lying at
the juncture of the Hai River and the Grand Canal; Shenyang, a center of heavy industry in
northeastern China; Wuhan, a port city situated at the confluence of the Han and Yangtze
rivers; Guangzhou, a port city on the Zhu Jiang (Pearl River); and Chongqing, a major inland
port on the Yangtze River. While all large Chinese cities have significant industrial bases, these
cities especially have expanded their service and support economies in recent years.
OVERVIEW OF CONSUMER PRODUCT BRANDS IN CHINA
As multinational enterprises started to invest in China, they also introduced their brand images.
For a company, such as Loewe, it is very important to understand the brand development of
both local and foreign consumer products, and then Loewe will know which market segment it
should set in.
BRAND DEVELOPMENT OF CONSUMER PRODUCTS IN CHINA
 Before 1949
When China hadn’t become a communism country, the brands then were basically the result
of their own products. Most of them were in handcrafts industry and lacked of economic scale,
10
such as Chinese herbal medicine, beer brewery in Tsingtao, a city in north-east China, and
restaurants.
 1949—1979
Because of Chinese planned economic program, the brand development was hindered. Most
brands of consumer products belonged to China itself and were of light industry, such as
bicycle and TV.
 After 1979
Since China embraced Capitalism gradually after 1979, a lot of multinational brands have
launched their business in China successfully by the means of establishing their brand images
which have been adopted worldwide, such as Motorola, Volkswagen, McDonald’s and Kodak.
China also has developed its own brands such as Lenovo computer and Haier refrigerator.
BRAND FEATURES OF CHINESE CONSUMER PRODUCTS
Some Chinese own brands have dominated market shares in each of their own industry. For
example, most first-time Chinese consumers buy Lenovo Computer and are proud of Lenovo
acquiring IBM PC division and Changhong TV has most of market share in China TV industry.
But those brands still face some problems. They lack of skilled marketing specialists, wellfounded marketing strategies and management systems. For those brands are previously
state-owned and can easily get into Chinese consumer market. Moreover, setting up the
lowest price is most adopted strategy among every industry, which hugely reduces the margin
profit. On the other hand, foreign brands focus on long-term development in China Market
and aren’t willing to lower the price. Adding that consumers of developing country have
stronger brand preference than those of developed country, Chinese consumers put more
value on brand recognition, package and brand history of prestige one. Foreign brands have
more advantages in those areas.
TV INDUSTRY ANALYSIS IN CHINA
OVERVIEW
During the last years the TV industry in China have had a huge development in terms of
competitors. At the beginning of this century, they were around 9 different LCD TV brands in
the Chinese market, and at the end of the year 2005 this number was over 55 different brands.
Including all the private Chinese companies, the state owned and the foreign invested
companies. The following is the development of the Chinese market in terms of LCD TV
competitors in the market.
11
In March 2005 the Chinese government announced the first tax incentives for the TFT-LCD
industry. Along with the country's continuing shift towards digital TV, this helped create a
favorable environment for LCD TV industry growth. Currently, China's LCD TV industry has
three main clusters: the Pearl River Delta, the Yangtze River Delta, and the Bohai Sea area. The
most popular and common LCD TV manufactories in China, including Taiwan, are BenQ,
Changhong, Chimei, Haier, Hisense, Hitachi, Kolin, Konka, Lenovo, LG, Olevia, Panasonic,
Philips, Polyvision, Prima, Proton, Sampo, Samsung, Sharp, Shinco, Skyworth, Sony, SVA,
Tatung, TCL, Teco, Toshiba, Viewsonic.
LCD TV Companies in the Chinese Market
60
50
40
30
20
10
0
2002
2003
Private Chinese companies
2004
Foreign Invested companies
2005
State owned companies
Image 7 LCD TV companies in the Chinese market
The local players in Chinese TV market are increasing. The latest trend shows the increase in
number of foreign players is comparatively high. Chinese consumer is becoming techno savvy
which could be an opening for Loewe AG in the technological aspect of the brand.
The following chart gives a brief note of the development of LCD TV industry in China:
Company
Jilin Caijing
Shanghai Video &
Audio Electronics Co.
Beijing Orient
Electronics Group Co.
Shanghai Video &
Audio Electronics Co.
Beijing Orient
Electronics Group Co.
Date
Issue
1990s
Introducing the FPD industry
Building the first TFT-LCD generation
production line
1998
Results
2005
Achieving scale production of the
fifth generation production lines
Milestone in TFT-LCD
industry
2007
Building the sixth TFT-LCD
generation production line
Turning to high-end
market
Technical Weaknesses
Lack of upstream resources and no complete industrial chains
at all.
Table 3 China LCD industry development
12
The rising of China FPD market provides an equal opportunity for both Chinese companies and
multi-national companies, especially for Asian manufacturers. For further development of their
TFT-LCD industry, Japan, Korea, and China Taiwan will surely explore the market in China
mainland. Those who can make it into China mainland earlier will lead in this market in the
future. Samsung clearly stated that its future depended on China, while Sharp set up its plan to
develop Chinese market in 2004 by advocating a “three-year strategy leading with LCD”. While
at the same time, since TFT-LCD industry requires high technology and high investment,
cooperation and acquisition become the keynote. The followings are the most important
cooperation between Chinese manufactories and foreign manufactories.
Image 8 Cooperation among Chinese and Foreign LCD Manufactories
The growth of LCD industry in China can only be achieved through international cooperation
and since China has already lagged behind, it is both wise and necessary to learn from Japan,
Korea and Taiwan, and to seek cooperation with them. The LCD industry in China mainland
needs global capital and technologies, while overseas manufacturers need local support for
exploring Chinese market.
SALES AND GROWTH
It was reported that in the first half year of 2006, the domestic sales of Chinese LCD TV is
3,770,000, which increased by 198% compared with last year.1 And LCD TV manufactories,
such as, Skyworth, Changhong, Hisense etc., claim that their LCD TV yield is more than
1,000,000 very year. According to the growth increase of LCD TV, the sales will be forecasted
up to 14.000,000 in the end of 2008, although the growth rate will decline in the global LCD TV
market.
1
http://china.nikkeibp.co.jp/china/news/sino/sino200609130130.html
13
The growing rate of the LCD TV market has been amazing since the year 2002, which has an
average growth rate of 340% yearly. The development of the market has been the following:
Chinese domestic LCD TV sales and growth rate
4.000.000
600%
3.500.000
480%
500%
445%
3.000.000
400%
2.500.000
2.000.000
300%
263%
1.500.000
200%
198%
1.000.000
100%
500.000
0
0%
2002
2003
2004
Domestic Sales
2005
2006
Growth
Image 9 Chinese domestic sales and growth rate
http://china.nikkeibp.co.jp/china/news/sino/sino200609130130.html
Image 10 Sales forecast of LCD TV in China
www.cciddata.com/2006zt_10/yejing.htm
CONSUMER BEHAVIOR
14
A ranking of the preferences in LCD TVs of the Chinese costumers show us which are the more
powerful brands in China, and gives us a base for looking in a benchmarking with these
companies that are the ones with the greatest attraction for the costumers. Philips, Samsung,
Skyworth and Sony are the leaders in the Chinese market, are the ones preferred by the
costumers. We have to keep in mind that this study is not stratified, it is not segmented in the
high class, just in TV preferences of the people in general.
Philips
14%
Others
17%
TCL
4%
Samsung
13%
Toshiba
5%
Changhong
6%
Skyworth
10%
Sharp
7%
LG
7%
Hisense
8%
Sony
9%
Image 11 TV brand preferences in China
http://www.ce.cn/cysc/zgjd/kx/200710/09/t20071009_13163483.shtml
According to the characteristic of consumer behavior, we classify the LCD TV consumer groups
into five types: Basic demand type, price-drive type, potential consumer, brand-guided type
and function hi-fi type.2 The basic demand type is more that the others, which reflects the
demand trend of simplifying in LCD TV. However in Loewe case, we focus on the last two types
which occupy 22% consumption. In 2005-2007, the families which want to buy LCD TV, are
increasing up to 82.5% from 53.4% of the whole TV potential consumers. And LCD TV becomes
the first choice for most of the costumers.
2
http://www.chinabgao.com/reports/24604.html
15
12%
25%
Price-drived type
Brand-guided type
Function hi-fi type
10%
38%
Basic demand type
Potential consumer
15%
Image 12 Consumption types in China LCD TV market
Besides that, we also study the relationship of family income and LCD TV possessing. Now the
criterion of middle year income is 51,000 RMB( ~5000 EURO) , and more than 80,000 RMB is
the high year income. According to the investigation by Gallup, the families which earn more
than 51,000RMB every year, occupy 27% in the urban mass which is 40% of the national
population.3 The increase of income makes this high-income population purchase the luxuries,
and 48% of high-income families tends to buying the foreign brand goods.
It is reported by MasterCard International that there is 39% rich class which is in Shanghai,
Beijing and Guangzhou, and this percentage will increase up to 47%.4 Here the criterion of the
rich class is more than 25,000 Dollar of family year income. And China had 2,900,000 such
families in 2005. It is predicted that the number will be up to 8,500,000 in 2015 and these
families can control 117 billion Dollar. And the age of the rich class arranges from 31 to 46
years old, which occupies 64% of the rich class. The following table shows that Shanghai,
Beijing and Guangzhou will be the best LCD TV markets for the foreign high-end brand,
although the European and America brands only have 7% market share of the whole China LCD
TV market.
CITY
LCD TV Market Share
Main Product
Chinese brands
Foreign brands
35%
65%
Size > 40”
Small and
Medium cities
70%
30%
Size < 37”
Average
48%
52% (Japan 29%,
Korea 16%,
Europe and
Shanghai
Beijing
Guangzhou
3
http://www.southcn.com/news/china/china05/fortume/news/200505170648.htm
4
http://biz.xmnext.com/guancha/2007/08/16/846780.html
Family annual
Income
Rich class:
25.000 Euro
Middle class:
8.000-10.000 Euro
< 5.000 Euro
2.700 Euro
16
America 7%)
Table 4 2006-2007 Consumption information of Chinese LCD TV market
The Chinese consumption for these century is estimated to spend 12.7% of the income in
housing, which includes buying electronic devices for the house, like TV sets or audio sets, and
so on. The complete consumption proportion is the following:
3,70%
Food
12,10%
Dressing
37,90%
11,60%
Household
Transport
Education
8,70%
Medical Care
Housing
8,60%
10,00%
7,30%
Others
Image 13 21st century Chinese normal family consumption proportion and structure
ANALYSIS OF CHINESE CONSUMER MARKET
1. The huge gap between rich and poor: As Chinese economy is booming up, the gap
between rich and poor grows dramatically. Luxury goods will have a great potential in
Chinese market. Targeting at those at top of pyramid will be a smart marketing strategy.
2. The extremely different development between city and countryside: China is still a
developing country. Affected by its previous communist planned economic model, China
has a huge different development degree between city and countryside, agriculture sector
and non-agriculture sector, which results in an extreme unbalance of social structure. For
example, when there was a glut of household equipment in metropolises, people living
countryside can’t even afford basic household commodities. The unbalance is worsened by
Chinese poor and underfunded infrastructures, such as road and sewage system; on the
other hand, yuppies in the cities are now more of frenzy-outlook than functional oriented.
Coincidently, for the thousand years, most cities and areas which enjoy economic
prosperity are located in coast area or important convergences along Yangtze River or
Yellow River. The huge swath of west area is still underdeveloped and poor.
3. The diversity of consumer products: As GDP per capita is constantly growing, especially in
those coast cities such as Shanghai and Shenzhen, where GDP per capita are over 8000
USD, consumer behavior in metropolises has already gone beyond the areas of basic
commodities such as food and energy, rather in the areas of laptop, digital camera and
DVD player. With the same time of mounting life standard and increasing amount of
holidays, there is a great change in Chinese consumer behavior model. For example,
consumers in metropolises are looking for both the best quality products and enjoyable
17
shopping experiences. And, exotic products and lifestyle brands, such as flat TV and PDA
can carve out a significant niche among the rapidly growing urban middle and upper class
with the right strategy and disciplined execution.
4. Children and teenagers are very important marketing target for most electronic products:
most Chinese families only have one child, because of Chinese one-child policy. As a result,
parents are more willing to spend money on children. To implant the brand recognition of
these high-class electronic products in the young generation will bring a great profit in the
future, because these electronic products will be their top-priority choice when they grow
up.
TECHNOLOGICAL ASPECTS AND CURRENT MARKET TREND IN CHINA
There is a very important feature in China LCD TV market, which is the increase in the TV size.
In 2003, size 15 and 17-inch were the hot sizes, and in 2006, 40 and 42-inch had become the
hottest ones.5 However after one year they were out of date, and replaced by larger size, such
as 46, 50-inch. The size increasing within the time is a fashion trend that has been a constant
during several years, and shows the industry that for the following years the hot sizes are
going to be bigger than the actual ones.
Image 14 TV Market Trend in China
RISK ANALYSIS IN CHINA
The CRA or Country Risk Analysis deals with the risks involved in making investments in a
foreign country, in terms of financial results or strategic interests of the firm. In this case we
are going to analyze Chinese and Indian country risk, highlighting the critical positive and
negative aspects of each of the following risks: Economic, Political, Local and Exchange.
According to the critical points, we are going to give our own rating in a scale from 1 to 10,
being 1 very risky and 10 not risky.
5
http://china.nikkeibp.co.jp/china/news/sino/sino200609130130.html
18
The CRA for China is the following:
RISK
Economic
Risk
Political
Risk
Local Risk
Exchange
Risk
POSITIVE
NEGATIVE
- GDP (nominal) – $2.650 trillion (2006
– 4th in the world)
- GDP (PPP) - $10.21 trillion (2006 –
Ranked 2nd after USA)
- GDP growth rate – 11.1% (2006)
- Domestic demand growth – av. 9.3%
(2002-2006)
- Population – 1.300 mil. – enormous
market – big market opportunities
- Poverty rate down from 53% in 1981
to 8% in 2001
- Positive trade balance in last 15 years
- Reforms towards more marketoriented economy
- Economic incentives held by the
government through a variety of direct
and indirect control mechanisms
- Quite open for FDI – one of the
leading recipients in the world,
facilitating foreign investors and
eliminating certain trade-related
investment measures
- Situated in considerably stable region
- Good relations with North Korea,
which is one of the neighboring
country
- A permanent seat on the United
Nations Security Council and other
multilateral organizations
- Cooperative relations with ASEAN
- Improving relations with South Asian
countries, including India
- Improving relations with Russia
- GDP per capita (Nominal) – $2.034
(107th of 179) (2006) – classified as
“low” by world standards
- Tax inspection difficulties
- Anti-dumping retaliation
- Discretionary authority of the
customs administrative
- High level of corruption and
economic crimes
- Poor supervision of counterfeit goods
- Independently functioning Central
Bank that formulates and implements
monetary policy, prevents and
resolves financial risks, and safeguards
financial stability
- Fixed currency rate that leads to an
unbalanced relationship between
money supply and demand
SCORE
- Constant battle between the
country’s central government and the
provincial and local governments over
applicable law, which make it difficult
for companies operating in China to
know which is the applicable law
- Inadequate Intellectual Property
Rights regulation law
- USA is accusing China of its
inapplicable IPR law, which results in
billions of dollars loss for the US
economy. At the same time USA are
willing to put some barriers to Chinese
export
- Not very good relations with Japan
Table 5 Chinese Risk Analysis
BENEFITS TO ESTABLISH BRAND IMAGE IN CHINA
Before Loewe launch its business in China, Loewe should have a series of sound market
strategies, such as experiential marketing and establishing a brand image instead of entering in
aimlessly. There are several benefits for Loewe to establish brand image while launching its
business in China. First of all, Loewe will have bigger room for bargaining, setting higher prices
than its peers. Then Loewe will enjoy longer product lifecycle. Consumers will be impressed by
19
its product, and Lowe will no longer have to spend as much money as it did at beginning for
advertisement. Finally, Loewe will have better ability to adapt Chinese easily-changing
consumer market. Highly recognized brand products aren’t easily affected by economic
downturn, because of its strong consumer loyalty.
METROPOLITAN CITIES IN CHINA
COST ANALYSIS IN CHINA
SETTING UP THE BUSINESS IN CHINA
INDIA
Officially the Republic of India is a sovereign nation in South Asia. It is the seventh largest
country by geographical area, the second most populous country, and the most populous
democracy in the world. Bounded by the Indian Ocean on the south, the Arabian Sea on the
west, and the Bay of Bengal on the east, India has a coastline of 7,517 kilometers (4,671 mi). It
borders Pakistan to the west; China, Nepal, and Bhutan to the north-east; and Bangladesh and
Burma to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka, Maldives, and
Indonesia.
India is the world's twelfth largest economy at market exchange rates and the third largest
economy in purchasing power. Economic reforms have transformed it into the second fastest
growing large economy; however, it still suffers from high levels of poverty, illiteracy,
malnutrition and environmental degradation. A pluralistic, multi-lingual, and multi-ethnic
society, India is also home to a diversity of wildlife in a variety of protected habitats. India's
largest cities are Mumbai (formerly Bombay), Delhi, Kolkata (formerly Calcutta), Chennai
(formerly Madras), Bangalore, and Hyderabad.
20
RULES AND REGULATIONS IN INDIA
TV INDUSTRY ANALYSIS FOR INDIA
COMPETITOR BAHAVIOR IN INDIA
TECHNOLOGICAL ASPECTS AND CURRENT MARKET TREND IN INDIA
RISK ANALYSIS IN INDIA
For India we have the following CRA:
RISK
Economic
Risk
Political
Risk
POSITIVE
NEGATIVE
- GDP (Nominal) - $1,089.94 billion
(2007 – 12th in the world)
- GDP $4.726 trillion (PPP) (2007 – 3d
in the world).
- GDP growth rate – 9.7% (2005/06)
(2nd fast growing economy in the
world).
- Domestic Demand Growth – av. –
7%-8%.
- Population - 1,200 million (2nd most
populated country in the world) – big
market opportunities.
- Since the liberalization the value of
India’s international trade has become
more broad-based and has risen.
- Poverty is declining since the
Independence.
- Reforms were made that allow
automatic approval of FDI in many
sectors, i.e. India is quite open to FDI
(one of the most preferred
destinations).
- Public sector covers only too
important and non-profitable enough
sectors.
- Initiatives were held by the Indian
- GDP per capita - $964
(2006)(nominal).
- The World Bank classifies India as a
low-income economy.
- 25% of the population is below the
poverty line.
- increasingly negative trade balance ($43 billion for 2007).
SCORE
- High level of corruption.
- Evasion of tax and exchange controls.
- Embezzlement.
- Sharp and growing regional variations
among India’s different states.
- Big problems with infrastructure.
21
Local Risk
Exchange
Risk
parliament for reducing the level of
poverty.
- Reforms, reducing the rates of
individual and corporate income taxes,
excises, customs.
- Simplification of laws and
procedures.
- Since 1991 India is not in isolation
anymore.
- A founding member of GATT and
then a member of WTO; a member of
SAFTA and other international
organizations.
- In good trade relations with China,
USA, UAE, UK, the countries from EU
and Japan.
- Situated in a considerably unstable
region.
- India is in very bad relations with
Pakistan, which has a very bad impact
on its inner stability. The country
spends a lot for maintaining a big
army.
- Foreign exchange reserves have risen
from US$5.8 billion in March 1991 to
US$270 billion in 2007.
- The Reserve Bank of India has
independence from the government
and it serves as the nation’s monetary
authority, regulator and supervisor of
the financial system, manager of
exchange control and as an issuer of
currency.
- The exchange rate of the Indian
Rupee is floating, with unannounced
interventions of the reserve bank to
control the floating.
- Since 2005 the value of Indian Rupee
has been appreciating against the US
dollar, British pound and EURO.
- External Debt service is decreasing in
relation of the exports, which means
the growth is assuming the debts.
Table 6 Indian Risk Analysis
METROPOLITAN CITIES IN INDIA
COST ANALYSIS IN INDIA
checklist
SETTING UP THE BUSINESS IN INDIA
22
CONCLUSIONS
RECOMENDATIONS
LIMITATIONS
23