China is considered a country with an emerging economy, which provides several opportunities for business to invest (Yin-Wong & Jakob, 2013.p.1). Even though the country has great potential for the economic growth, providing access to the broad market and considerable savings in the labor cost, caution should be considered because of differences, in the political and cultural surrounding which creates more threat and pose uncertainty for the foreign investors (Yin-Wong & Jakob, 2013). For that reason, this paper examines the PESTEL and SWOT factors that might affect positively or negatively children shoe business to be located in China. In addition, the internal and external analysis of key findings will be discussed and an explanation of how they influence the decision-making process.
PESTEL Analysis of the Business
PESTEL analysis is a valuable management tool to assess the macro-environmental factors that might negatively or positively impact children shoes business in China. The PESTEL factors comprise of political, environmental, social, economic, technological and legal considerations (Ethridge, Marsh and Bunn, 2011.p.2). Political factors involve government regulations that can impact the business in the country. In the current days, political riot has occurred in China, and this has created an unstable condition for most of the business. However, the government has taken some strict measures to prevent such situation from occurring to create a conducive environment for the business. Riots can result in instability hence can negatively impact the business in the country by slowing the sales level of the commodity in China (Ethridge, Marsh and Bunn, 2011.p.3).
Economic factors, for the last five years, China economy has experienced significant improvement in their gross domestic product. Some of the critical factors that have contributed towards the economic success include abundant labor and skilled workforce. Any economic development might have the major positive impact on the shoe business (Ethridge, Marsh and Bunn, 2011.p.3). China gross domestic product level is an indication that every citizen is adding more value to the society. As a result, it will impact the shoe business positively by increasing the consumer buying power. On the other hand, there is a high inflation rate in the country that can also slow down the purchasing level in the country due to the increased price of the products,and for that reason negatively impact on the performance of the business (Ethridge, Marsh and Bunn, 2011.p.5).
Social factors are also a crucial to consider especially when expanding the business to another country such as China. Therefore, various social factors plays a vital role because the country population regularly change (Ethridge, Marsh and Bunn, 2011.p.5). For instance, the population growth, together with age distribution fluctuates, and this alters the family size in the country. Such factors mostly influence how decisions are being made concerning the kind of product to be offered in the market. In addition, China is a collectivist culture, and this can positively affect children shoe business especially in relation to how people chose or select where to purchase a commodity (Ethridge, Marsh, and Bunn, 2011.p.5)
Technological factors, China is considered to be a country that has developed as a result of innovation and improved technology. The new business can adapt to new purchasing mechanism using intranet and extranet to attract more customer to the market (Ethridge, Marsh, and Bunn, 2011.P.3). Although, a key technological problem in China is the improvement of the B2C industry that does not have a protected and sure payment system which can negatively impact the business especially how customers pay for the products. Due to changing technology, particularly in the Chinese market, the business will be adversely affected as they will be required to adopt or change how they conduct business in the country.
Legal factors, as a way of encouraging foreign investment in China, the government has continuously established a relative law system. For instance, the Interim Provisions for Guiding Foreign Investment; that will guide business being conducted in the country. Also, it will protect children shoe business from exploitation. These offer legal bases from which to warrant the autonomous operation rights for business and safeguard the legal rights and interest of both the domestic and international investors. It will positively influence the business since their operations will be protected in the country (Ethridge, Marsh and Bunn, 2011.p.8).
Environmental factors, there is a high growing demand for ecologically friendly products in China. This will positively affect the environment in which the business is being conducted. Introduction of children shoes business and importing products that are environmentally friendly will be crucial for the business. High pollution is also another critical factor that can affect the operations of the business within the country (Ethridge, Marsh and Bunn, 2011.p.11). It is one of the significant challenges for most industries within China. For that reason, the government has taken strict measures to ensure business does not contribute towards the unsafe environment in China. Water scarcity in the country is another critical factor which can adversely impact the operations of the business in ensuring the clean environment where the business will be located.
The PESTLE chart below summarize the findings concerning the business
Political
Economic
Socio-cultural
1
Increasing political instability in the country
High inflation rate
Constantly changing population
2
Cheap labour
Collectivist culture
3
Skilled workforce
High population
Technological
Legal
Environmental
1
Changing technology in use of payment systems
Laws on investment in the country
High demand of ecologically-friendly products
High population
2
Water Scarcity
SWOT Analysis
China is considered a protected country for most of the investors with a global dream to conquer international markets. SWOT analysis assists in determining some of the key areas the business need to improve and some risk the company might experience in China. Providing quality good in the market is regarded as one of the strength for the business in the industry since it will be able to attract more potential customers. The existence of cheap labor in the country acts as one of the strengths for the business because they will be able to distribute their products easily. In the China market, there is skilled and cheap labor, which helps in reducing the price of the finished products in the country (Hill, 2012). For that reason, the children shoe business will find the easiest way to import products within the country. It can be interlinked to economic factors especially in contributing towards improvement in the gross domestic product of the Chinese economy. This influences the decision-making about obtaining resources and how quality is the materials to be used in expanding the business. The business will be able to sustain its growth in the market, establish or penetrate the new market easily. Effective utilization of cheap labor will also be beneficial to the business because they will deploy the labor to make sure the business can easily adjust and compete in the market (Hill, 2012.p.3).
Weaknesses, as the business expands to China, some of the challenges it will experience is the inadequate protection of the intellectual property in the country. The Chinese corporate governance is considered weak and regarded to be non-transparent. This poses a more risk especially for the new investors in the country (Ethridge, Marsh and Bunn, 2011.p.12). In addition, the political system of the country is unstable and cannot adequately respond to the changes within the society. This interrelates with political factors as it negatively influences the purchasing power among customers within the country. Another weakness that might negatively affect the business and relate to social factors involves the consumer buying pattern in the country. China, as a country, most of the people focuses in purchasing product from well-established companies, and this can influence the business because it is yet to establish itself in the country and as a result not easier to determine the number of consumers to purchase children shoes. Therefore, such factors can influence decision making by the business acting aggressively towards most of its competitors to divert their focus from the defect (Ethridge, Marsh and Bunn, 2011.p.8).
Opportunities, technology plays a significant role in making sure the business flourishes in the country. This poses a major opportunity for the business since they can quickly improve their service delivery in the country. Accordingly, as the internet penetration continues to grow in the country, the idea of online sales is considered to be one retail channel especially in the footwear industry (Ethridge, Marsh and Bunn, 2011.P.3). The online sales in China take two forms, first is the one established as self- operated interconnection, whereas the other one is making use of the B2C electronic business platforms such as Taoxie.com that will enable the business to compete well in the market compared to other competitors. Also, the business can enhance on its payment system and ensure customers can easily purchase and pay for the services in an effective way. The potential opportunities can impact decision positively by the business identifying and overlooking the market segmentation, advancing regarding technology with the key aim of attracting more customers into the newly established business (Ethridge, Marsh, and Bunn, 2011.P.12).
The threat, some of the key issues that can act as a threat to the business is government protection of the domestic enterprises as well as the market. For the foreign business, it is challenging to deal with such matters since they are not adequately protected in the country. This can cause a threat to the market in a way that it might be closed down if it does not follow the required legal requirement of conducting business in the country (Ethridge, Marsh and Bunn, 2011.P.3). Another threat is fierce competition in the country regarding children shoe business. There are several favorite shoes manufacturing companies in the country such as Fujian footwear industry that solely distributes sporting shoes in the industry. The firm will pose a significant challenge to the new business because their brand is well known in the market compared to the business to be introduced. Hence, it is challenging to take up a place among the big and famous companies. As a way of attracting more customers to their business, the expanding business will have to establish its brand within the country. Stiff competition in the China market can positively affect decision making particularly in expanding the business in the country. For instance, the business will have to put in place some strategies in place to improve on their services in the country (Ethridge, Marsh, and Bunn, 2011.P.3)
Generally, in relation to the SWOT analysis, it illustrates better opportunities as well as many chances for the Children shoes business to enter into the Chinese market even though there are some few challenges within the market. For that reason, it will be much better for the business to make good use of various opportunities available for the business to grow in the country.
The below table summarize SWOT analysis from the business
Strengths
Opportunities
Cheap labour
Quality products
Internet penetration as a result of new technology
Business to adopt new payment methods for the customers
Weaknesses
Threats
Poor protection of the intellectual property
Consumer buying pattern
Non-protection of non-local business by the government
High competition
References
Ethridge, Jack R.; Marsh, Treba; and Bunn, Esther, "Environmental Risks: Doing Business in China" (2011). Faculty Publications. Paper 9. http://scholarworks.sfasu.edu/accounting_facultypubs/9
Hill, C & Jones, G. (2012). Strategic Management: An Integrated Approach (10 ed.). Mason, Ohio: Cengage Learning
Yin-Wong Cheung & Jakob de Haan (2013). The Evolving Role of China in the Global Economy. Cambridge: MIT Press
