The paper "Challenges of Expansion into China" is an outstanding example of a business case study. A reputable wine company in Barossa wants to set up an additional bottling plant in Yantai, Shandong province with an eye to catering to the Chinese market next year. Doing business is unlike doing business elsewhere in the world, so there are a number of areas of concern on this proposal to set up the plant. This paper analyses five of such concerns and attempts to delve deep into how they are likely to impact the business if led to the operational stage. Introduction Even as China's business is booming, it can be a daunting task to do business in that country.
In 2010, China emerged as the second-largest economy of the world and its annual economic growth rate has steadily at 10 percent for the last three decades. That is an impressive number and has the potential to lure any foreign company China's shores to tap into its vast and growing market. The picture seems very glossy on the outside; however when one is "into it", it is realised that Chinese way of doing business is unlike how it is done in rest of the developed world.
For establishing and thriving in the Chinese market, foreign companies must have a thorough and practical knowledge of the major challenges that the country throws for a foreign entrant. To succeed under the shadow of these challenges' stiffness, one needs to face them head-on. Given the experience of working with medium and small-sized companies to get established in the Chinese market, many foreign companies assisting others to enter this market, have shortlisted a number of major challenges that companies face in either establishing, operating or growing businesses in China. Five major challenges that the wine company in Barossa in setting up a bottling plant in Yantrai, Shandong could be i) extended lead time of supply, ii) extended and unreliable transit times, iii) multiple consolidation and breakpoints, iv) multiple freight modes and cost options, v) prices and currency fluctuations. Five key issues/ challenges An extended lead time of supply For some time now competitiveness of time as a weapon has been recognised.
It is of critical importance for a foreign company in the Chinese landscape to meet customer demands of shorter delivery times (Stalk, 1998).
For any foreign company, thus, the extended lead times pose a significant challenge, particularly during troughs and peaks in an era that is based on time-based competition (Stalk and Hood, 1990). Red tape, to some extent, is supposed to be one reason for this. Bureaucratic and administrative tasks that have been streamlined and simplified in the developed nations are still time-consuming in China. That might be the first frustration, to begin with as the bottling plant would have to undergo all that from the very stage of its conception.
It might take months to get the plant registered, to open a bank account and get necessary approvals. There is an inconsistent application of regulations and lack of strong rule of law which might be an instant turn off as they would not seem to be going by the type of convenience the company expects.
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