Expert answer:Places and promotion essay
Expert answer:The Piana Miele (Honey Company) wants to expand their business (exporting their products) to China market. Now based only all the information below write Marketing Mix (Place and promotion only) the marketing budget is around (50,000US).
(at least 3 pages with 6 references)
You can take reference from any source but information you take has to be related what is written in the document attached Place you can focus on a few big cities like shanghai and Beijing Promotion 50000 usd you need to listen what would it be used for eh event, marketing etc and write other pointers which ever u can
promtion_and_place.docx
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The Piana Miele (Honey Company) wants to expand their business (exporting their
products) to China market. Now based only all the information below write Marketing
Mix (Place and promotion only) the marketing budget is around (50,000US).
(at least 3 pages with 6 references)
Company Background (Piana Miele)
➢ Established in Italy in 1903
➢ Top in Italian market with production of 40 hundred kilos per
➢ Year
➢ Started distributing products to chemists and herbalists, then to food and
pharmaceutical firms
SWOT analysis
Strengths
Weaknesses
➢ High quality product as it has its
➢ Lack of brand awareness
own laboratory and it is always
➢ Piana miele has little experience
controlled
entering China market
➢ Affordable price with good quality
➢ Low selling price
➢ Great variety of honey products
➢ Limited budget
➢ Awarded several certifications
Opportunities
➢ Consumer’s purchasing power is
high
➢ Labor cost is low
➢ China’s greatest opportunities in
bio-technology
➢ Chinese consumer’s perception:
Western products is good quality
with premium price.
➢ Chinese concern about fake
domestic honey
Threats
➢ Government support local
companies with strict law and
tariffs for import
➢ A lot of competitors from local as
well as foreign firms
PESTEL Analyse:
1. Political Factors and Legal factors:
These factors are all about how and to what degree a government intervenes in the economy
or a certain industry. This can include government policy, political stability or instability,
corruption, foreign trade policy, tax policy, labour law, environmental law and trade
restrictions. Furthermore, the government may have a profound impact on a nation’s
education system, infrastructure and health regulations. These are all factors that need to be
taken into account when assessing the attractiveness of a potential market.
The People’s Republic of China has only one political party which is CCP (Chinese
Communist Party). Though there are eight registered small parties, all of them are controlled
by CCP (Export Entreprises SA, 2017). It shows that China’s politics can be considered high
stability.
“Since becoming General Secretary of the CCP Xi Jinping has made his anti-corruption drive
a key pillar of his domestic policy agenda with the campaign having resulted in some highlevel arrests and convictions of previously powerful party officials such as Zhou Yongkang
and Su Rong” (Dewilde, 2017). Dewilde (2017) also indicated that government starts to
target the subsidiary business partners of those CCP party officials. This circumstance has
made foreign companies whose doing business in China face a lot of new political risks. Due
to government policy that encourages joint ventures between foreign investors and local
firms, it is inevitable that foreign companies are also under investigation at the same time
with their local partners.
There are some tax policies that foreign exporters should notice when exporting product to
China. For Value Added Tax (VAT), you can get zero-rate the VAT on honey products if you
are VAT registered and notice within 3 months from the time of sale. For corporate tax,
(https://www.gov.uk/guidance/exporting-to-china#legal-considerations-of-doing-business-inchina)
Value Added Tax (VAT) in China
If you’re VAT registered you can zero-rate the VAT on most goods you export to China. You
will need to get evidence of the export within 3 months from the time of sale.
Corporate tax in China
If you set up an office in China corporate tax will apply. Taxes applicable to a foreigninvested enterprise (FIE) include:
•
enterprise income tax: 25% (rate for SMEs under Chinese law is 20%)
•
business tax: usually 3% or 5%
The EU SME Centre provides information on enterprise income tax in China.
Importation of goods into China can fall into 3 categories: prohibited, restricted and
permitted.
Find the General Administration of Customs of the People’s Republic of China’s (GACC)
listing of prohibited and restricted items.
Chinese customs uses a valuation database that lists the values of various imports based on
international market prices, foreign market prices and domestic prices. Importers’ values are
normally accepted, but if they are out of line with the valuation database there may be a
recalculation.
All service companies obtaining income in China or with consumers located in China are
subject to Chinese taxes, unless exempted expressly by Chinese regulations.
Documentation in China
Goods exported to China must comply with domestic legislation. The documentation needed
by Chinese customs varies according to product.
Certificates of quality, quantity or weight issued by manufacturers or public assessors are
normally required. Certain goods will be inspected on arrival or must be accompanied by
formal certification recognised by the Chinese government
Goods will be returned to the seller if they don’t conform with the certificates after reinspection by the Chinese authorities. In addition, a claim may be lodged for compensation.
2. Economic Factors:
Economic factors are determinants of a certain economy’s performance. Factors include
economic growth, exchange rates, inflation rates, interest rates, disposable income of
consumers and unemployment rates. These factors may have a direct or indirect long term
impact on a company, since it affects the purchasing power of consumers and could possibly
change demand/supply models in the economy. Consequently it also affects the way
companies price their products and services.
https://www.focus-economics.com/countries/china
China Economic Growth
The Chinese economy’s slow-but-steady deceleration will continue in 2018 as policymakers
continue to rebalance the country’s economic model. Tighter regulation in the property
market and stricter environmental regulations will exert downward pressure on growth.
FocusEconomics panelists forecast that the economy will grow 6.4% in 2018, which is
unchanged from last month’s forecast. In 2019, the economy is expected to grow 6.2%.
China Economy Data
2012
2013
2014
2015
2016
Population (million)
1,354 1,361
1,368
1,375
1,383
GDP per capita (USD)
6,333 7,124
7,662
7,948
8,109
GDP (USD bn)
8,575 9,694 10,480 10,925 11,212
Economic Growth (GDP, annual variation in %)
7.9
7.8
7.3
6.9
6.7
Consumption (annual variation in %)
9.1
7.3
7.7
7.5
7.3
Investment (annual variation in %)
20.6
19.6
15.7
10.0
8.1
Industrial Production (annual variation in %)
10.0
9.7
8.3
6.1
6.0
Retail Sales (annual variation in %)
14.3
13.1
12.0
10.7
10.4
4.1
4.1
4.1
4.1
4.0
Unemployment Rate
2012
2013
2014
2015
2016
Fiscal Balance (% of GDP)
-1.6
-1.9
-1.8
-3.4
-3.8
Public Debt (% of GDP)
14.4
14.6
14.9
15.5
16.1
Money (annual variation in %)
13.8
13.6
12.2
13.3
11.3
Inflation Rate (CPI, annual variation in %, eop)
2.5
2.5
1.5
1.6
2.1
Inflation Rate (CPI, annual variation in %)
2.6
2.6
2.0
1.4
2.0
Inflation (PPI, annual variation in %)
-1.7
-1.9
-1.9
-5.2
-1.3
Policy Interest Rate (%)
6.00
6.00
5.60
4.35
4.35
3.2
-6.7
52.9
9.4
-12.3
Exchange Rate (vs USD)
6.23
6.05
6.21
6.49
6.95
Exchange Rate (vs USD, aop)
6.31
6.15
6.16
6.28
6.64
Current Account (% of GDP)
2.5
1.5
2.3
2.8
1.8
Current Account Balance (USD bn)
215
148
236
304
196
Trade Balance (USD billion)
230
258
383
591
510
Exports (USD billion)
2,049 2,209
2,342
2,272
2,097
Imports (USD billion)
1,819 1,952
1,959
1,681
1,587
Stock Market (annual variation in %)
2012
2013
2014
2015
2016
Exports (annual variation in %)
8.0
7.8
6.0
-3.0
-7.7
Imports (annual variation in %)
4.3
7.3
0.4
-14.2
-5.6
3,312 3,821
3,843
3,330
3,011
8.5
13.0
12.7
International Reserves (USD)
External Debt (% of GDP)
8.6
8.9
China’s Economic Policy
Economic growth soared in the last few decades mainly due to the country’s increasing
integration into the global economy and the government’s bold support for economic activity.
However, the successful economic model that lifted hundreds of millions out of poverty and
fueled the country’s astonishing economic and social development has also brought many
challenges. Severe economic imbalances, mounting environmental issues, rising economic
inequality and an aging population are the key questions that the new administration lead by
President Xi Jinping will have to tackle in the near future in order to ensure the country’s
sustainability.
China’s Exchange Rate Policy
The IMF labels China’s exchange rate regime as a crawl-like arrangement. The speed and
direction of the crawling peg is decided by Chinese authorities according to domestic and
international economic developments. The PBOC classifies its regime as a managed floating
exchange rate regime based on market supply and demand with reference to an undisclosed
basket of currencies. The U.S. dollar is likely to represent a large stake of the basket. The
yuan fluctuates in an intraday trading band around an official midpoint rate. On 15 March
2014, the PBOC widened the trading band from +/-1 to +/-2.
From 1995 to 2005, China kept its currency fixed versus the U.S. dollar at around 8.28 CNY
per USD. This was the case until 2005, when it switched to a managed float of the currency
to facilitate a controlled appreciation of the CNY. However, in the wake of the global
financial crisis, China pegged its currency to the USD at 6.82 CNY per USD from June 2008
to June 2010.Since then, the PBOC has made a number of revaluations to the currency in
order to bring it closer to it market value.
While the Chinese yuan is freely convertible under the current account, it remains strictly
regulated in the capital account. Chinese authorities expressed their willingness to allow the
yuan to be fully convertible in the near future.
Chinese authorities are gradually enhancing the use of the currency in other parts of the world
in order to promote the yuan as a global reserve currency. Although the process is far from
being completed, China has already established trade settlements with selected countries and
launched a series of currency swap agreements with more than 20 central banks. In addition,
China is rapidly expanding the yuan’s offshore market. The opening up of the country’s
capital market will be a crucial step in the yuan’s journey to becoming a major reserve
currency.
3. Social Factors
China, which is still a communist society, is undergoing a rapid and substantial social
change. These social changes define the country’s demographic and cultural aspects which
are likely to influence consumer needs and their decisions to buy Piana Miele’s products.
These social factors include the country’s population growth, the age distribution, job market
trends, and employees’ attitude towards work. The social environment provides a very
volatile situation for foreign investors who would wish to invest in the country. Due to
changes in its demographics, most companies are moving to the inland areas where they can
pay less wages (Boontanapibul, 2010). The cultural differences between the western culture
and Chinese culture will affect the company’s operations in China due to the differences in
human thinking and business dealings, especially how the business is to establish business
partners, recruit its employees and earn tenders and market products to consumers.
As the most populated country in the world, China presents a large market for the
company’s products. China’s population is approximately 1.3 billion with more than 50
million of the population living in cities. This urbanization has pushed consumption and has
increased income per person, leading to improved infrastructure and a fast changing culture.
China’s huge population also presents opportunities for accessing a profuse workforce, hence
making it a viable market due to low operating costs. Despite having a high population and
growing economically, China has a high unemployment level which has led to a high income
inequality (OECD, 2012). This poses a challenge to the business since a high percentage of
the population may not be able to purchase the product. However, the project of investing in
China can help minimize the unemployment rate which is currently estimated at 7%, by
providing job opportunities. The company should also consider labor factors. Currently,
China has increased its employment rate, hence the need to consider the company’s ability to
access affordable labor in the Chinese market (Bingqin Li, 2004).
China’s cultural aspects play an important role as most demographics are constantly
changing. Chinese family size, aging population, and social behaviors influence how people
make decisions due to its collective cultured nature. The country has unique social and
religious beliefs which differ from the Western views (Li, 2012). China’s age distribution,
health consciousness, as well as career attitudes differ from westerner’s, and this will directly
impact how the company is to understand the target customers especially what drives them.
Figure 1: Differing social aspects
Social Dimensions
China
Western Culture
Individualism/ Collectivism
Collective
Individualistic
Risks
Risk –avoiding
Risk-taking
Business relationships
Official
Friendly with humor
Culture
Conservative
Liberal
One of the main societal challenges which the business is likely to experience is the
high corruption which persists in the country. This corruption is likely to be experienced in
one way or another, especially expectations for facilitation payments, government and other
officials expecting bribe, and the need to give out expensive gifts in order to establish
business relationships. The business will have to establish a strong ethical framework for
guiding employees in all their business dealings.
In the workplace, the Chinese emphasize on issues such as hard work and
achievement. This is likely to help the business succeed due to the focus on communism
rather than individualism. Due to this culture, the company will be required to focus on the
rank differences when communicating to various stakeholders. Due to the difference in
Chinese culture, individuals prefer face to face communication unlike the western culture
which is mostly done through emails and messaging. Since the Chinese culture is different,
individuals have established a clear demarcation between business and socializing. These two
ought not to be intertwined. The differences in culture might take a long time to establish and
will lead to a long period before Piana Miele is fully established in this market.
4. Technological Factors
China is one of the world technological leaders. The advanced technology impacts
how companies produce, distribute, sell, and market their products in the Chinese market.
The high technological advancement also provides platform for adopting new production
technologies and opportunities for embracing new technology strategies. China has at least
500 million internet users, with most preferring online to over-the-counter shopping. Ecommerce has changed consumers’ shopping habits in China. Most shoppers utilize Taobao
e-commerce website which has boosted online sales within the last few years. Due to these
technological advancements and willingness to purchase products online, Piana Miele can
utilize this platform to sell its products online, leading to lower operational costs. The online
platform would also increase consumers’ convenience, boosting the quantity of sales.
However, there is a huge percentage who are still skeptical due to the risks associated with
online shopping, hence prefer physical and face to face contact when purchasing products
(Liqin Ren, 2010).
China is a market leader in some of the technologies, leading to adoption of various
technologies in production, distribution, and in marketing of products. These new
technologies can increase the company’s competitiveness in the global platform. Some of
these technologies are also labor saving, and this can help mitigate the risk of costly labor (S
Yu, 2014). However, these technological advancements are yet to be fully taped due to the
high control of technology advancements by the government. The Chinese government has
maintained a closer watch of any advancements, since the technology and other business
sectors are highly regulated. For as long as the country upholds its communism political
system, Piana Miele is unlikely to fully enjoy the high technological advancements (Bell,
2015).
5. Environmental Factors
As one of the many countries facing severe environmental challenges, China is
currently very keen on pollution hence the need to adopt an ethical sustainable operations
when carrying out business in China. Along with China’s rapid industrial development has
been very serious negative impacts on the environment as a result of decreasing natural
resources and increasing pollution (Greenbaum, 2016).In 2007, China was ranked as the
largest carbon dioxide emitter. According to WTO report, seven out of the ten most polluted
cities are all in China. Of all China’s 402 cities, at least two thirds of them are severely
polluted. The government has put in place carbon footprint targets (Dayong Hong, 2014).
However, the situation has not subsided since at least 300 million Chinese people drink
contaminated water.
Some of the environmental factors to be considered in choosing location for the
business would include water scarcity especially in the Northern China which also faces
severe pollution responsible of affecting China’s GDP by a 3%. As china focuses on being
environmental friendly, foreign companies are expected to explore Chinese green market and
participate in developing green economy in China. This will require Piana Miele to embrace
low carbon technology, clear energy, and gas emission reductions.
References
Export Entreprises SA. (2017). CHINA: ECONOMIC AND POLITICAL OUTLINE.
Retrieved from Santandertrader: https://en.portal.santandertrade.com/analysemarkets/china/economic-political-outline
Dewilde, C. (2017). The Business-Political Nexus and Chinese Political Risks. Retrieved
from Marketmogul: https://themarketmogul.com/chinese-political-risks/
Boontanapibul, C. (2010). Doing Business in China: Cultural Factors, . knowledge center, 13.
OECD. (2012). China in Focus:Lessons and Challenges. OECD , 148.
Bingqin Li, D. P. (2004). Poverty and Inequality and social Policy in China . Centre for
Analysis of Social Exclusion , 49.
Li, B. (2012). Social welfare and protection for economic growth and social stability —
experience . LSE Research Online , 23.
Liqin Ren, D. Z. (2010). Innovation in China. Emerald Group Publishing Limited, 4.
S Yu, M. E. (2014). Analysis of the Chinese Market for. U.S Department of Energy , 68.
Retrieved from Battelle :
https://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22761.pdf
Bell, D. A. ( 2015). The China Model-Political Meritocracy and the Limits of Democracy.
Princeton University Press .
Greenbaum, D. S. (2016). China’s environment: challenges and solutions. he Ecological
Society of America, 2.
Dayong Hong, C. X. (2014). The Growth of Chinese Environmental Sociology . umd.edu, 14.
(n.d.).
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