Sustainable World Company International Expansion Plan

Sustainable World Company International Expansion Plan

International Expansion into China

The business might expand to China in 2023 to increase its market share and profit margin. The reason for expanding to China is that the country has good growth prospects because the footwear market in the country is expected to generate $80.9 billion by 2026. The clothes CAGR in China is also expected to settle at 14.1% in China by 2022. China is also a suitable market for our company’s international expansion because it has favorable regulatory initiatives relating to national exercise programs and fitness. This is in addition to rapid urbanization, global sporting events regularly held in the country, and increasing participation in recreational activities.

Current political, economic, sociocultural, technological, and stage of China’s development

The tradition and culture of China have a significant impact on the Chinese economy due to the country’s ‘Great Power.’ However, economic development has been uneven due to different region-based preferential policies and the impacts of geography (Arestis et al., 2021). This has resulted in a large wealth disparity between inland and coastal regions and various rural areas and cities. Foreign investment continues to be an important part of China’s economic development by expanding to lucrative global markets and welcoming foreign investors to expand trade and create jobs in the country. However, the Chinese economy is being affected by global financial issues, particularly the recent economic conditions of technological expansion, trade, tariffs, and the COVID-19 pandemic. The country has also been experiencing rapid technological advancement, including the 2019 launch of the 5G network.

China Infrastructure

China has the best infrastructure in the world, including thousands of miles of railways and roads. The country has metro services in 34 cities with network coverage of more than 4,500 kilometers. The country also has more than 1 kilometer of highway and a road network of more than 4 kilometers (HSBC, 2021). The rail system is also more than 130,000 kilometers. Most goods in the country are transported by rail due to the efficiency of high-speed rail cuts distributed in different parts of the country. The rails connect dense urban areas with other cities, creating a more balanced distribution of goods and labor.

Population income and literacy levels

The literacy levels in China are 96.8%, based on the number of people aged between 15 years and above who can write and read (China: Literacy rate, 2021). The living standards in the country have significantly improved over the past 20 years, but the income gap between urban and rural households is still large. In 2020, the annual per capita disposable income was approximately 17,131 yuan in rural households and roughly one-third of the urban household’s income (China: Per capita disposable income of rural and urban households 2020, 2021).

Potential risks arising from doing business in China

Companies doing business in China may face various risks, such as misappropriation of assets, fraudulent reporting, and lack of integrity in management. Relationships are important, and businesses are expected to form relationships with investors, government bodies, staff, and business partners. The market environment in the country is completely detached from most other global economies, making it difficult to establish a large market share in the country. The consumer environment in the country is also diverse therefore requiring businesses to adopt differentiation strategies. China also has complicated regulations characterized by bureaucracy, thus making it hard for foreign investors to acquire the necessary permits and licenses. Foreign investors must also adhere to the country’s language, whereby product specifications must be written in Chinese. China is also one of the countries with a high level of counterfeiting, making it hard for foreign companies to grow.

Skills and strategies necessary to minimize risks

One of the strategies that will be adapted to minimize the risks is hiring some employees from the Chinese community to guide employees from other cultures on what to do to adhere to Chinese culture and regulations. Another strategy will be partnering with small businesses in the country to make it easier to acquire the permits and licenses required to start operating in the country. Relationships will be closely monitored to ensure that they do not create conflicts of interest that may affect business operations and result in corrupt practices. Another strategy that will be adapted is differentiating products to meet customers’ diverse needs. The company’s staff will also be trained in Chinese culture to ensure that they interact with customers and other Chinese staff to maintain a collaborative business environment and encourage the sharing of information among employees and customers to facilitate business growth and productivity. Interpersonal skills and cultural competence are also required to interact with business partners in the country. All products will be inspected to ensure that the specifications are written in Chinese and include a translation in English. All products will also have the company’s logo and brand name to minimize the risk of counterfeiting.

Market entry strategy to access the overseas market

The company will use strategic alliances to expand to the Chinese market. According to Das (2019), this strategy includes forming a partnership with another company in the host country to achieve strategically important objectives that are mutually beneficial. Therefore, the company will partner with small local retailers who want to increase their customer base by selling unique products. We will be supplying them with the products to sell and collaborating with them in marketing to create awareness of the existence of the products in the market. We will also partner with local designers who want to venture into the fashion industry but do not have the capital to purchase raw materials such as the required fabric. The designers will be allowed to create various designs and market them under the company’s brand to increase their exposure to potential customers.

References

Arestis, P., Karagiannis, N., & Lee, S. (2021). The economic growth of China: Enabling politico-institutional and socio-cultural factors. Review of Evolutionary Political Economy, 2(2), 339-358. https://doi.org/10.1007/s43253-021-00046-3

China: Literacy rate. (2021, May 25). Statista. https://www.statista.com/statistics/271336/literacy-in-china/

China: Per capita disposable income of rural and urban households 2020. (2021, January 18). Statista. https://www.statista.com/statistics/259451/annual-per-capita-disposable-income-of-rural-and-urban-households-in-china/

Das, T. (2019). Strategic alliances. Management. https://doi.org/10.1093/obo/9780199846740-0157

HSBC. (2021). China’s infrastructure builds Foundation for growth. Global Banking and Markets | HSBC. https://www.gbm.hsbc.com/insights/global-research/china-infrastructure-builds-foundation-for-growth

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Frequently, there comes a time when the business needs or wants to push into new overseas markets. Possible reasons include cost-cutting to sustain or improve domestic profits or market expansion to increase revenue.  Planning for international business entails much of the same research as for a domestic business but has increased complexity and risk due to different political, economic, legal, social, and cultural considerations. This section of the plan should

Sustainable World Company International Expansion Plan

• be two to three pages
• clearly identify the country (countries) into which the business might expand and the reasons for international expansion
• outline the current political, economic, sociocultural, technological, and stage of the country’s development
• consider the infrastructure of the country
• detail population income and literacy levels
• identify any potential risks arising from doing business in the selected country, including language, culture, trade barriers, and fluctuating exchange rates
• describe the skills and strategies necessary to overcome or minimize the risks
• identify the market entry strategy the business will use to access the overseas market