Aptamil in China Market - Case Study Example

Student: Course: Lecturer: Date: Aptamil in China Market Focused Business Activities International Trade Requirement in China Aptamil is an Australian based company which is involved in the production of powder milk. The company plan to expand its business to China. To be able to establish and develop a competitive and profitable business venture, the company needs to be involved in various business activities. These activities should focus on fulfilling the legal requirements set for foreign companies by China and create a good business foundation to be successful in the country. One of the most important aspects to consider is the legal and governmental requirements for foreign entry in China. China has in past experienced a number of challenges in milk import sector which include health and safety challenges. In this regard, the country developed regulatory measures to be satisfied before importing milk from any foreign country. Some of these regulations include the need for shared health certificate and bilateral agreement between the exporting country and China. In this regard, Aptamil must verify whether Australian government has attained this requirement before making any further move. In addition to this, any food product company in china is required to make an online registration with the general administration of quality supervision, inspection ad Quarantine (AQAIQ). Milk is regarded as a food product and thus, Aptamil will be required to make this registration (EUSME Centre 10). Beside of the special regulation set for food product in China, Aptamil will also need to satisfy other governmental policies and regulations employed on foreign investors. These include adhering to the Chinese government taxation rules. Any foreign company venturing in Chinese market is needed to pay taxes based on the Chinese local tax codes. The most significant categories of tax for foreign business include business tax and corporate income tax. Business tax is currently being converted to value-added tax system as integration to current VAT regime for trade, retail, wholesale and manufacturing. The company will be required to register with the right tax authorities after receiving its license within 30 days (Sovereign China 24). The company will also need to understand other legal aspects such as the employment law of the country, and compensation guideline and other legal requirements. Understanding the governmental and legal requirement for starting a milk business in china will help the company to make a sound decision regarding the form of entry it should use to venture in the country. This is because different tariffs are imposed for different forms of entry in the country. It will also give the company a good chance to operate freely in the country without experiencing legal conflicts. Strategic Framework for Developing and Promoting Business Ambition China is one of the countries in the world that is experience high population growth. The country is experiencing annual birth of between 15 and 20 million children. It is approximated that the total number of children aged between 0 and 6 years is at 96 million (Sovereign China 14). In this regard, this country will act as a booming market for milk products, which is one of the essential food products for children growth. Moreover, china is increasing the population of middle class individuals with higher purchasing power. The rate of urbanization is also growing swiftly in the country. In this regard, the country serves as a good market for powder milk which will highly target families living in urban region where fresh milk is not very accessible. The main aim of the Aptamil Company is to successfully venture in the Chinese market and develop high market shares to emerge as the best and the most competitive powder milk suppliers in the country. This will be enhanced by developing good business-customer relation that can be attained by ensuring the product quality and safety. The product will target infants who require nun milk to grow, particularly children born and raised in urban area by working mothers, and also urban families that need milk for their daily use. Moreover, the current government policy regarding family planning has made children in china to be regarded with great care and prestige. The country is experiencing the generation of little empresses and emperors. Families are having less and less children. This is giving families an opportunity to offer the best to their children and thus, offering quality milk product into the country will provide Aptamil with a chance to grow and thrive in the Chinese market. Positioning Aptamil will need to decide on the best entry mode to employ when venturing into the Chinese market. To decide on the best mode of entry the company will need to conduct a market survey focusing on the consumers’ behaviour in the market and the level of competition. The selected form of entry plays a great role in determining the future performance of the company in the new market as well as the company’s ability to overcome challenges. The selection of the right mode will also be determined by the cultural factors, time factor, risks, cost, firm size, and governmental regulations. For instance, children are highly regarded in Chinese culture. They act as the hope for the future continuity of the family. In addition Chinese consumers are currently focusing more on product quality, health and safety of the food products, nutritional value, modern packaging, convince and freshness (Chen 13). Although it is not clear on the Chinese population perception on powder milk, it is clear that they can be influenced to purchase a product based on the above stated aspects. The available modes of entry will include export, Alliance, joint venture, Franchise and License, Wholly Owned Subsidiary. The best strategy to make entry to the china market for now is through exports. This is because the company will not need to incur extra cost to developing a production plant in China, which would require new employees and handling huge cultural barrier in terms of the language and business relations. Moreover, the regulations for exports are less than regulations set for production. In addition, export will assist the company in studying the market effectively and enhance testing of their product performance in different parts of the country prior to establishing a more expensive venture. The company can easily withdraw if the product fails in this market, without incurring huge loses (Johnson and Tellis, 6). Works Cited Chen, Hu. “A Systematic Analysis of the Market Potential of Foreign Infant Powdered Milk Brands in China.” Sovania. 2013. Web. 13 Jan 2016. < https://www.theseus.fi/bitstream/handle/10024/70210/thesis_CHEN%20HU.pdf?sequence=1 > EUSME Centre. “Guideline: Importing Dairy Products into China.” 2015. Web. 13 Jan 2016. < http://www.ccilc.pt/sites/default/files/eu_sme_centre_guideline_import_dairy_products_into_china_july_2014.pdf > Johnson, Joseph and Tellis, Gerard. J. “Drivers of Success for Market Entry into China and India.” Marketing Science Conference, Emory University, Atlanta, Georgia. 2005. Print Sovereign China. “China Market Entry Handbook 2015 Edition.” Soverign Group. 2015. Print Resource Development Aptamil will need to employ various resources based on the selected form of venture to be established in the market. Export form of entry has been identified as the best strategy for Aptamil to enter into the Chinese market. In this regard, this section will focus on the resources the company should strategize on to enhance a successful entry and development in the Chinese market. Strategic Framework for Developing and Promoting Business Organization To enhance effective development of export business to China, Aptamil will have to establish an effective supply chain system. The export business will involve manufacturing and packaging of the powder milk products in Australia and transporting them to China and later to various distribution centres in the country. The company should therefore identify various retail distributors in the country that will be willing to house their products and make an agreement with them. This includes supermarkets and other wholesale stores in the country. The company will also need to develop a strategy on how the products will be transported in bulks to China. The company should either consider developing a depot in China, where the company can be store its products from Australia and distribute them later based on the distributors order, or regular supplies can be made on weekly or monthly basis based on the rate of product consumption in the market from Australia direct to the distributors. The best strategy to be employed in this case is establishment of one depot in the country where orders can be placed and distribution done based on the retails requirements. Aptamil will also need to focus on product marketing process in the Chinese market. Being a new product, the company will require regular marketing to create product awareness and to promote sales. In this regard, the company will need to employ Chinese marketers who can manage to design suitable ads based on the locals’ behaviours and preferences. Other marketing techniques such as discounting and promotion will be employed to encourage consumers to taste the product for the first time, and thus creating a chance for awareness and gaining customers based on taste and preference. The company will require training Chinese marketers. Basically, China experiences the shortage of trained personnel (Wu 170). The company will thus need to either export marketers to China, or train marketers in china. The best option will be training marketers to cover the cultural gap. This will increase the company’s ability to convince consumers, than it could have been for foreign marketers. The supply chain process and the marketing process will both be controlled from the main company’s offices in Australia. However, the company will employ senior marketer in charge of marketing in China. The marketer will keep track on the rate of sales in the market and identify the regions where more marketing efforts are needed, or durations when marketing can be more effective to the company. The senior Chinese marketer will always report to the company’s marketing manager in Australia before implementing his or her ideas. The supply chain process will also have a distribution team that will be provided with the right resources to enhance the products distributions from the depot to the retail outlets. This team will be head by a distribution manager who will be in charge of orders and orders delivery in China. The company will need to satisfy the government employment regulations and policies to avoid any legal challenges in the country. Investment Aptimal Company will invest in the supply chain to China. Either the company will use railway to transport its products or sea. Powder milk is preserved to live for a long period of time, and thus it cannot be considered to be very perishable. In this regard, the company can afford transporting it using slow, bulk means of transportation. The two available connections from Australia to China include railway and sea (Anthony et al. 32). Thus, the company will require to either purchase or hire vehicles to transport finished goods from its warehouse to the Australia terminal to China. The products will then be transported via rail or water to the China terminal, where road will again be used to transport the products from the terminal to the warehouse built not far away from the two terminals. Therefore, the company will need to manage and maintain transportation and storage resources on both ends, which include trucks and warehouses. It will also need to manage and maintain human resources responsible of transporting these products. An alternative option is employing a transportation services for the transportation of these goods based on the company’s convenience. The company will also require developing and maintaining a communication system that will monitor transportation and distribution of its product from Australia to China and across China. This communication system will keep track of all forms of goods transportation and distribution in China, while also communicating to the headquarters in Australia to provide more updates on the rate of consumption in the country. This will assist in adjusting the rate of production to cater for the Chinese market’s needs. The company will also be responsible of providing communication gargets to the Chinese distributors and training them on how to use them to enhance effective distribution of products (Fowler 56). Development of effective transportation, storage and communication system will play a major part in enhancing efficiency in goods distribution in the country. This will counter shortages or any other inconveniences that may interfere with product availability (Madhani 12). Good storage will assist in maintaining the product quality, by preserving its taste, nutritional value and general appearance. In this regard, investment on these aspects will be very necessary for effective product performance in the Chinese market. Works Cited Anthony Beresford, Stephen Pettit, Yakuan Liu. “Multimodal Supply Chains: Iron Ore from Australia to China.” Supply Chain Management: An International Journal, 16.1, (2011): 32-42. Fowler, Simon. “Harnessing the Right Software Systems to Deliver a Quality Supply Chain Experience.” Credit Control, (2013): 54-59. Madhani, Pankaj M. “Demand Chain Management: Enhancing Customer Lifetime Value Through integration of Marketing and Supply Chain Management.” Journal of Business Strategy, 7.3, (2015): 8- 26 Wu, Jianlian. “An Analysis of Business Challenges Faced by Foreign Multinationals Operating the Chinese Market.” International Journal of Business Management, 3.12, (2008): 169-174. Read More