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Batch A Team 5

The document discusses whether China will continue to be a growth marketplace. It analyzes factors contributing to China's economic growth like population, skills, innovation, and changing consumer behavior. While China's huge market size attracted foreign companies, the document notes risks like less reforms and rising competitiveness of other nations. It examines why Best Buy and eBay failed in China by not understanding local culture and consumers, unlike Alibaba which tailored its platform Taobao to Chinese customers. The case leaves open questions around China's economic growth trajectory and foreign companies' role from 2020-2030.

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Salman
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108 views

Batch A Team 5

The document discusses whether China will continue to be a growth marketplace. It analyzes factors contributing to China's economic growth like population, skills, innovation, and changing consumer behavior. While China's huge market size attracted foreign companies, the document notes risks like less reforms and rising competitiveness of other nations. It examines why Best Buy and eBay failed in China by not understanding local culture and consumers, unlike Alibaba which tailored its platform Taobao to Chinese customers. The case leaves open questions around China's economic growth trajectory and foreign companies' role from 2020-2030.

Uploaded by

Salman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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WILL CHINA CONTINUE TO BE A GROWTH

MARKETPLACE?

TEAM – 5
HARISH J - R01437349
SALMAN - R01437161
SANJAI - R01436746
SURIYA - R01437144
VIGNESH - R01437191
SUMMARY

The case discusses about the existing economic scenario of China by analysing various factors
including population, income, culture, consumer behaviour, etc. With this analysis, the opportunities
available for China to sustain its economic growth and the opportunities available for foreign
companies to do business in China are discussed. The potential risks involved in the Chinese market
are also focused through examples. The case leaves many questions behind regarding the economic
growth of China from 2020 to 2030, The emergence of new foreign companies in China and the
changing Chinese culture.
INTRODUCTION

• Low production cost and the huge market size enabled companies to enter China
• Overtook Japan to become 2nd largest economy
• FDI was the biggest driver for increase in Chinese economy
• Exports to China increased and US exports increased by 542% ($16.2 billion to $103.9 billion)
• US exports to rest of world were increased only by 80%
• Economic growth (GDP) was 10.4% from 2000 to 2010
• 200 million people in middle and high income is expected by 2020
• 10 times increase from 17 million in 2010
• China’s purchasing power is high now
• Creates opportunities for Foreign companies
FACTORS
CONTRIBUTING
FOR CHINA’S
ECONOMIC
GROWTH
•Gigantic population with production
efficiency and creating labour force
•Investing in population’s skills and
education
•Innovative and technological
advance
•Affordable yet achievable desired
quality for the products
China is well know for its labour skills and production efficiency
REASONS FOR
CHINA TO LOSE IN
COMING FUTURE

Less reforms, more state


Other Nations own manufacturing
unit to provide and contribute for
employability and economy.
China’s manipulation in trade
FDI IN CHINA
• Chines politics is not open but it
favours FDI
• US FDI in 2016 was $139 billion
• Economy is market based
• Corporate tax – 25% and 15% to
qualified govt. aided business
• Focuses on online enterprises as highest
tech population prevails
• Legally regulates businesses into
encouraged, restricted, prohibited and
permitted
• GDP accounts 20% by FDI
• Foreign invested enterprises provide
30% industrial output, 22% profits and
10% employment.
• 10% Growth rate by FDI(1980-2010)
KEY ISSUES

• Exports to China had become stagnant to about $113 billion


• Domestic consumption declined from 46% to 33%
• 85% mainstream consumers are living in top 100 wealthiest cities
• Affordability to global products are high
• Can the growth sustain or increase through consumption?
• Can the Chinese culture, beliefs, demands, purchasing behaviour, consumption values enable
foreign companies for business?
• Best buy and e-bay failed in China
• Does the reasons for these firms failure exists even now?
SCENARIO PRESENTED BY BEST BUY
• Best buy, a megastore based consumer electronics, founded in 1966 and entered china in 2006.
• Acquired Jiangsu five star appliance for $180 millions.
• Hit by cultural things in china.
• Tried implementing American product staples.
• Premium pricing.
Main three shocks,
• Chinese will not pay for overly expensive products.
• Too much of piracy in china.
• Chinese do not want to shop at huge megastores.
Reason to fail,
• Company tried replicating U.S model in china.
• Has not worked at the pace of Chinese customers.
PURCHASING IN 2020
• From 17 million in 2010 to 200 million in 2020 of people will be in middle class and upper
income.
• only few consumers are found in lower middle class as per 2020.
• China’s GDP growth expected to be gradual from 2020 to 2030, say 5.5% annually.
• GDP growth is greater than U.S, Japan and Germany.
• Consumers will afford range of products and variety of consumption.
DECLINE OF eBay
• eBay was Product centric.
• Failed to recognize the Chinese market, as they where different from that of the West.
• eBay had a German Manager to lead their operations and a Chief Technology officer from United
States, neither one spoke Chinese or understood their market.
• eBay charged its sellers listing and transcation fees.
• Top level management also didn’t understand the Chinese market, as they spend a lot of money on
Advertising on the internet, as only 90 million people used internet and most of the small scale
businesses didn’t use the internet.
• As lack of understanding of the Chinese market, eBay had only 29% of market share.
SUCCESS OF ALIBABA
• Jack Ma, founder and CEO of Alibaba, decided to launch a completing Consumer-to-Consumer
auction site, not to make money but too fend off eBay taking Alibaba’s customers.
• It was lauched free of charge for the individuals to buy and sell goods.
• As most small scale business people in China watch TV instead of log on to the internet, Alibaba
advertised for TAOBAO on major TV channels.
• Taobao was Customer centric.
• At that time, China had about 300 million cell phone users and only 90 million Internet users.
• Taobao also offered instant messaging and voice mail to mobile phones for buyers and sellers.
• In March 2006, Taobao became the market leaders in China with 67% of market share out playing
eBay with 29%.

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