Introduction
The business world has undergone globalization, and the Chinese market has appealed to foreign investors as well as entrepreneurs. However, various factors present business barriers for foreign entrants to this market. The cultural, political and legal, technological, natural, economic as well as the competitive environments need serious considerations by a company attempting to start operations in China. The restaurant and retail food market in China are difficult to break into due to low prices and fierce competition (Hopper, 2012). The country’s long cultural history and its great differences with the Western perspectives need proper analysis. Nevertheless, it is the market with the highest population in the world and getting a small share of it entails great business prospects for foreign firms. By 2025, the country's population is expected to reach 1.4 billion, with an expanding middle-class population and rapid economic growth. It has also witnessed a nutrition transition to increased consumption of animal products as well as edible oils (Lam & Sun, 2013). The food production and consumption enterprises are vast. Given the global economic importance of the country, it offers attractive business prospects to foreign market entrants.
Cultural Environment.
The cultural environment is one of elements that marketers need to put into consideration while discussing international marketing (Cui & Ting, 2009). Further, Cui & Ting (2009) acknowledges that concerning marketing, culture refers to the collection of beliefs, customs as well as values which influence consumer behavior in a particular market. These elements are characteristic of society, and differences exist among countries. Culture manifests through values, language, and customer behaviors among others. Values may not be directly observed but can rather be inferred from different cultural products such as fairy tales and advertising and play a significant role when deciding to enter a foreign market.
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Several cultural factors need to be put into account while deciding to enter the Chinese food market. Some of these include relationships, Confucianism, collectivism, face, gifts, meetings and greetings among others. Popularly known as Guanxi, the Chinese value relationships, which creates networks and interactions (Yang, 2015). They consider it an important element for success as it minimizes business risks. They prefer to engage in business with people they know and can thus trust. It is thus vital that a company establishes personal relationships before trying to strike a business deal. Confucianism also plays an important role in business such that, respect is expected regarding age, education and seniority differences indicating that all relationships are considered to be unequal. The Chinese prefer collectivism and thus honor groups rather than individuals. They prefer to work in teams and value collective responsibility and achievements (Cui & Ting, 2009).
Face or Mianzi refers to dignity, pride and public reputation. This means that they despise public embarrassments as it makes them lose face. Showing respect makes them gain face, and as a result, it will lead to more trust. Giving gifts symbolizes friendships and thus better business prospects. Greetings and meetings present great business opportunities in China. It is where people meet and forge lasting business relations. Showing sincerity and respect is important. One should offer light handshakes and make sure to exchange business cards having both Chinese and English texts. Do not directly look into people’s eyes as this will show lack of respect. Meetings are aimed and building long-term relationships, and as such, they are relatively long, as Chinese prefer to take their sweet time and not to be rushed. For a business deal to be successful, it may entail several meetings (Yang, 2015).
Political and Legal Environment
Some of the political/legal issues that matter in China's food market include the form of representation, registration, certification and licensing requirements, business scope, intellectual property protection, foreign exchange regulations, local tax and import duties, dispute resolution as well as compliance to the labor laws (Shen & Tiller, 2010). A company needs to have a form of representation before it can be able to do business in China. In this respect, the company should consider the most effective way to enter in the market, assess the modes of representation that the local laws support, costs as well as resources that are needed and liabilities that exist. Food involves human health and safety and must meet the registration, certification as well as licensing requirements of the relevant Chinese authority for it to be sold in China.
In China, according to Shen & Tiller (2010), companies have to define their business scope which indicates the product or services that the company can legally produce or provide. The company should thus be careful so that future expansions are not considered as illegal. The Chinese law is comprehensive in protecting trademarks, patents, copyrights, and trade secrets, but there is a general violation as well as poor law enforcement. The company should thus evaluate the most important property rights, make proper registration of patents and marks in China, and use both the English as well as Chinese versions of the registration marks. Foreign exchange regulations for China are very stringent, and any foreign currency transfers attract settlements, approval or registration requirements. Incomes such as royalties, interest, and capital gains are subject to China's enterprise income tax, and all imported goods have import-duty and value-added tax.
In the case of dispute resolutions between a Chinese and a foreign party, the foreign party may still have to rely on the Chinese court as lack of existing treaties between China and the foreign country will mean that judgments passed in the foreign country cannot be enforced by a Chinese court (Shen & Tiller, 2010). On January 2008, a new Labor Contract Law was formulated in China with the objective of protecting the employees in China. This law is enforced by both domestic and foreign firms. The company should thus ensure compliance with these and other labor laws.
Technological Environment
The technological aspect of the market entails such elements as new inventions as well as ideas including research and development initiatives, technology incentives, automation and consideration of the rate at which technology is changing. Technology is the engine of growth for global companies. It guarantees fast growth and low production costs. Consumers are also increasingly becoming technology savvy and technological advancements in goods and services will bring much appeal to customer satisfaction. The company should thus appeal device innovations and be fast in adopting new technology in the food market to maintain a competitive edge for more effective business operations as well as gaining a bigger market share. China has highly developed in technology as well as internet infrastructure (Yang, 2015). The company should thus integrate the latest technological appeal in its products and services and also use marketing strategies that take advantage of the internet to reach a great consumer audience.
Natural Environment.
In the recent past, various news reports have indicated that China has poor Corporate Social Responsibility (CSR practices such as workers committing suicide, toxic emissions and faulty products among others (Sarkis & Zhu, 2011). According to Sarkis & Zhu, the government, as well as industrial organizations, have been trying to get rid of this negative publicity by making various changes in corporate practices though the pace at which this is taking place has been perceived to be very slow. The CSR dimensions of China are replicate to other developed economies but with unique variations that may depend on other factors such as politics, culture, and geography. With the increasing global awareness of global warming, countries like China are adapting to industrial practices that minimize the emission of greenhouse gases. It is thus advisable that the company should adopt the accepted global practices that are meant to conserve the environment as part of its CSR objectives (2011).
The government of China plays the biggest role in regulating industrial practices. Previously it did not seriously take this into account until recently following certain highly publicized events. Private industrial institutions have also increased the diffusion process of industrial processes in the country. Pressure to conserve the environment also comes from the community, the media, the civil society, and unions. The Electric Power Law in China requires companies to use electricity efficiently and to protect the environment (Yang, 2015). The company should thus ensure that its industrial processes do not pollute the environment beyond the minimum required levels. Compliance with this law may be costly to the company and thus negatively impact on its operations.
Economic Environment
China is the global leader in exports and is also the top economic powerhouse (Lam & Sun, 2013). According to Lam & Sun, China contributes 13.3% of the world GDP. The IMF reports that the country's GDP, as well as the purchasing power, has been exceeding that of the US since 2014. The country has been promoting foreign investments and exports as can be seen from its recent economic reforms to encourage these. As such, its economic growth has been at the rate of about 10%. The recent decrease in its growth rate reaching 6.9% in 2015 indicates that the economy is shifting more towards the service sector. This sector contributes 50% of China’s economy. The company should assimilate more service in its marketing to take advantage of the transformation. The other factor to consider is that the middle class is growing at an increasing rate. Currently, it is estimated at 109 million people, and the number is expected to double by the year 2020. The middle class is attractive to foreigners since it represents avid consumers (2013).
Competitive Environment
As an attractive global market, China offers many opportunities for both local and foreign companies (Cui & Ting, 2009). As such, there are many multinational companies in the Chinese food market. This means that competition is very stiff from both the local and foreign firms. Before entering the market, the company needs to analyze the various competitive strategies that it can use to survive in such a market. First, it is important that it understands the right strategy in which it can be able to meet consumer needs and create higher consumer preference for its products relative to competitors.
Some of the competitive strategies that the company can use include forging strategic alliances with local companies to be able to understand the local consumer needs better. It should partner with a local company in the food market since it may be very difficult to start on its own. This will ensure that it can avoid making mistakes and adapt to the new market faster by accessing a network that is already established and also gain a better understanding of the market. Starbucks became successful in the Chinese market by heavily relying on local companies such as Beijing Mei Da in the northern part of the country, Uni-President in the eastern part and Maxim’s Caterers in the south. The company can also adapt its recipes and menus to the different regions as KFC successfully did. The country is heterogeneous with 56 different ethnic groups, and consumer behaviors vary among regions as well as event cities (Cui & Ting, 2009).
Conclusion
A foreign company that intends to enter the Chinese food market requires considering various factors before doing so. The technological, environmental, legal & political, natural, economic and cultural environments present market entry barriers for a foreign firm as they may be very different from the situation back home. Their analysis and understanding will enable a company to design its market strategies to conformity and thus break the barriers and turn them into business opportunities. China offers the most populous market in the world and reports the growing population of the middle class favoring consumption. The population is also shifting from vegetarian to consumers of animal products which are relevant for the food market. Coupled with its leading global position in economic growth, China offers an attractive market for foreign firms.
References
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