Appraising Markets in China for Industrial Products - Case Study Example

Case Study: Appraising Markets in India/China for Industrial Products Student’s Name Course Professor’s Name University City (State) Date Case Study: Appraising Markets in China for Industrial Products 1. Introduction A Health & Safety Engineering Corporation is a company that specializes in a range of activities including design and construction of dust manufacturing and filtration materials. The business also specializes in the production of tools and spare parts of different types including exhaust filters, spares in dust extraction, fluid, and other construction products. The company also produces distinct lines of goods including dust removal products such as cartridge dust collectors, bag dust collectors, oil mist collectors, and power core collectors. The company’s fluid filters include 10 GA filter, flush-flo, Hydro-cyclone separator, strainers, Klariflo, and the eliminators. In most cases, the Health and Safety Engineering Company operates in the unpredictable engineering industry with its core products being used in industrial environmental safety processes and others. The key product chosen in this case study is a cartridge dust collector. The equipment is utilized in the industry to collect and remove harmful smoke and dust particles from industrial processes to avoid spilling over and the pollution of the environment. This case study will focus on China as a rapidly growing economy. The choice is informed by the fact that China is the world’s leading emerging market not only in terms of its large population but also, in the diversity of economic activities. It is generally agreeable that China is quickly becoming dominant in the world market because of its widespread manufacturing and production capability. Furthermore, apart from being a significant importer and exporter of a wide range of products, it is also world’s fastest growing consumer markets owing to its large population. The manufacturing industry in China, for instance, is highly diverse; the sector produces products ranging from aircraft to chemical products. 2. Market Profile and Implications China’s fast economic growth in recent decades has instigated the development of a robust market for engineering products and services. The nation is competitive especially in the engineering sector because of the rapid expansion of manufacturing initiatives. The current statistics support this effect, for instance, in 2015 and 2016, the manufacturing industry in China received revenue that amounted to more than $29 billion. A growth in income is expected even in future due to the expected increase in engineering construction output as well as growth in the manufacturing sector (Ok, Ortoleva, & Riella 2011). Together with positive annual growth in the industry, the engineering sector in China faces frequent technological and innovation disruptions that contribute to the expansion and development of the industry. These factors make China a prolific destination for businesses operating in the engineering sector across the world. The industrial air filtration market across the globe is one of the fastest growing. According to Grand View Research Inc. global industrial filtration market is one of the highest growing segments within the engineering industry. The research showed that the future market for industrial air filtration is expected to hit $6.5 billion by 2025 (Boontanapibul, 2010). This growth is projected to be accelerated by a myriad of factors such as incessant demand for high performing and energy efficient air filtrates in the next decade. Furthermore, rapid industrialization together with sudden environmental awareness and resource scarcity has catalyzed the present market and will be expected to elicit the same effect even in the next years. Industrial filters have become critical elements of the manufacturing industry in China because of increasing environmental awareness and the need to reduce risks associated with molecular and microbiological contaminations. Industries in China have also heightened their strategies towards the elimination of hazardous emissions in order to reduce environmental pollutions (Fan & Zigang, 2001). Owing to this, the demand for dust accumulators such as cartridge dust collectors has greatly increased in China. For instance, in 2015, dust collectors accounted for more than 20% of the entire filter market. This is due to its increased usage in manufacturing industry especially in controlling pollution. Importantly, industrial demand for filters in China, especially in the power production segment, accounted for more than 10% of revenues in 2015 (Report Linker, 2015). The expansion witnessed in the growth of dust collectors and filters is anticipated to have a steady increase in the next years. Undoubtedly, the market for dust collectors and filters in China has great prospects not only in the contemporary business environment but also in the future. With increase environmental sensitization as well as increasing regulations from the government towards environmental protection, the future market for dust cleaners and filters is expected to remain steady. 3. Cultural Profile and Implications The number of companies extending their operations internationally is growing rapidly thanks to globalization. The countries that were initially considered conservative are opening up their markets for foreign businesses and multinationals. China is a diverse nation with distinct cultural dimensions incomparable to any in the world. The significant cultural differences shape some aspects of business. The major aspects of culture that have been seen as determinants of business operations in China include religion, social collectivism, class system, Chinese language, protectionism and others. Any company that opts to expand its operations to this regions has to put the facts below into consideration. Social Collectivism Chinese society favors social collectiveness because people, including those living in urban areas, put great emphasis on reaching consensus within the group setting. People generally depend more on institutions and groups to tell them what they should do. Importantly, Chinese tend to identify with a distinct group, team, unit or organization. Therefore it is easy to identify the insiders and outsiders within the social setting (Fan & Zigang, 2001). Businesses develop more in China when they have a good network relationship with different individuals and stakeholders. Class System The Chinese society is generally cohesive with great tendencies towards the social stratification. There is great adherence to hierarchical relationships which is seen as a source of social harmony in the society (Hiu et al. 2001). It is under these social classes that people act in the society. The success of businesses is shaped by the social cohesion and respect of existing social classes. Religion The leading religion in China is Confucianism. This religion teaches a sense of attaining human perfection. It has a comprehensive and strict social code that every member of the society is expected to follow. It is under this Confucian loyalty that the operations in business are achieved. Chinese employees are influenced by Confucian degrees, they tend to remain loyal to the management and the business (Boontanapibul 2010). Ethics There are many ethical codes that the Chinese observe. The codes touch on personal space, eating habits, nonverbal communications, and gift giving (Boontanapibul, 2010). The ethical codes are important because they are an inherent part of business operations in the society. Importantly, a business operating in the Chinese market needs to accept and observe the moral codes because they are perceived as a sign of respect and uprightness. In order to market effectively in China, it is important to understand the Chinese consumer behavior as influenced by the Chinese culture. Although the consumer market in China is experiencing transformation, many citizens, especially in rural areas, still adore their conservative culture. A company wishing to invest in China needs to profile Chinese consumers by segmenting them in terms of existing demographic variables, as well as different decision-making styles. The Chinese citizens living in towns have shown an increasing adoption of Westernized culture, this is reflected in their perfectionist tendencies (Ok, Ortoleva, & Riella, 2011). 4. Analysis: Marketing Mix The Health & Safety Engineering Company sells largely to other business i.e. they conduct business to business operations. The aspect of B2B marketing mix is unique especially in China because companies tend to manufacture most of the products it needs in the manufacturing process. It is, therefore, important under this circumstances that an international business like Health & Safety Engineering Company wishing to establish their operations in China needs to understand nature of the company. In order to market a foreign product in China, the company need to adopt the 4P concept of the marketing mix. Marketing Mix: The 4Ps Concept Product Any company expanding to international market needs to mold the product to meet the cultural expectation of the target population, for a Health & Safety Engineering Company, marketing its filter in China need to meet the expectation and requirements of the Chinese market. Needless to say that for the company to succeed, it is important to spend time studying the regulations existing in China about manufacturing businesses and the rules pertaining environmental conservation (Boontanapibul 2010). After the evaluation, it is important to tailor the product to meet the specifications of the existing regulations. Apart from tailoring the product to meet regulations and rules, international companies need to have serious grassroots marketing and a serious consideration of the brand equity process. Price For a company expanding to China, a pricing strategy is crucial in conquering the market. It is highly recommended for the company to use the mid-range pricing strategy which tries to balance between gaining profits while ensuring that the consumers remain satisfied. In China, lowering the price below the market value gives the notion of poor quality. Hence the product can be rejected by consumers while at the same time, setting the price above acceptable market value will be out of reach to many consumers, therefore, the merchandise will still be forbidden by the consumers (Ok, Ortoleva, & Riella, 2011). It is highly advisable that a company expanding to China needs to take control of the price to ensure that it gives maximum revenue while at the same time taking care of the customer’s feelings. For Health & Safety Engineering Company, competitive and strategy expansion in China should be correlated to ensuring quality and adopting a balanced pricing strategy. Place Successful penetration of a dense market in a foreign country such as China should be related to ensuring effectiveness and efficiency. The approach involves streamlining the distribution and supply chains. Strategic positioning is important for a foreign company because it will assist in the identification and product promotion (Fan & Zigang 2001). Choosing an appropriate location within the international market is crucial in ensuring future growth and expansion as well as increasing chances of success in future. Taking strategic measures in selecting cities to establish their operations is fundamental for foreign companies because it ensures that they cope well with challenges (Ghodeswar 2008). The Health & Safety Engineering Company needs to understand the dynamics of the market and the importance of choosing strategic locations for setting up business operations. Ideal locations remain significant for Health & Safety Engineering Company because selling products to other firms and manufacturers needs an efficient distribution and supply network for effective movement of products (Langevin & Riopel 2005). Promotion Merchandising products in China is generally profitable because of the Chinese population though the conservative culture accepts any form of advertising. Effective marketing promotion is China is fundamental to the success of international companies. Entry of Health & Safety Engineering Company into volatile and competitive Chinese market needs effective and efficient product promotion. The product promotion strategy that the company will adopt should focus on target manufacturing and business organizations. This is important because the target market for its product is manufacturing and processing companies. Any international company wishing to penetrate Chinese market needs to opt for a promotion mix that will reach many consumers. One of the common trends in marketing is the use of e-commerce (Langevin & Riopel 2005). E-commerce is important promotion strategy especially in China because the number of internet users in China is increasing each year. To succeed, especially in reaching a wide market, the Health & Safety Engineering Company needs to target manufacturing companies by using internet marketing to increase awareness. 5. Conclusion and Recommendations Looking at the challenges of expanding or setting up businesses in foreign countries it is important for the company wishing to expand internationally to learn the business dynamics of operating in the international environment. Establishing a Health & Safety Engineering Company in China comes with fresh challenges including unique cultural factors, a competitive working environment, and challenges relating location and logistics. Having looking dynamics in Chinese market I recommend the following: The Health & Safety Engineering Company should focus more on creating a product that is appealing to the target market. Business to business marketing is important for a company that specializes in manufacturing products used by other businesses. Therefore, streamlining product to meet customer demand is important Adopt a good pricing strategy that meets customer’s needs while enabling the company to maximize profitability The company should choose a strategic place where it will meet logistical needs The company should adopt promotion strategy that increases awareness among the target customers Reference List Boontanapibul, C 2010, ‘Doing Business in China: Cultural Factors, Start-up Concerns, and Professional Development’, Executive Journal, pp. 170-182. Fan, P & Zigang, Z 2001, “Cross-cultural challenges when Doing Business in China”, Singapore Management Review, vol. 26, no. 1, pp. 81-89. Ghodeswar, B 2008, ‘Building Brand Identity in Competitive Markets: A Conceptual Model’, Journal of Product & Brand Management, vol. 17, 1, pp. 4-12. Hiu, A, et al. 2001, “An Investigation of Decision Making Styles of Consumers in China”, The Journal of Consumer Affairs, vol. 35, no. 2, pp. 326-343. Langevin, A & Riopel, D 2005, Logistics Systems: Design and Optimization, Springer, New York. Ok, E, Ortoleva, P, & Riella, G 2011, Theory of Product Differentiation in the Presence of the Attraction Effect, available from . [Accessed Mar. 29, 2017]. Report Linker 2014, Industrial Air Filtration Market Analysis by Product (Dust Collectors, Mist Collectors, HEPA Filters, Cartridge Collectors & Filters, Baghouse Filters), By End-Use (Cement, Food, Metals, Plastic, Power), By Region, and Segment Forecasts, 2014 – 2025, available from . [Accessed Mar. 29, 2017]. Read More