STRATEGY FORMULATION & IMPLEMENTATION
S.W.O.T. Analysis For Doing Business In China:
a.)China is considered the most populous market on earth, one that is
virtually untapped by foreigners. China has over 1.2 billion consumers,
with a total land area of 9.6 million square kilometers, next only to Russia
and Canada. Its territory extends over 50 latitudes from north to
south and 62 longitudes from east to west.
b.)A highly skilled labor force is available in China. The labor
force is highly educated and accustomed to working 12-hour days.
A relatively large portion of China’s labor force is college educated.
China has also been the recipient of emerging technological developments.
c.)China has relatively low land and labor cost which makes it an attractive
market. China’s export business has grown considerably in the recent
years due to the low cost of production. China has a very favorable
balance of trade because of this.
d.)China boasts the second largest GDP in the world. From a business
perspective, you could operate in an economy with eight to ten percent
annual growth rate, an expanding middle class, and the potential to the
largest economy in the world in the next 10 years.
a.)Intellectual property laws are poor. This deters most of the
cutting edge technologies from entering. The government hasn’t been
proactive in developing and enforcing piracy. A company’s trade secrets
and patents are virtually unenforceable.
b.)There is several state owned enterprises that are draining the economy.
They are characterized by inefficiency and corruption. Some of the
largest industries, such as telecommunications are state owned, which discourages
c.)Foreign ownership can only be accomplished by equity or joint partnerships.
China discourages wholly owned foreign enterprises. The pervasive
network, referred to as guanxi, is imperative to a firms existence an can
only be accomplished through Chinese citizens. Without the network,
nothing gets done.
d.)The central government role can’t be underestimated as well.
A deal struck at the local level isn’t always safe from changes in policy
and regulation at the central government level. Gifts and donations
are expected for favorable treatment.
e.)China has a weak legal system, especially when it comes to foreign
companies. Contracts aren’t as readily enforceable if the company
is not locally owned. In China a contract is regarded as a historical
document and can change at any time.
a.)China is joining the World Trade Organization. This will give
it a favorable trade status with the other member countries. The
cheaper labor and land rates will bode well for continued trade.
b.)China is encouraging more foreign investment in technology.
China relies heavily on technology transferring, which fosters a technological
business environment. As China continues to become cognizant of the
benefits of foreign investment, it will continue to create an environment
that is conducive for foreign businesses.
c.)With the population that is currently unemployed or working part-time,
China’s labor force should remain relatively cheap for years to come.
Businesses can capitalize on China’s lower cost of production.
a.)A major threat to China’s future viability is the lack of control
over the birth rate. China has inadequate population control program
which threatens the future prosperity of the country. China’s overall
living standards continue to deteriorate due to the uncontrollability of
b.)Another long-term threat to continued rapid economic growth is the
deterioration in the environment, notably air pollution, soil erosion,
and the steady fall of the water table especially in the north. China
continues to lose arable land because of erosion and economic development.
c.)China is also susceptible to the slowing of the world economy.
With the emergence of China’s extremely favorably balance of trade, it
has become increasingly reliant on the export market. As the economy
in the United States continues to falter, which is China’s largest trading
partner, the impact will be felt.
Sources: Deresky, Helen, International Management (Prentice
Hall 2000) p202-209.
China Business Desk: Investments, Representative Offices, www.chinabusinessdesk.com/pages/Investment/structures.html
China Business Desk, www.chinabusinessdesk.com/pages/investments.htmlBusiness
Ethics in China, www.stthom.edu/cbes/oje/articles/xiaohe3.htmlIgnatius,
Adi. “Find Road Bumpy but Have Few Regrets.” Wall Street Journal