Comparison of two Markets - Europe and China - Case Study Example

mраrisоn оf two Markets Еurоре and China Student's Name Institution's Name Professor City Date Соmраrisоn оf two Markets Еurоре and Сhinа Abstract The development of international business has heightened the need for international market selection especially for companies marketing strategies. Companies are therefore in the race to comprehend the geographical, demographical, economic, social and political characteristics as compared to their home countries. The decision on which marketing strategy to employ in the international market has triggered studies to create optimal approach for the foreign market entry. This case study is therefore designed to evaluate and determine the most appropriate market place for the Australian company either in Europe or China. In addition, this case study suggests specific recommendations from the analysis of the different levels of business environment in the two entities to provide a robust map of market's prospect and the conditions of the brand. In this context, managers from the company will be equipped with a comprehensive evaluation of the future of market places in order to give priority to the most appropriate market destination. The achievement in determining the optimal market destination for the Australian company is based on the comparative analysis of financial, economic, political, legal and cultural environments between Europe and China. The R.M Williams Company was established in 1932 aimed at upgrading the leather work and craft[Fer14]. The company's commitment and trials enabled it to produce fashioned boots and later specialized in production of luxury goods. Eventually, the company was able to invest heavily on footwear and other equipment registered under the company's trademark. The technological advances enhanced the diversification of the market to other regions and new markets in foreign countries. In addition, R.M Company expanded the number of outlets and stores with at least 800 stockists across the world as well as retails stores around Australia. From the inception of the company, it enjoyed the skills and lifelong dedication of the staffs who passed their knowledge from generation to another. Through the evolution of marketing strategies from mail-order catalogue into e-commerce business R.M Company launched online marketing to ensure that the company reach out to their clients, help them make choices and contribute to the success of the company[Fer14]. The status quo in the company allows their brands to reach more passionate customers around the world. However, owned by the LVMH, a luxurious goods company is now key player in luxurious leather goods and wines and spirits. Besides, the mega-brands from the company are drawing inspirational and emerging markets demand in turn contributing to faster growth and superior margins. The company takes the advantage of them being the first mover in the industry to push its brands ahead of the competition. In this case study the aim is to recommend the best market for the company either in Europe or in China in respect to the trade of leather goods. Economic and Financial Environment Comparison The economic and financial environment of a given country is measured by the micro and macro-economic factors that influence the total make up of the entire economy. In this context, the micro-economic factors such as market size, suppliers, demand and supply influence business activities. In addition, macro-economic factors such as inflation, taxes rate, current exchange rates, unemployment rate, recession and depression contributes to success of economy or leads to economic meltdown if not well managed[Lee12]. These economic parameters are useful in rating the economic and financial environment in Europe and China in the bid to establish the best market for LVMH company into the foreign market. It is important to mention country's monetary policy have significant effects on the country's entire economic environment. The policy aims at controlling the flow of money from businesses to the banks and individuals in turn ensuring stability in employment, price and purchasing power of the customers. China accession to the World Trade Organization in 2001 created a feather to enter into the global economic landscape. The rate of unemployment in China decreased from 4.04% to 4.02% in the last two quarters of the year 2016[Fog10]. Additionally, the unemployment rate in China has been slightly above four percent in the last decade. The socialist heritage, full employment policy by the government has enhanced economic environment in the country. On the other hand, the European rate of unemployment decreased from 8.9% in January 2016 to 8.1 in January 2017. In most of the member states the unemployment reduced in January 2017. According to the econometrics in Europe, the rate of inflation is currently at 2.00 percent with a projection of 2.20% in 2020. However, China 's consumers prices experienced variations from 2015 with 0.8% rise in 2017 as compared to 2.5% one month earlier. From the historical data and statistics from the country's economic calendar indicate a rise in customers price in household goods and clothing. In the same point, China Yuan continues to depreciate due to conservative currency policy that may lead to world economic recession. On the other hand, despite the strength of the Euro, the use of different currencies in Europe may lead to meltdown economy due to difficulties in exchange of currencies. After long period of economic struggle Europe has currently witnessed improvement in stronger job growth, rising retail sales and improvement in credit market situations[Gua14]. In addition, European nations have successfully avoided deflation thus while the rate of inflation remains low. However, despite the aggressive monetary policy which resulted into growth in cash flow in Europe, the denial of credit to the private sector continues to decrease in the peripheral countries. Financial integration in Europe and economic restructuring of economic tenets are necessary for the countries to restore strong economic growth especially in the luxurious goods products. The slower economic growth in China implies that the country is unable to absorb workers shifting from rural to urban areas. The decision by the Chinese government to crackdown corruption declined the luxury goods thus worsening the slowdown in retail sales growth. Consequently, wealthy individuals in China are looking for opportunities to invest their capital in foreign nations rather than in their country thus considerable outflow of money from China forcing the central bank to sell foreign currency to control the sharp decline. Political and Legal Environment Though China has successfully joined the game in the international market, the geographical and sectoral authorities involved in regulating business is confusing to the foreign investors due to the different authorities imposing taxes, rents and regulations[Czi13]. Despite the Chinese government devolving the powers to the local authorities to take advantage on the foreign businesses, foreigner investor in the country is faced with the challenge of meeting officials and agencies to start a business project. The political and legal environment in China is subject to the effectiveness of the exchange rate and currency management. The implementation of currency policy and fiscal policy to ensure the overall quality of business environment and ease to carry out business. The attacks from external and internal forces in China have negatively affected the movement of tourist and local people from one place to the other thus reducing the sales on luxurious goods. However, the social mobility in China has increased the scope of personal freedom while as the government has new criminal and civil laws to ensure long term peace for locals and foreigner investors. Inevitably, the constant battle between the central government and the local governments over the applicability of laws make it difficult for companies operating in China to know which laws to follow. Europe enjoys political stability as a constitutional monarchy thereby providing vibrant and promising opportunities for foreign investors. Since the adoption of free market policy in Europe, establishment of policy to protect employees working in foreign companies and banking systems reforms has seen Europe emerge as a lucrative business destination. Indeed, the introduction of universal rate of taxation at 21% to all companies whether local or foreign in Europe and the consideration that Pound is a free-floating currency and it is easily converted to other international currencies[Bar13]. The licensing in EU is easy and affordable to the traders and access of pricing information to the clients as well as inspection of products to curb copying and duplication thus safeguarding the trademark and the brands. Companies are presented with property rights such as patents and trademarks. The legal environment in EU ensure the control of all basis of production, exchange and distribution of products to all the segments of the vast market. Order and stability is paramount in doing business in EU thus the establishment of rules and conventions defining the standards of fair trading. Cultural Environment China is estimated to have the largest population in the world of about 1, 133,682,501 people from the census carried out in 1990[Tia16]. However, the rate of population growth in China is estimated to be about 15 million annually. The acceptance of the Chinese cultural practices and values makes one accepted in the country. The minor Chinese cultures have been absorbed into the mainstream and thus the creation of legal framework to protect the rights and cultures of the minorities. The Chinese culture believe that business thrive and people prosper if harmony prevails in the entire land. The purpose of the common culture is to fulfill their potential in business. However, the uniqueness of the Chinese culture poses a danger in introduction of foreign products that are not common in the country. In this context, the market of luxurious leather products and wines and spirit can be negatively affected due to the traditional goods and products which are still relevant to the current generations. In the same point China records a high level of inequality in power and wealth due to the masculinity versus femininity cultures. The free market economy advocated by EU intensified the cultural-crossing which is characterized by unfamiliar languages, values, beliefs and behaviors[Gua14]. In this context, the EU authorization of multiple cultures put some business opportunities at stake. However, the free market allows interactions which minimizes the differences in cultures across Europe. The employees learn about other cultures and acquires unique cross-cultural skills to improve on brands to meet the standards in the current market. The adopted culture of free market enhance the international relationships between Europe and other nations thus encouraging cross cultural negotiations, easy and quick establishment of rapport with the suppliers, customers, distributors and other relevant partners in business. The embracing of the global culture is a clear indication of the acceptance of global business and culture sensitivity. Europe has been in the front line to advocate for collectiveness in culture adversity through the recognition that culture is not about individual but it involves groups. Recommendations Conducting business in China can turn to be difficult due to their political, legal, economic and cultural environments. Chinese prefer working with companies there are familiar with. In this context, Chinese see company managers as representatives of firms and not as individuals. Additionally, Chinese prefer meeting face-to-face rather than written or telecommunication negotiations and thus having demarcation between business and socializing. It is important to highlight that socialization is essential for business as managers and expertise interact with customers in turn knowing the taste of their customers on certain products thus improving it to meet the standards of their clients. In this context, LVMH company can do well in Europe given the economic alignment is flexible, political stability and also the ease to manipulate the currency at will. Though China is rapidly growing in industrial and economic development the LVMH company will need to work on the differences in their cultural, political, legal and economic frameworks. Learning process of the various business environment may as well hinder business. The fluctuating inflation rates and currency strength insecurity may not augur well with entering into business and introducing new products. European pound stability facilitates the flow of cash throughout the entire land thus improving on the living standards of people in turn demanding for luxurious goods. The brand name and the property rights protects new companies in Europe from exploitation. The legal policy in Europe are controlled and offers a good deal of reduced taxation and universal charges to the local and foreign investors. Europe thus is the best option for the LVMH to venture into the business on their brand. Conclusions The development of international business has heightened the need for international market selection especially for companies marketing strategies. Companies are therefore in the race to comprehend the geographical, demographical, economic, social and political characteristics as compared to their home countries. The decision on which marketing strategy to employ in the international market has triggered studies to create optimal approach for the foreign market entry. The achievement in determining the optimal market destination for the Australian company is based on the comparative analysis of financial, economic, political, legal and cultural environments between Europe and China. Financial integration in Europe and economic restructuring of economic tenets are necessary for the countries to restore strong economic growth especially in the luxurious goods products. References Fer14: , (Ferrell, Niininen, Lukas, Schembri, & Pride, 2014), Lee12: , (Lee, Bang, Ha, Lee, & Kim, 2012), Fog10: , (Fogel, 2010), Gua14: , (Guay, 2014), Czi13: , (Czinkota & Ronkainen, 2013), Bar13: , (Baron, 2013), Tia16: , (Tian, 2016), Read More