Degree programme: Business Administration
Author: José Miguel Tejedor Fernández
Deadline: 24 November 2011
Lecturer: Jukka Lahtinen
Table of contents
Introducing some macroeconomic figure 3
Back to basics 5
Cultural Factors 6
Introducing some macroeconomic figure
Chinese purchasing power is rapidly growing, which implies some risk to Western economies but also many opportunities to companies. Moreover, Chinese economy is rocketing at an annual rate of more than 9 points, so some companies are seeing a great opportunity for their products and services. The objective of this writing is tooutline some interesting ideas focused on the activity of marketing and communication of business towards the Asian giant.
Table 1 Evolution of Gross Domestic Product – Real growth rate for 2004-2009* [pic]
. *This variable comprise the annual Gross Domestic Product (GDP) adjusted for inflation, expressed as percentage. Source: The World Fact Book (2010)
Lately, findingpress articles about China’s economic miracle is common and both, general-interest and economic press equally detail the trade relations between the West and China and how the power is changing is focus towards the Asian giant.
Indeed, China and its economy deserve the attention in its own right, raising its gross domestic product (GDP) from $ 1,931 billion in 2004 to over $ 5,800 billion (1) dollars in 2010, representing a compound annual average growth of around 9 percentage points. Undoubtedly, the trade imbalance with the Asian giant is so significant that represents the main economic factor for Western's trade deficit.
Given this situation, some companies recognized the opportunity to access a new market for their products and services.
The first impression is thatWestern nations cannot compete with its manufacturing capacity, falling into the temptation that it is time to move on. But nothing further from the truth. If you go, for instance, to Xiang Yang market in Shanghai which is located on Central Street Hualhai of the former French concession, and in it is possible to find plenty of posts with imitations of all kinds of watches, luggage, clothing, etc..In this shopping route, it is possible visit several of the most elegant and exclusive shopping malls, where the new wealthy local people buy luxury clothing manufactured in Europe, and all types of furniture and household items, always with one common denominator: top quality and high added value.
This image can be paradoxical if we take a look at the stereotype of developing countries withcheap labour. Figures are more descriptive. According to the World Economic Outlook Database (September, 2011) the income per capita in China is estimated at about $ 4,382 a year, away from just over $ 44,400 in Finland, but the numbers and mostly means can be deceptive. In fact, the Chinese population is very heterogeneous both in terms of income and living standards. In a country of contrastsas China with a population of over 1,300 million people, the first lesson to learn marketing managers is to return to basic marketing: managing and segmenting the market. For more abuse of statistics in China, not only are there more than two million millionaires - which definitely is attractive - but also, it is estimated that 30 per cent of disposable income is up 10 per 100 of thepopulation. This last fact makes a market with a purchasing power of the OCDE countries had a couple of decades ago, meaning that a good opportunity for Western companies.
Economic indicators of Chinese municipalities*
| |Population 2003 (millions) |Growth of Gross Domestic Product|Per capita income 2004 (RMB(3)) |