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A

Project

On

COUNTRY ANALYSIS OF CHINA

Presented to

PROF. PREETI SALVI

S.V.Institute of Management, Kadi

Hemchandracharya North Gujarat University,


Patan

Prepared By:

PRIYANK SHAH
DHIMANT VYAS
SHRUTI VELANI
SACHIN NANDHA
MRUNAL VAZA
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PREFACE

As the part of the syllabus of MBA program in Sem-IV, We are assigned


some practical and theoretical work in the partial fulfillment of the segments
for the country analysis”, we have selected china to support our study.

In today’s era it is very necessary to keep our surroundings as well as


ourselves to be updated by the latest happenings, especially when we are
going to be future MBA’s .Keeping the same thing in mind, we have
decided to do country analysis of china. The same procedure is being
implied to every of the student with us. Such country analysis of a particular
country makes us aware of the same in the fullest. Generally students select
the country in which they are interested or they are able to get the maximum
information on that industry.

Really this project enhanced our knowledge regarding country analysis


substantially. This project will really helpful us in future also as if include
almost each and every kind of data in it.

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ACKNOWLEDGEMENT

To make any such in – depth macro level project without the help of
anybody is not at all possible. Moreover teamwork is more beneficial than
the isolation. In other words there are so many external people who directly
or indirectly help us in out project.

First of all we are very grateful to, Prof. Preeti Salvi, for their guidance
whenever we called for. We have always been welcomed with very pleasant
smile and full co-operation by her.

Working on the project is hard, need hard work and concentration but we
made it possible with the support which we had received from those around
us. We thankful to all the faculties of our college for giving us guidance
encouragement and right path to work on it. We thank everybody who has
directly or indirectly helped us in this project to make it successful. Grateful
to the whole staff of S.V.Instititute Of Management, as they co-operate us in
preparation of our project and keep the lab open as per our convince.

PRIYANK SHAH
DHIMANT VYAS
SHRUTI VELANI
SACHIN NANDHA
MRUNAL VAZA

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TABLE OF CONTENT

 Map of China
 Histry
 Some basic Information
 Geographical factors
 Political factors
 Economic factors
 Socio-culture factors
 Reason for selection the country
 Product to be export in China
 STP
 Pricing Stratergy
 Distribution Strategy
 Promotional Management and Advertising
 Conclusion

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TOPOGRAPHY: With a broad area, China's topography is very complex. The
outline descends step by step from the west to the east. Mountains and hilly land
take up 65 percent of the total area. There are five main mountain ranges. Seven
mountain peaks are higher than 8,000 meters above sea level. The Bohai Sea, East
China Sea, Yellow Sea and South China Sea embrace the east and southeast coast.

RIVERS: China has 50,000 rivers each covering a catchment area of more than
100 square kilometers, and 1,500 of them cover a catchment area exceeding 1,000
square kilometers. Most of them flow from west to east to empty into the Pacific
Ocean. Main rivers include the Yangtze (Changjiang), Yellow (Huanghe),
Heilong, Pearl, Liaohe, Haihe, Qiangtang and Lancang. The Yangtze of 6,300
kilometers is the longest river in China. The second longest Yellow River is 5,464
kilometers. The Grand Canal from Hangzhou to Beijing is a great water project in
ancient China. It is of 1,794 kilometers, making it the longest canal in the world.

LAND FORMATION: Mountains 33%; Plateaux 26%; Basins 18.8%; Plains 12%;
Hills 9.9%.

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China is gold mine because the country needs 1000 sets of engines a year &
must hold more than $100bn on power generating equipment. GE opened a
service center in seventeen Chinese cities and also making office in Beijing

Ranking of risk of different countries:

Source : PERC’s Asian risk Prospectus for year 2009

on the basis of political & legal, economic, social-cultural factors Analysis


china rank 5.5 to 5.6 risk out of 10 in year 2007-2008 & 08-09respectively.
How it comes we will see in analysis of one by one factor.

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History

 Optimum war and the decline of the Qing Dynasty (1839-1900):


By 1900, the Ging dynasty had grown weak having been
influenced by western power like Britain, France, Japan. it was only a
matter of time before Chinese people called revolution.

 Early years of the Republic:


It is a time between1912 to 1928. At that time government was
established. china continued to be suppressed by western power. Two
forces across during this time that would change the history that is the
communist party and the national party.

 War against Japan and World War II (1937-1945):


Between1937 to 1945 there is a war against japan and also world
war-II is there. But despite of this bloodshed, china would find itself
amidsta civil war.

 Civil War (1945-1949):


The inevitability finally took place in 1945. China’s divided
government could no longer bear the strain of differences running
through the core of the national & communist ideology. With the help of
the people, the communists would win & a new era would lay ahead.

 Early years of People’s Republic of China:


It is a time period between1949 to 1966. After the establishment
of PRC (People’s Republic of china), china went forward in the plan to
create the perfect socialist society. Although the people welcomed
communism in the beginning, it would soon tear their country apart once
again.

 Reforms of Economy:
It is a time period between1976 to 1997. After the Cultural
Revolution, Deng Xiaoping returned and began to reform china’s
rundown economy. He brought china back from the dead so to speak.
But, many human right issues still plagued the country.

 Present:
Today china still has many problems to sort over. In 1997 Hong
Kong was returned to china. new talk of freedom is now taking place.
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Some basic information

 Official Name: People’s Republic of China.

 China is a Geocentricity:
It means they might be thought of denationalization and they
consider the whole world as target market rather than one nation.

 Capital City : Beijing

 Major Cities : Shanghai,Guangzhou, shenzhen, Tiamzin

 Official Language : Mandarin Chinese, Other Major Language like


Cantonese, Fuzhou, Shanghaiese

 Currency :Renminbi (RMB),it means “People’s Currency” one, two,


five, ten, fifty and a hundred Yuan; one, two and five Jiao; and one,
two and five Fen.

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GEOGRAPHICAL FACTORS:

If we see the geographical location of china in map than it is surrounded by


North Corea, Japan, Vietnam etc.

 Natural Hazards : There are frequent typhoons, damaging floods,


tsunamis, earthquakes, droughts, land subsidence etc occurs. so there
is a high risk of natural calamities over there.

 Climate : If we talk about the climate of china than it is extremely


diverse, hot in south to cold in north.

 Mountains and hilly land take up 65 percent of the total area. so most
of the area of china are covered by mountains.

 Area = total: 9,596,960 sq km


land: 9,326,410 sq km
water: 270,550 sq km

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 Coastline :14500 Km

 China is World’s fourth largest country after Russia,canada,US.

Which Provinces of China to Invest in /Trade


with?

Area POSITIVE FACTORS NEGATIVE


FACTORS
1. Coastal Area Economically Prosperous. Highly Competitive
Market.
2. Inner China Potential for Future Lack development,
Investment and Trade Poor.
3. Border Close proximity with Limited Market
Provinces Thailand
Interested in Trade and
Investment with Thailand.
4. North Eastern New Markets with Far Proximity from
Provinces Potential. Thailand.

If we see in the table than china is divided into four areas. in that the coastal
area is economically prosperous area but due to economic prosperity there is
a highly competitive market is there. Inner china having potential for future
investment and trade but the problem is lack of development. Broader
provinces area having close proximity with Thailand and interested in
investment and trade with Thailand but the problem is that it is limited to
Thailand only.

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Political System:

 China is communist country.


 Chinese communist parties (CCP) and eight registered small parties.
In china holds that all resources should be owned and shared by all the
people not by profit seeking enterprises for the benefit of the society.
In china government controls all the productive resources and
industries and as a result the government determine jobs, production,
price, Education etc They emphasis on human welfare. Because profit
making is not the government’s main objective.

 Political pressure group and leaders


 China democracy Party
 No substantial political opposition group exists

 Cabinet : State Council appointed by the National People's Congress


(NPC)
 Elections: In China president and vice president elected by the
National people.

 People's Congress for five-year terms; elections last held 15-17 March
2008; premier nominated by the president, confirmed by the National
People's Congress.

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Legal System

 China’s legal system is based on civil law system; derived from


Soviet and continental civil code legal principles; legislature retains
power to interpret statutes. In this system, the main rules are
embodied in legislative codes. Every circumstance is clearly spelled
out to indicate what is legal and what is not. There is also a strict and
literal interpretation of the law under this system.

 Judicial Branch : Supreme People's Court (judges appointed by the


National People's Congress); Local People's Courts (comprise higher,
intermediate, and basic courts); Special People's Courts (primarily
military, maritime, railway transportation, and forestry courts)

Intellectual Property Rights:

The problem of getting patent granted is often difficult in many


communist countries and less developed countries because patent law do not
exist or are ignored.

 China did not enact its first patent laws until 1984
 Items like computer software, animal, plants, food, beverages, atomic
energy related innovations, chemicals, pharmaceuticals are not
included in patent law
 Process of filing for patent – First to File system is adopted. here
patent is granted even if innovation was actually found by someone
else. Patent publication is will be published eighteen month after
filling.
 According to business software alliance 95% of computer software
used in china is illegal copies. Software companies are making a loss
of $400mn every year.

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Political risk

 Confiscation Risk:
It is a process of Government taking ownership without giving any
kind of compensation like in case of coke. Chinese government
take the American property after the Chinese communists take
place in 1949.

 Operational Risk:
here Chinese government constrain the company’s business
operation in all areas including operation, marketing and finance. For
example direct marketing is not allowed in china.

 Political instability:
Company should identify & evaluate the indicator of political
difficulty.

 Social unrest: China is modernizing economy does not fully


embrace open economy which is liable to encourage
disseminations among the various groups for the sake of its
own survival. Co operative society may have to obstruct the
dissemination of new idea and neutralize an external group that
forces a threat.

 Policies of host government: In china production of illegal


compact disk has greater increased. The factories making
counterfeit products are able to operate freely because of their
political contacts.

 Attitude of nations: The product of a multinational company is


accepted or not is depend on the attitude of the nation towards
the multinational companies.

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Bribery and Corruption

• Top 7 Rankings
• 1. Nigeria
• 2. Pakistan
• 3. Kenya
• 4. Bangladesh
• 5. China
• 6. Cameroon
• 7. Venezuela
• Bottom 7 Rankings
• 45. Australia
• 46. Netherlands
• 47. Switzerland
• 48. Singapore
• 49. Norway
• 50. Canada
• 51. Finland

If we see above than the China ranks fifth in Bribery and corruption. so
from that we can come to know that the political risk and business risk is
very much high in china.

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Minimize the political Risk
It is impossible to eliminate the political risk but it cane minimized. Here are
some ways to minimize the political risk.
 Stimulation of the local economy:
Company can link its business activities with the host countries
national economic maters. Company can involve the company’s purchases
local products and raw materials for its production and operation. For e.g.
Coke purchase raw material & labor from local market.

 Sharing Ownership:
Instead of keeping complete ownership for itself a company should try to
share ownership with others especially with local companies. Like
company convert from private to public or from foreign to local
company. For e.g. Cathay Pecific sell a new public issue to allow
Chinese investors for invest

 Being civic minded: A good idea is to assist in building schools,


hospitals, roads because such projects benefits the host country as well as
the company. For e.g. In china H.G. Heinz spent 94000$ for infant
Nutrition studies

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Trade Barriers

 Distribution channel takes longer time to reach the product in the


hand if customer:
Overseas distribution channel often has to be longer than desired
because of government regulations, a foreign company may find it necessary
also through a local agent in china foreign firms can not wholly on retail
outlets and they can not engage in wholesaling activities.
 Banned on direct selling: In china direct selling is not allowed so due to
that a company can not go for that it has to choose any other media for
advertising. for e.g. in case of Amway

• Reason:
– Fear of Grey Marketing and fake goods
– criminals have used direct marketing to spread heretical
religion and start secret societies;
– Anti social activity
– Fraud and corruption
 Foreign firm can not wholly own retail outlets and can not engage in
wholesale activities. so due to that all multi national company has to tie
up with the local firms.
 Newspaper is controlled by govt. and is used for propaganda. In china
news papers tend to carry news items that government wants to express
and carry social values.

Examples:
• Canon Inc., for example, has historically had to use its Hong Kong
office as the primary sales arm in servicing China because of
regulatory constraints on mainland sales and distribution.
• One option is to emulate the Chinese practice of building dedicated
distribution networks that can be used to smooth the supply chain, get
closer to customers and gain better control of marketing and
communications through to the point of sale.
• Kodak has been a pioneer. In 1998, it negotiated a deal with the
Chinese government to take over three large state-owned enterprises
in the photographic industry and integrate them with Kodak's existing
operations into a holding company.

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Trade benefit:

China is having benefit of SEZ. so due to that the trade become easy.

 SEZ for manufacturing, banking, exporting, importing, foreign


investment.
 Provide more liberal environment: Due to SEZ a company can
get the benefit of more liberal environment as it is totally
organized.
 Company enjoy considerable administration autonomy and
offer numerous activities
 Co. get advantage of lower production cost, reduce both duties,
freight charges
 International organization & Participation
 ADB,APEC,APT,G24,ASEAN,IMF,WTO,WHO,UNESCO,SA
ARC, BIS.
China is having participation with different organization. So if one
company is doing business in china than ultimately it can get the
benefit of these all above organization participation.

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ECONOMIC FACTORS:
Before few years company going to china faces lot of problem due to
communist government, and there was a fear of confiscation that
government may take over a control over your business and may ask you to
leave the country and can have control your business and your investment.
But after that the was a tremendous change in the political system of china
and it open the market for the foreign companies to invest in their country
and for that it gives may benefits to those foreign companies and due to that
many foreign companies are attracted to invest in china and to take the
benefit of cheaper source of production like labor, natural resources and lot
of government support.
• Market oriented economy : Due L.P.G in china it gives it’s a
tremendous benefit to those who are operating in china and or wants
to operates in china because of its cheaper source of production and
due to that many labor intensive companies had made china as a
production hub. And even due to large population in china many
companies established in china and they are earning by satisfying the
local demand.

• Chinese government faces numerous economic development


challenges like:

 Sustaining adequate job growth for tens of millions of migrants:


The main problem in china is that the rural market is not
developing with the same pace as the urban areas of china and
due to that migration level is very high in china, so the main
problem for the government is to give support to those migrant
and to give them employment and this is the main reason that
labor is available at cheaper rate and due to that manufacturing
companies are very much attracted to work in china and to
make investment in china.

 New entrants to the work force: Now due to increase population


literate people are also increasing and due to that workforce
also increase but due to control of government on population
there is a one child policy and due to that slowly the young
working population is also increasing.

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 Workers laid off from state-owned enterprises: Now because of
privatization in china and reduce in number of public
corporation due to that laid off is increases in china and the
labor laws are not that powerful and by this labor exploitation
in china increases this one of the reason that why the labor is
cheap in china and it is helpful to labor intensive industries are
increases that manufacturing companies are more attracted.

 Reducing corruption and other economic crimes: The main


problem the Chinese government is facing is the problem of
high level of corruption is there and which is disturbing the
economy and environment badly. And by these the high
polluted companies are also given permission to set-up and
which affect the environment badly which creates
environmental damage and social strife related to the economy's
rapid transformation.

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TAX SYSTEM:
VAT applies to enterprises engaged in importation, production,
distribution or retailing activities.
• The general VAT rate is 17% but necessities, such as agricultural and
utility items, are taxed at 13%. And it is beneficial to the companies
which are generally producing agriculture related products and the
daily necessary products

• Custom duty of 25%.generally for all the product the custom duty is
less as compare to India and so it even cheaper to import the products
to china and due to that it also gives benefit to companies to earn good
profit, and the companies who are export oriented units the
government provides special tax exemption and also provide s.e.z area
for the exporting from china which is more attracting the multi-
national companies and due that the cost of production is very less in
china.

• Tariffs for ASEAN countries is 5.8% from 9.9%: Even special tariffs
are there for the ASEAN countries in china and due to that many
Indian companies have set up their plants and offices in china and it is
also beneficial to other Asian countries.

• And even the government gives special concession to the companies if


they invest 40% of their earnings in china only, by this china will get
good amount of investment as well as the companies will get several
tax reliefs.

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GDP (purchasing power parity) (Billion $):

Even the GDP of china is increasing and is high as compare to other


developing countries like India whose GDP is around a trillion dollar only so
we can say that the growth of china is higher as compare to other countries
and even domestic demand is increasing due to increase in living standard
and increase in income of the people.

GDP growth in (%).

Even the GDP in % also increasing though there is a recession in the world
it has been very less affected in year 2008 and constant growth is there,
though as compare to other last year it is less but it is higher that India which

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is around 6-7% and due to that more and more companies are attracted to
invest in china and will be attracted after the recession period is over.

GDP Composition by sector

GDP is compose of 3 factor that is agriculture is contributing 11% to GDP,


while service sector contribute 40%, and industry contribute 49%,
manufacturing is high because of cheaper source of production factors in
china but service sector and agriculture sectors are providing less as compare
to Brazil and India respectively so there I a chance for the service and
agriculture oriented units china.

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But the Chinese GDP if compare to developed countries like America it is ¼
of that country but it is growing very fast and slowly and steadily increasing
and it is a good sign for china but fear for America because more and more
companies are attracted to work in china because of its image of low cost of
production and changes in demographic factor like increase in living
standard and increase in disposable of people of china.

Industrial production growth rate (%)

Due to many manufacturing are setting up their plant in china and already
established in china the industrial increasing except 2007-08, because of the
manufacturing plants are being set up from the companies established in
developed countries and most of them are badly affect by the global
recession but these companies comes out of the effect of inflation they start
again to invest in china.

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Share of global manufacturing output:

Due to cheaper cost of production more and more manufacturing units are
setting up their plants in china due to this their over cost of production also
reduces and now most of the multinational companies want to make china as
their manufacturing hub and china slowly eating the share of manufacturing
output of developed countries like Japan and America.

Inflation Rate:

Even since the last few years inflation in china is under control which is
around 2.15% average so that we can say that there are very chance of
demand and supply gap in china because of the large scale production it is
use to satisfy the local demand as well as feeling the international demand of
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several countries many countries are directly or in directly depended on
china.

Balance of payment:

Even since many years the current account is in surplus it is there due to
large scale production and exports to other countries and due to that its
foreign exchange reserves are also increasing and due more and more
companies are investing in china its FII’s and FDI is also increasing which
directly affect the balance of payment of china and due to these reasons
current account balance is in surplus.

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Currency appreciation:

The local currency is appreciating since few years which shows the sign of
increase in exports to other countries and due to that many companies are
setting up their plant in china so that they can easily sell to other countries at
very cheaper rate as compare to their competitors in that particular countries,
because people will try to buy the product which is cheaper and qualitative
with quantative products. And due to that many Indian companies are setting
their units in china and exporting in India.

Gold Reserve:

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Even the gold reserve is also increasing with china which is a good sign for
any country because it shows that china is now becoming self dependent and
now require less help from the developed country and it happen due to
several favorable policy of Chinese government.

FDI (MN USD):

Due its liberalized policy investment from the foreign countries is increasing
in the form of FDI that is the companies are investing in setting up a
Greenfield units or investing in domestic companies this had happen due to
several tax relief policies as well as low cost of production more and more
companies are investing in china and these are the reason why FDI in china
is increasing.

FDI and MNC:

• China has absorbed huge amount of foreign investments.


• Billions of dollars and 350,000 foreign-invested enterprises
• Between them, McDonald's and Kentucky Fried Chicken have almost
700 branches.
• Kodak has half of the market for film and photographic paper, with
Fuji holding most of the rest.
• Procter & Gamble is the biggest seller of shampoo, while foreign
manufacturers, led by Motorola, Ericsson and Nokia, have 95% of the
market for mobile phones, the world's biggest market in terms of
handset sales.
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• Coca-Cola says that China is about to become its biggest Asian
market. Some estimates put foreign involvement at about one-tenth of
the whole economy.
• In China, annual exports are equivalent to at least 23% of GDP,
making China the world's ninth-largest exporter.

Investment Opportunity:

• Negotiation with Govt. to get tax benefit: Even the MNC can bargain
with the local government and can get more tax benefits by accepting
certain norms of the Chinese government.
• High no. of SEZ and Protected zones are Established: Due to more no
of SEZ and protected zones export oriented units are attracting
because in these zones they get good infrastructure facilities and
several tax holidays which will reduce their cost of production and
profitability will increases.
• Priority sectors include transportation, communications, energy,
metallurgy, construction materials, machinery, chemicals,
pharmaceuticals, medical equipment, environmental protection and
electronics.
• China encourages reinvestment of profits. A foreign investor may
obtain a refund of 40 percent of taxes paid on its share of income, if
the profit is reinvested in China for at least five years.
• Where profits are reinvested in high-technology or export-oriented
enterprises, the foreign investor may receive a full refund. Many
foreign companies invested in China have adopted a strategic plan
which requires reinvestment of profits for growth and expansion.

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Labor Force (mn):

Due more labor in china it is quit cheaper as compare to other countries like
India and even due to increase in literate labor production of the company is
cheaper and even quality is maintained due to literate labor and even capital
intensive firms are also increasing in china which are technology based.

External Debt:

And due to lot of investment and increase in foreign exchange external debt
on the country reduce tremendously and due to that current account become
surplus and by this there is less burden on the local public and their
consumption also increases due to this.

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Attitude towards Foreign Banks:

• Fully opened for foreign bank: Now the government gave permission
to set up the foreign banks and due to this transaction of the multi-
national companies became easy and fund can transfer easily.
• Access its RMB retail business and lifts all geographic and client
constraints: Even the government gave permission to access to local
currency and local transaction.
• Also allows subsidiary and branches of foreign banks.

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Socio Culture Environment:
Culture plays a significant role in influencing consumer’s perception, which
in turn influences their preference and purchase. A marketing mix is
effective as long as it is relevant to their culture. According to culture a
company must modified their product.

 Great wall, Grand Canal, Karez irrigation system is the symbol of rich
culture which build 2000 years ago.

 Culture is socially shared:

In china culture is socially shared.

 Girl children must have small feet:

The preference of wanting their girl children to have small feet. Large
feet viewed as lower class people. So that parents from upper class bound
daughter’s feet tightly.

 Lack of shared common culture common values:


In china due to lack of shared common cultural values,
standardized advertisement may have difficulty in communicating with
customers. So due to that advertising and sales promotion require special
attention.

 Culture is enduring:
In most Asian countries also in china culture is enduring.
Culture is shared and passed along from generation to generation. Old
habits are hard to break. People tend to maintain their own heritage.
That’s why India and China are over crowding. In past china views large
family are blessing and assume that children will take care of parents
when grown. Old but modern Chinese government make compulsory of
one child per family. It’s result in numerous death of first born daughter.

 Chinese do not consume beef at all:


Influence of culture on consumption pattern. Living style and
priority of needs are dictated by culture. Chinese do not consume beef at
all. They believed that it is improper to eat caftan that work on ferns.
Asian consumer prefer their chicken boiled rather than fried.

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Classes of Population

The People's Republic of China is a unified, multi-national country,


comprising 56 nationalities. The Han people make up 91.02 percent of the total
population, leaving 8.98 percent for the other 55 ethnic minorities. They are
Mongolian, Hui, Tibetan, Uygur, Miao, Yi, Zhuang, Bouyei, Korean, Manchu,
Dong, Yao, Bai, Tujia, Hani, Kazak, Dai, Li, Lisu, Va, She, Gaoshan, Lahu,
Shui, Dongxiang, Naxi, Jingpo, Kirgiz, Tu, Daur, Mulam, Qiang, Blang, Salar,
Maonan, Gelo, Xibe, Achang, Pumi, Tajik, Nu, Ozbek, Russian, Ewenki,
Benglong, Bonan, Yugur, Jing, Tatar, Drung, Oroqen, Hezhen, Moinba, Lhoba
and Gelo. All nationalities in China are equal according to the law. The State
protects their lawful rights and interests and promotes equality, unity and
mutual help among them.

Age structure
The age structure of China:

0-14 years: 20.4% (male 143,527,634/female 126,607,344)


15-64 years: 71.7% (male 487,079,770/female 460,596,384)
65 years and over: 7.9% (male 49,683,856/female 54,356,900)(2007est)

• Looking to above it is very clear that in China the Older population is very less
around 5 to 10 Per Cent, while the ratio of Generation X & Generation Y is
high. So from above we can conclude that in China most of age of people are
young and so it is very good market for the product targeting to the young age.

• FAMILY NAMES: Chinese family names came into being some 5,000
years ago. There are more than 5,000 family names, of which 200 to 300 are
polular. The order of Chinese names is family name goes first, following by
given name. For instance, the family name of a person is Wang, given name is
Dong, his/her full name would be Wang Dong . The most popular Chinese
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family names are LI, ZHANG, WANG, LI, ZHAO, LIU, CHEN. According to
the most recent official statistics, the three most popular family names are: LI,
WANG and ZHANG, occupied 7.9% (97million), 7.4 and 7.1 of total
population in China respectively.

Food Habits:-

China is a vast country with a wide diversity of ethnic groups and eating habits—
and large differences in the life-styles of rich and poor. In general, however, the
Chinese recognize the relationship of diet to good health, and believe that the ideal
diet is one that stresses both diversity and balance. Ancient texts stress the
importance of the five flavors (pungent, sour, sweet, bitter and salty); the five
grains (wheat, glutinous millet, millet, rice and beans); the five tree-fruits
(peaches, plums, apricots, chestnuts and dates); the five vegetables (mallows,
coarse greens, scallions, onions and leeks); and the five domestic animals (fowl,
sheep beef, horses and pigs.)1 Meat, although not to be eaten in excess, was valued
for its strengthening properties.

China fiber-rich diet based on grains and vegetables offers substantial protection
against cancer, heart disease and osteoporosis.a fundamental feature of Chinese
heating habits is the inclusion of a wide diversity of food items—everything from
pickled ant eggs to dog hams—most Chinese, especially most Chinese in rural
areas, consume a diet that is dull and limited in the extreme. A 1946 survey of
rural China indicated that 88% of the diet was composed of cereals and legumes,
with only 5% as vegetables, 3% as meat and fish and 4% as fats. Rice is China's
most important cereal. In the Southern regions it is consumed at all three meals.
Millet and wheat production dominate the more arid regions of northern China—
with millet consumed principally in the form of a fluffy porridge, and wheat made
into noodles and bread, although in the poorest regions, wheat is consumed as a
rough porridge. Barley, sorghum, corn, buckwheat, rye and oats constitute minor

34
crops in China, but the total of them all adds substantially to the amount of
carbohydrate food consumed by the populace. Millet and wheat production
dominate the more arid regions of northern China—with millet consumed
principally in the form of a fluffy porridge, and wheat made into noodles and
bread, although in the poorest regions, wheat is consumed as a rough porridge.
Barley, sorghum, corn, buckwheat, rye and oats constitute minor crops in China,
but the total of them all adds substantially to the amount of carbohydrate food
consumed by the populace.

Traditionally, rice and wheat were eaten as whole grains or whole meal, probably
after a long, slow steaming in the case of rice, or a soaking procedure in the case
of wheat. Noodles were made by a process of stretching and sun drying that
amounted to a partial fermentation. Today these grains are consumed as white
polished rice and white wheat flour, shorn of their valuable vitamins and minerals.
But millet and the other minor grains continue to be consumed in whole form, as
porridges, gruels or cakes. " Congee", a watery porridge made from rice or other
grains, is a common food, either eaten plain or with other ingredients such as
meat, fish, vegetables or flavoring.

Animal foods in the Chinese diet, while beyond the reach of many, are
characterized by great diversity. Scavenger, omnivorous animals such as pig,
chicken and duck are preferred to beef and lamb, although beef and lamb—and
more meat in general—are consumed by the northern Chinese, who are admired
for their size and strength. Whatever the animal, it is entirely consumed—organs,
feet, tail and tongue. Packages of duck's tongues are available even in Chinese
markets in America. Goose, pigeon, turkey, dog, frog, monkey and snake are
available in Chinese markets, often sold live, for the Chinese put a great store on
freshness. Even rat figures in accounts of traditional cuisine and bear paw was
considered a great delicacy by the aristocracy. Insects such as flies, gnats,
earthworms, bees, cicadas, beetles, crickets, silkworm cocoons, waterbugs, locust

35
and stinkbugs are valued both as food and as medicine. The Chinese also cultivate
caterpillars that have become infected with a fungus that roots in the caterpillar's
neck and grows upward to a height of six to eight inches. When both die, they
become dry, hard and brown and may be prepared in a broth. Insects are a
valuable source of protein and fat soluble vitamins in the Chinese diet, especially
that of the poor, but their use and importance are generally overlooked by
researchers. 3

Traditionally lard was used in cooking, by those who could afford it, along with
small amounts of sesame oil that was produced by vendors who set up their stone
grinders in the street and sold the fresh oil as soon as it was extracted. Today most
cooking oil is extracted in factories from rapeseed, soybeans, peanuts and
cottonseed.

Eggs are highly valued as a brain food throughout the Orient. In China, they are
consumed preserved or fresh, often scrambled with vegetables and other
ingredients. In the northern areas, a breakfast dish is prepared by placing a raw egg
in a bowl and pouring hot soy milk over it. The mixture is eaten with a flat
pancake. Sometimes a raw egg is mixed with hot rice and soy sauce.

Soy foods are widely used in China as an adjunct to animal foods. The Chinese
have perfected numerous ways of fermenting soy in order to neutralize phytic acid
(which blocks minerals like zinc and calcium), enzyme inhibitors (which block
digestion) and goitrogens (which inhibit thyroid function.) Traditional preparation
of soymilk begins with soaking until the beans become soft. The softened beans
are ground into a mush on a stone grinder, using copious amounts of water. The
mush is then put into a cloth bag and placed under a weight or heavy rock so that
all the liquid is squeezed out. The resulting soy paste is then cooked in fresh water.
Large amounts of dirty scum that rise to the surface are carefully removed. To
serve, raw egg or dried shrimp are placed in a bowl along with scallions, soy
sauce, flavorings and vinegar, and the scalding soy milk is poured over. The
36
vinegar causes the soy milk to curdle slightly. In traditional times, homemade
soymilk was consumed by the elderly and by nursing mothers in the belief that it
stimulated breastmilk, but was not normally used in feeding infants.4

Industrial methods for the production of soymilk leave out the all-important
squeezing and skimming steps. The presoaking is shortened by using an alkaline
solution. This process helps deactivate some of the enzyme inhibitors, but not the
other antinutrients. The high pH value of the soaking solution results in a decrease
in cystine content when the beverage is heated, thus lowering total protein
availability and soymilk's usefulness as a protein source.5 Various refined
sweeteners, preservatives and stabilizers may then be added.

The real value of the soybean is that it can be made into soy sauce, the salty elixir
that gives Oriental food its unique character. Traditional soy sauce is made by a
fermentation process that takes six to eight months to complete. This long and
careful procedure creates a mix of phenolic compounds, including a natural form
of glutamic acid, that contribute to the unique taste and aroma of traditionally
brewed soy sauce. The modern bioreactor method produces a product by rapid
hydrolysis, rather than by complete fermentation, in the space of two days, and
uses the enzyme glutamase as a reactor, so that the final product contains large
amounts of the kind of unnatural glutamic acid that is found in MSG.6

Various types of vinegars, fermented sauces made from oysters or fish, ginger,
garlic, ginseng and a wide variety of peppers and spices are used with great
imagination in traditional Chinese cuisine; these too, have been replaced in large
measure with preparations in which MSG allows manufacturers to cut corners and
use only minimal amounts of basic ingredients.

Salt in general is not added to Chinese food during cooking—rice is prepared


without salt, for example—but because it is used in the production of condiments
and pickled vegetables, Chinese food has a salty taste, and overall salt

37
consumption is high. Most salt is produced by the evaporation of sea water in the
coastal areas so that, unlike industrially processed salt in America, it provides a
rich source of natural iodine.7 There is a large black market in salt in China. 8

Since antiquity, the Chinese have used a number of sweeteners including honey,
rice or barley malt, palm sugar (jaggery), sorghum syrup and dehydrated sugar
cane juice, but only in moderation in accordance with the Oriental concept of
balance. Chinese living overseas have adopted Western habits of high sugar
consumption. A recent study found that Chinese children in Malaya had as much
as 30 percent of the total caloric intake as sugar in the form of candy, cookies, soft
drinks and other sweets.9 However, it is unlikely that mainland Chinese will adopt
such expensive habits in the foreseeable future.

Chinese cuisine includes a large variety of vegetables, although the diet of the
poor is limited to a very few, notably cabbage and various forms of radish. Sweet
potato consumption is high, especially among the poor.

Fish consumption ranged from about 120 grams per day on seacoast areas, to zero
in remote inland regions. Fish consumption was positively associated with
consumption of sugar, "other oils," beer, liquor, meat, and rice and negatively
associated with consumption of salt, wheat and legumes. Fish eaters had more
diabetes, nasal cancer and liver cancer, but less TB, infectious disease and
rheumatism. Fish eaters had lower triglycerides. There was no significant
correlation, either positive or negative, of fish eating with coronary heart disease.
There was a negative correlation of fish eating with pipe smoking.

Milk consumption was zero in the vast majority of the provinces. However, in the
western border region, milk consumption averaged 856 grams (about 1 quart) per
person per day. (Whether this figure includes fermented milk products is not
specified.) The rate of coronary heart disease in the western border region was
about half that of Jiangxain and Longxian, where no milk products are consumed

38
and where lipid intake is under 10% of total calories. Milk consumption showed
no strong correlation, either negative or positive, with any disease but there was a
high correlation of milk drinking with taking snuff.

Language:
Language is a important part of culture and communication is impossible
without it.
 Mandarin is national language:
In china mandarin language is uniform; there are hundreds of
local dialects. Mandarin is the national language.

 Written language uniform and number if dialects:


In china written language is uniform and number are
dialects.

 Chinese pay more attention to visual information processing


as well as the writing of a name:
Marketer should understand the how customer process
linguistic information. East Asian pays more attention to visual
information processing as well as writing of name. As far as brand
name is Concern Company must use visually distinct brand name
meaning for communication or calligraphy and logo design.

 Chinese read from right to left:


Writing and reading rules are different in different countries.
China read from right to left and in America they read and write
from left to right. This difference usually requires a product to be
adjusted to some contest. For example computer maker must take
care and change their system according to countries. so that
computer can produce a printout reading from right to left.

 Chinese are strict punctuality for social occasions & business


appointment:
Latin American people are usually late, Asian people are tend to be
punctual but the Chinese observe struck punctuality for social occasion
and business appointment. For Chinese people time is money.

 Language of Friendship
39
China has the unique characteristics of being friendly. They believe
that let’s make friend first and than see if we can conduct a business.
General motors have learned that in china. the Chinese meet together first
before taking about business.

 Language of Religion:
Religion affects people in many ways including work habits.
Islamic Indians are seems as a sign of persons lack of faith in religion in
Budhism. The emphasis on the elimination of desire. Because desire
cause worrying marketer must pay attention to religion activities. The
entire month of Ramzan is a religious holiday for muslim who fast from
down to desk each day during the month. Therefore worker must use part
of normal sleeping time for them so that work production can affected.
Also muslim pray five time a day and they stop all work to do so attitude
and religion shape the text and visual image that appear in print
advertisement. (Christian, Muslim, Buddhist, Buddhism, Taoism,
Catholicism and Protestantism)

 Language of Color
In china red is lucky color. it is compulsory for all company to
put money in red envelope as gift for employee and children on special
occasion. special on Chinese new year day. marketing manager should be
careful in using certain color with the product because using wrong color
can make or break the deal for example parkers white pen did not fare
well in china where white is color of sorrow and sadness.

 Language of Gift
Business people must understand the customer gift giving. It is
wise to avoid giving anything or any item with four in the name to the
Chinese because it means death. likewise clocks are a choice of gift in
china because the word for a clock sound like in word for terminate as for
a cultural visit to the dying.

40
Language of Negotiation
State Negotiation Power (traits)

Northwestern, eastern mandarin,Business Mindset


Gan, Minnan

Hakka Not so good at business

Yu, Wu, Xiang Stubborn, argumentative, hot


tempered, competitive,
adventurous

Chinese negotiation is generally rough minded well prepared and no time


constraints. they are prepare to use various tactics to secure the best deal. in
china foreign countries should expect repetitive and time-consuming
negotiations. Chinese executives more likely than Canadian executive to
avoid conflicts when Chinese managers had to deal with conflicts when.
They were using more likely use negative strategies.

 Subculture:
41
Subculture provide an effective basis for market segmentation.

 2 & 4 number are known as “Easy” & Death” respectively


For example one marketer offered one discount coupen of $24
with each purchases to Chinese people. But unfortunately 2 & 4
number in Chinese communities known towards. Easy and
Death naturally many consumer do not want each day.

 Green baseball caps were offered as premium


In china baseball caps were offered to the Chinese people as it is
a sign of premium things to be offered.

 Road drive side:


• Mainland China: on the right
• Hong Kong: on the left
• Taiwan: on the right
So due to this different kind of driving system the automobile
producer has to take into consideration.

 Surname comes first (for e.g. Huang Zhirong addressed as Mr.


Huang

 Chinese Opera Performance

 The working days are from Monday to Friday. Most people do


not work on weekend. Official hours are from 8:00 am to
17:00pm with one hour for lunch.

42
Culture Adaptation examples:
• Kentucky Fried Chicken's (KFC), which provides fast and cheap
foods in the US, built its first store in Beijing twelve years ago. In
China, the customers go to KFC for a special occasion or a family
gathering, and therefore, expect better surroundings, a higher hygienic
standard and higher quality food and service. So KFC in China played
classical piano music and made it a place for young couples’ special
event.
• Wal-Mart, the world's largest department-supermarket chain store,
opened eight stores in less than four years in China. It found that
instead of locating in suburbs which offer large spaces and lower rents
as in the United States, it had to find city-center sites or those in
heavily populated areas, as most Chinese do not drive. The stores also
needed to carry different food items in different cities due to varied
eating habits between south and north.

43
Behavior of Chinese People
 Chinese consumer give more emphasis on convenience of location,
sales person’s manner and less emphasis on stores return policy. It is
also possible to identify the personality traits that vary from one
region to another within the same country.

 Each region have different language, heroes, local capital, and


different behavioral traits and tastes. so due to that marketer may want
to match the traits of the product with the audience’s positive traits.

STATE THEMES USED FOR


SALE THE PRODUCT
Gavi Nations, Northern, Simple, old-fashioned, frugal
southern, Northwestern, themes
southwestern mandarin
nation
Wu & Eastern Mandarin Luxury themes
nations
Hakka Independence

Northern Mandarin Gentle humble image

Minan Adventure

Yu, Wu, Minnan, Hakka Hardworking, innovative,


aggressive

44
Population

China is having world’s largest population Population (2007 est.): 1,321,851,888


(growth rate: 0.6%); birth rate: 13.5/1000; infant mortality rate: 22.1.1/1000; life
expectancy: 72.9; density per sq mi: 367. This shows that there are enough people
to accept our product.

Population below poverty line: 8%


note: 21.5 million rural population live below
the official "absolute poverty" line
(approximately $90 per year); and an additional
35.5 million rural population above that but
below the official "low income" line
(approximately $125 per year) (2006 est.)
Household income or lowest 10%: 1.6%
consumption by percentage highest 10%: 34.9% (2004)
share:

Related Indicators for the Seven Chinese Banks (Unit: US$ hundred million)
45
Rank Bank Primar Total Pre-tax Real Profit
in y Assets Profits Growth
world Capital Rate %
top
1000
banks
6 Industrial and 222.13 3912.13 4.17 14.1
Commercial bank
of China
18 Bank of China 147.12 2990.07 4.25 -74.2
65 Construction 59.88 2031.16 12.15 20.1
Bank of China
99 Agricultural Bank 48.02 1900.95 0.95 -83.7

129 Bank of 28.16 584.54 3.22 -48.5


Communications
300 Merchants Bank 9.74 166.79 2.42 -29.7
938 Xiamen 1.63 12.08 0.22 -14.6
International
Bank

Source: Beijing Review Vol.43 No. 16 Ap

CHINA-COMMUNICATION

Telephones - main lines in 368 million (2006)


use:

Telephones - main lines in 279 Telephones - main lines in use per 1000
use density: people

Telephones - mobile cellular: 461.1 million (2006)

Telephones - mobile cellular 349 mobile cellular telephones in use per


- density: 1000 capita

Telephone system: general assessment: domestic and


international services are increasingly
available for private use; unevenly
distributed domestic system serves principal

46
cities, industrial centers, and many towns;
China continues to develop its
telecommunications infrastructure, and is
partnering with foreign providers to expand
its global reach; 3 of China's 6 major
telecommunications operators are part of an
international consortium which, in December
2006, signed an agreement with Verizon
Business to build the first next-generation
fiber optic submarine cable system directly
linking the US mainland and China
domestic: interprovincial fiber-optic trunk
lines and cellular telephone systems have
been installed; mobile-cellular
subscribership is increasing rapidly; the
number of internet users reached 162 million
in 2007; a domestic satellite system with 55
earth stations is in place
international: country code - 86; a number
of submarine cables provide connectivity to
Asia, the Middle East, Europe, and the US;
satellite earth stations - 5 Intelsat (4 Pacific
Ocean and 1 Indian Ocean), 1 Intersputnik
(Indian Ocean region) and 1 Inmarsat
(Pacific and Indian Ocean regions) (2007)
Radio broadcast stations: AM 369, FM 259, shortwave 45 (1998)

Radio broadcast stations 3,582,255 people per AM Radio broadcast


AM density: station

Radio broadcast stations FM 5,103,676 people per FM Radio broadcast


density: station

Radio broadcast stations 29,374,487 people per shortwave Radio


shortwave density: broadcast station

Television broadcast 3,240 (of which 209 are operated by China


stations: Central Television, 31 are provincial TV
stations, and nearly 3,000 are local city
stations) (1997)
Television broadcast stations 407,979 people per Television broadcast
47
density: station

Internet country code: .cn

Internet hosts: 10.637 million (2007)

Internet users: 162 million (2007)

Internet users - density: 123 internet users per 1000 capita

CHINA-RAILWAYS

Railways: total: 75,438 km


standard gauge: 75,438 km 1.435-m gauge
(20,151 km electrified) (2005)
Roadways: total: 1,870,661 km
paved: 1,515,797 km (with at least 34,288
km of expressways)
unpaved: 354,864 km (2004)
Waterways: 124,000 km navigable (2006)

Pipelines: gas 26,344 km; oil 17,240 km; refined


products 6,106 km (2007)
Ports and terminals: Dalian, Guangzhou, Ningbo, Qingdao,
Qinhuangdao, Shanghai, Shenzhen, Tianjin
Merchant marine: total: 1,775 ships (1000 GRT or over)
22,219,786 GRT/33,819,636 DWT
by type: barge carrier 3, bulk carrier 415,
cargo 689, carrier 3, chemical tanker 62,
combination ore/oil 2, container 157,
liquefied gas 35, passenger 8,
passenger/cargo 84, petroleum tanker 250,
refrigerated cargo 33, roll on/roll off 9,
specialized tanker 8, vehicle carrier 17
foreign-owned: 12 (Ecuador 1, Greece 1,
Hong Kong 6, Japan 2, South Korea 1,
Norway 1)
registered in other countries: 1,366
(Bahamas 9, Bangladesh 1, Belize 107,

48
Bermuda 10, Bolivia 1, Cambodia 166,
Cyprus 10, France 5, Georgia 4, Germany 2,
Honduras 3, Hong Kong 309, India 1,
Indonesia 2, Liberia 32, Malaysia 1, Malta
13, Marshall Islands 3, Mongolia 3, Norway
47, Panama 473, Philippines 2, Sierra Leone
8, Singapore 19, St Vincent and The
Grenadines 106, Thailand 1, Turkey 1,
Tuvalu 25, unknown 33) (2007)

Airports: 467 (2007)

Airports density: 2,830,518 people per Airport

Airports - with paved total: 403


runways: over 3,047 m: 58
2,438 to 3,047 m: 128
1,524 to 2,437 m: 130
914 to 1,523 m: 20
under 914 m: 67 (2007)
Airports - with unpaved total: 64
runways: over 3,047 m: 4
2,438 to 3,047 m: 4
1,524 to 2,437 m: 13
914 to 1,523 m: 17
under 914 m: 26 (2007)
Heliports: 35 (2007)

REASON FOR THE SELECTION OF THE COUNTRY

49
 The Economic Growth rate of China is very good and showing
continuous growth rate and there is lots of Opportunity available for the
international company.

 Having world largest population resulting in very lucrative and


attractive market.

 The size of the middleclass is increasing as well as its spending.

 The appreciation of the market for foreign goods.

 Cheap Labour force is available at the same time infrastructural


facilities are provided by Government (0.22 $ per hour)

PRODUCT TO BE EXPORTED IN CHINA


50
We would be exporting Soya Beans to China

Why Soya beans should be exported to China?

 China’s thirst for natural resources has for several years been an issue in the
global markets for petroleum and hard commodities like iron ore and
copper. Since the summer of 2007 at the latest China’s thirst for
commodities has even been felt by consumers in Germany – after all, the
rising prices of dairy products in German stores have been blamed on
increased demand in China. And shortly before Christmas it was reported
that the prices of Christmas trees would also rise on account of
unexpectedly strong demand from China.

 The fact is that swift industrialization and rapid growth in sectors ranging
from steel to IT have made China the leading importer of a whole range of
commodities. With a share of nearly 70% of global chromium imports
China ranks a long way ahead of Russia with just 13%. China is also the
world’s biggest importer of iron ore and manganese with shares of over
40% of each segment. Only on copper imports does China land in second
place with almost 19% – just behind Japan.

 Another consequence is China’s increased energy requirements. Fossil fuels


provide more than 80% of all electricity generated in China, with hard coal
the main source. China’s proven coal reserves are the third largest in the
world, behind those of the US and Russia. However, it tops the production
rankings by generating nearly 40% of global output. As long ago as 1993
China had already lost its status as a net exporter of crude oil, and imports
have risen inexorably since. Between 1996 and 2006 its oil consumption
doubled, whereas its output rose by just 16%.

51
 Only one-fifth of China’s natural resource imports are agricultural
commodities (also known as soft commodities). All the same, demand for
meat and dairy products in particular has risen constantly in recent years.
This can be attributed to the rise in incomes and the associated changes in
dietary habits, and it is most clearly reflected in the growth of imported
animal feed: around 40% of global soya bean exports are destined for
China. There are, however, other categories like vegetable oils that are also
posting strong growth. Besides demand-side factors urbanisation along with
soil erosion and water shortages are reducing the land area used for
agriculture. This limits the capacity for boosting output. China thus imports
mostly commodities that require intensive land use – like grain, soya beans
and cotton – and exports labour-intensive agricultural products like fruit
and vegetables.

 Soybean production in the India grew by more than 23.68% last year The
soybean production rose to 9.4 million tones during October 2006-
September 2007 from 7.6 million tones Soybean meal, an intermediate
product, is the second most important export with 9%of sales. Soybean is
the single largest oilseed produced in the world.
 The Chinese recognize the relationship of diet to good health, and believe
that the ideal diet is one that stresses both diversity and balance and Soya
bean is such one product .
 Chinese soya bean imports are set to reach 16.5 million tonnes in 2003/04,
from 16.25mt in 2002/03, due to an increased demand for oils and livestock
feed,
 Let us see the uses of Soya Bean :-
I) Soy foods are widely used in China as an adjunct to animal foods.

52
II) Preparation of soymilk begins with soaking until the beans become
soft. The softened beans are ground into a mush on a stone grinder,
using copious amounts of water. The mush is then put into a cloth
bag and placed under a weight or heavy rock so that all the liquid is
squeezed out. The resulting soy paste is then cooked in fresh water.
Large amounts of dirty scum that rise to the surface are carefully
removed. To serve, raw egg or dried shrimp are placed in a bowl
along with scallions, soy sauce, flavorings and vinegar, and the
scalding soy milk is poured over. The vinegar causes the soy milk to
curdle slightly.
III) Homemade soymilk was consumed by the elderly and by nursing
mothers in the belief that it stimulated breast milk, but was not
normally used in feeding infants.
IV) The real value of the soybean is that it can be made into soy sauce,
the salty elixir that gives Oriental food its unique character.

Because of such high utility of Soya-Beans in Chinese cuisines


And having so much nutritious value the demand is increasing for
the Soya beans in the Chinese market is prompting us to export
this product .

53
S-T-P

Segmentation:

Demographic Segmentation
Target:

The middle class is increasing at a rapid rate and their purchasing power is
also increasing very high and they welcome foreign made products.

Target Market for Soyaji

Population Size 1,321,851,888

Target Market (65%) 859203727.2

Positioning: We will promote our Soyaji as a soybean ready to made soya-


milk, soya-sauce with special ingredients including corn, sesame seed which
are special ingredients in coffee which is only suitable for such countries and
give the nutritious value to the body and easily digestible and fat free and
high protein providing dietary product which make your body balanced and
healthy.

Thus our product is very specific with is focusing on “MAN” Factor


i.e.
M = Money means those who have purchasing power,
A = Authority means those who have authority to purchase the
product,
N = Needs means those who are health conscious and wants to
make their body in balance i.e. high protein rich diet food product.
54
II. PRODUCT STRATEGY
Product To Be Exported: Soya bean ready mixture

In relation of demand for the product i.e. Soya bean the market has lot of
potential .

Brand Name: “Soyaji”

Ingredients: The ingredients on the label include 85%soyabean, 10%


corn and 5% sesame seed.

Packaging: The Size of the Packaging includes:


100 Gms
250 Gms
500 Gms

Colour: White plus light Shed of Yellow ;almost transparent. .

55
PRICING STRATEGIES

As the China is socialist economy it will always encourage some product


which helps it citizen to become healthy. Though its combination of
free market and socialist economy the incorporation would not be
having so much legal formalities.

As the product is new in the market and looking the mentality of Chinese
People and to take the introductory advantage we would follows the
following pricing Strategy in the Chinese Market:

Skimming Pricing Strategy:

Since the product is of new kind due to as the Middle Class Family have
enough income to buy our product and looking to the food habit the Chinese
people use Soya Bean oil in their cooking which is very good for health. So
we have added two more ingredients corn & sesame seed which is fat free
ingredients. And as the product is new in the market and health conscious,
so we would go for “Skimming Pricing Strategy”.

Base of Export Price Quotation:

In China mostly CIF Price are used as a bases of export price quotation. As
we know that under CIF (Cost Insurance & Freight) pricing includes
FOB+ Ocean Freight+ Insurance. Under this pricing delivery take place
when the Bill of lading is handed over and the goods and transit risks
are transferred when the goods go over the ship’s rail.

56
Implication: The implications of such insistences are two-fold:

The Exporter will have to arrange for shipping space and

2) He will have to bear all transit costs and risks till the goods are
handed over at the port of destination.

Thus any change in the transportation cost subsequently will have to


borne by the exporter.

Demo of Export Price Quotation eligible in China

Price Quotations

The pro-forma invoice is the most commonly used document to give price
quotations to potential customers. The quotation in a pro-forma invoice is
usually considered binding, although prices may change prior to final sale.
To prepare the invoice, you should give a detailed description of the product,
an itemized list of charges and sale terms. Prices should be quoted in United
States dollars to reduce foreign exchange risks. The invoice should also
indicate the period during which the price quotation is valid.

PRO-FORMA INVOICE*
SHIPPER: Agility logistics Reference No:. RB20693
Date: April 30, 2008
Customer P.O. No.5555
Shivranjani Road
Gujarat
(079) 22554466
57
Terms of Payment:
Estimated Date of Shipment

SOLD TO: SHIP TO:

Suoi Moli Ltd Chin Chong Industriale


633 Estate Road 454 Estate Road
Shanghai,China Shanghai.China

ITEM QUANTITY DESCRIPTION UNIT PRICE TOTAL PRICE 100


Soya Bean Ready US $75.00 US $7,500.00 Mixture

FOB factory 7,500.00


Inland Freight Forwarder fees 500.00
Ocean freight 1,500.00
Five (5) sealed cartons Insurance 25.00
Gross weight: 10 lbs. C.I.F. China C 9250.00
Authorized signature/Title

The above offering is based on current prices and is valid 60 days from
invoice date.

*NOTE: This pro-forma invoice is only a sample. It is advisable to contact a


freight forwarder in advance of shipping.

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DISTRIBUTION STRATEGY

1. Logistic Management

In preparing your goods for international transport, you must first


determine what mode of transport you will use. Maritime shipping is
almost always slower and less expensive than air. However, an exporter
must factor in the additional costs of sea freight, such as surface
transportation to the dock.

 Another factor is the time value of money: payment may not be made
until the ship reaches its destination -- ocean freight can be
significantly longer than air freight.

With reference to international freight forwarder can assist in weighing the


pros and cons of different modes of transportation. Let us evaluate from the
view point of exporting product to China :

The Advantage of Sea Transport is:

 Less Costly Compared to other mode of transport

The Disadvantage of Sea Transport is:

 As the payment may not release until the goods are reached at the
customer ends. So slow process in mode of transport.

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With reference to international freight forwarder can assist in weighing the
pros and cons of different modes of transportation. Let us evaluate from the
view point of exporting product to Mexico:

The Advantage of Sea Transport is:

 Less Costly Compared to other mode of transport

The Disadvantage of Sea Transport is:

 As the payment may not release until the goods are reached at the
customer ends. So slow process in mode of transport.

DOCUMENTATION:
Export Documentation Checklist -- Documents Prepared Before the
Shipment

Commercial Invoice/Consular Invoice

After the pro-forma invoice is accepted, the exporter must prepare a


commercial invoice. The commercial invoice is necessary for both the
exporter and importer.

The exporter needs the commercial invoice to prove ownership and secure
payment. The description of the goods on the commercial invoice must
correspond exactly to the description in the letter of credit or other method
of payment. There can be no exceptions.

The importer needs the commercial invoice since it is often used by Customs
authorities to assess duties. For this reason, it is common practice to prepare
a commercial invoice in English and in the language of the destination
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country. The freight forwarder can advise you when a translated copy is
necessary.

Similar to a commercial invoice, a consular invoice is required by certain


countries. The consular invoice must be prepared in the language of the
destination country and can be obtained from the country's consulate, and
often must be "consularized."

In some countries, the commercial invoice must be prepared on a special


form known as a "customs invoice." Your importer may request this of you.

Export License

Export controls are based on the type of goods being shipped and their
ultimate destination. Most exports do not require a license, per se.
Technically, most exports are shipped under a "general" license which does
not require an application.

Should your particular export be subject to export controls, then a


"validated" license must be obtained. In general, your export would require a
"validated" license if export of the goods would: threaten China national
security; affect certain foreign policies of the China; or create short supply in
domestic markets. Check with the U.S. Department of Commerce's (DOC's)
Bureau of Export Administration (BEA) to determine if your product may be
subject to export controls (see Part II, The Exporter's Directory).

Shipper's Export Declaration (SED)

The most common document used by exporters is the Shipper's Export


Declaration (Form 7525-V), for mail shipments valued at more than $500,

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and required for other shipments valued at more than $2,500. In addition, a
SED must be prepared for all shipments covered by an Individually
Validated Export License (IVL), regardless of value. The SED enables the
Bureau of the Census to monitor for statistical purposes the kinds of
products being exported from the China . The SED must be presented to the
carrier before the shipment departs.

A sample SED follows:

A Shipper's Export Declaration Form 7525-V cannot be reproduced here.


The form is available through the Superintendent of Documents,
Government Printing Office, Washington, DC 20402 and local Customs
district offices.

Three items appearing on the SED may cause confusion:

Item 14, "Schedule B Description of Commodities"

You will need to determine the official description of the commodity you are
shipping by obtaining a copy of the Mexico government publication entitled,
Harmonized System/Schedule B Statistical Classification of Domestic and
Foreign Commodities Exported from the China and then transfer the
appropriate description onto the SED. This is available from the Government
Printing Office and from most freight forwarders.

Item 21, "Validated License No./General License Symbol"

If your product for export is controlled, the "validated" license number is


inserted in this space. If you are exporting under a "general license," one of

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eight possible "General License Symbols" must be noted. The three most
commonly used symbols are:

 G-Dest (General Destination): authorizes the export of any items not


requiring a validated license
 GLV (General License Limited Value): authorizes the export of a single
shipment of limited-value items
 GTE (General License for Temporary Export): authorizes the export of
items for trade shows, training or temporary use abroad

Item 22, ECCN (Export Control Commodity Number)

Only necessary when a "validated" license is required, the ECCN is the


number assigned to your commodity from the Bureau of Export
Administration's Commodity Control List. This special number must be
supplied on the SED.

Shipper's Export Declaration

SED forms can be obtained through international freight forwarders, the


Government Printing Office or local Customs district offices. The "Exact
Way to Fill Out the Shipper's Export Declaration" is available from the
Bureau of the Census, Washington, DC 20233.

Certificate of Origin (where applicable)

Although the commercial invoice may contain a statement of origin, some


countries (particularly those subject to certain free trade treaties, such as
Canada or the Caribbean Basin) require Certificates of Origin. Certificates of
Origin allow for preferential duty rates if the exporter's country has an

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agreement with the importer's country to allow entry of certain products at
lower tariffs.

Export Packing List

Considerably more detailed and informative than a standard domestic


packing list, an export packing list itemizes the material in each individual
package and indicates the type of package: box, crate, drum, carton, etc. It
shows the individual net, legal, tare and gross weights and measurements for
each package (in both U.S. and metric systems). Package markings should
be shown along with the shipper's and buyer's references. A copy of the
packing list should be attached to the outside of a package in a waterproof
envelope marked "packing list enclosed." The list is used by the shipper or
forwarding agent to determine the total shipment weight and volume and
whether the correct cargo is being shipped. In addition, customs officials
(both U.S. and foreign) may use the list to check the cargo. The original
packing list should be forwarded along with your other original documents
in line with the conditions of sale.

Insurance Certificate

If the exporter is providing insurance, a certificate will be needed confirming


the type and amount of coverage for the goods being shipped. Normal
accepted practice for coverage is 110 percent of the CIF value. This
certificate should be made in negotiable form and must be endorsed before
submitting to the bank.

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Inspection Certificate

Many foreign purchasers request that the seller certify that the goods being
shipped meet certain specifications. This certification is usually performed
by an independent inspection firm.

Documents Used During the Inland Movement of the Goods

Shipper's Instructions

As an exporter, you are responsible for providing your freight forwarder


with the necessary information regarding your shipment. The more details
you provide, the greater the chances of your goods moving problem free.
Your freight forwarder can provide you with a commonly used form for
noting instructions.

Inland Bill of Lading

Inland bills of lading document the transportation of goods between inland


points and the port from where the export will emanate. Rail shipments use
"waybills on rail." "Pro-forma" bills of lading are used in trucking.

Delivery Instructions

This document is prepared by the freight forwarder giving instructions to the


trucking or Railroad Company where the goods for export are to be
delivered.

Dock Receipts

This document transfers shipping obligations from the domestic to the


international carrier as the shipment reaches the terminal.
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Bill of Lading/Air Waybill

Bills of lading and air waybills provide evidence to title of the goods and set
forth the international carrier's responsibility to transport the goods to their
named destination. There are two types of ocean bills of lading used to
transfer ownership:

• Straight (non-negotiable): provides for delivery of goods to the person


named in the bill of lading. The bill must be marked "non-negotiable."
• Shipper's Order (negotiable): provides for delivery of goods to the
person named in the bill of lading or anyone designated.

The shipper's order is used with draft or letter-of-credit shipments and


enables the bank involved in the export transaction to take title to the goods
if the buyer defaults. The bank does not release title to the goods to the
buyer until payment is received. The bank does not release funds to the
exporter until conditions of sale have been satisfied.

When using air freight, "air waybills" take the place of bills of lading. Air
waybills are only issued in non-negotiable form, therefore the exporter and
the bank lose title to the goods once the shipment commences. Most air
waybills also contain a customs declaration form.

PACKAGING

Goods shipped for export require substantially greater handling than


domestic shipments. The exporter must pack the goods to ensure that the
weight and measurements are kept to a minimum, breakage is avoided, the
container is theft proof, and that the goods do not suffer the stresses of ocean
shipment, such as excess moisture.

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In addition to proper packing, the exporter should be aware that certain
markings are necessary on goods transported internationally. Some countries
require that the country of origin be marked on the outside of the container,
and even have regulations as to how the mark of origin should appear.

The second type of marking with which the exporter should be familiar is
labelling. Food and drugs must often carry special labeling as determined by
the laws of the country of destination.

Third, certain "shipping marks" must appear on the outside of the package.
The weight and dimensions should be visible and any special instructions
should be shown, and you may want to repeat these instructions in the
language of the importer's country.

If your business is not equipped to package your goods for export, there are
export packaging companies which can perform this service for you. Ask
your international freight forwarder for a list of export packaging companies
in your area.

Many businesses, after achieving success in exporting, or as an alternative to


exporting, contemplate joint ventures or licensing agreements with foreign
companies to produce goods overseas. Some companies even set up their
own off-shore operations.

Channel of Distribution:

As our product is for Middle Class group means those who have average income of
$20000-30000 and so due to this our primary focus had been on hypermarkets in China to
give our product more popularity and to reach effectively and efficiently on the target
consumer. So we will go for Selective distribution channel.

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PROMOTIONAL MANAGEMENT AND ADVERTISING

1. ADVERTISING

BRAND NAME: “SOYAJI”

THEME OF THE PRODUCT: “Get Healthier Everyday”

SELECTION OF MEDIUM includes:

TELEVISION CHANNEL:

Our target market is likely to have TV sets and in relation of this we would
be selecting the national channel and all those channel which are dealing in
the local dialect or language.

SALES PROMOTION:

As we are going to Target “Middle Class” income group, so our sales


promotion scheme should be very standard and value-added.

With every above 250 Gm 1 utility air tight container would be given to
store our product and a recipe booklet also for making new dishes.

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CONCLUSION

Thus lastly I conclude that “China” is really very potential market for
“Soyaji” from the view point of:
 The Economic Growth rate of China is very good market and
showing continuous growth rate and there is lots of Opportunity
available for the international company.

 The population of China is world’s highest. This population


shows that there is enough people to accept our product in the market.
So from population point of view it is attractive market.

 Soyaji is source of high protein with added value of corn and


sesame seeds making it more nutritious.

 It is very handy hence can be taken to any place.

 The percentage of Generation Y and X is more in Chinese


population which mean more working class so this product coul be
proved more beneficial.

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