Diy Market in China

Sector-Specific Considerations for EU Businesses considering envisioning the DIY Market in china. As Deng Xiaoping once said bounce back the river by feeling the stones. This saying is in truth relevant for the DIY foodstuff in mainland mainland China beca accustom you ar threading down a road into the very unknown.In 2004 the Chinese DIY and home improvement merchandise place reached an all-time mellow of RMB 195 Billion and has been depleting ever since. DIY stores be constantly losing popularity at bottom the market . The market demand circulating(prenominal)ly is for soft decoration, with the rural familys moving to the fast increase cities to attain employment, there is a demand for moveable decoration in case they suck to re-locate again.The younger generation be also lede the market for multifunctional, low cost furniture, such as DIY kitchens and bathrooms this is due to the stopping point of the Chinese families with the kitchen and bathroom being t he most personal atomic number 18a in their homes. (Allience, 2007) A study competitor and little terror to the DIY railway linees already effected in China are the growing number of small extortors, as their friendship of DIY is improving with the market trends.A high percentage of juvenilely homes being bought are being left unfinished and require a major coronation in home improvement, this is where they just decide to hire a smaller contractor to do the time consuming work instead of doing it themselves therefore the companies are losing out on the profit, precisely with Chinas plaza legal injurys rising it is just possible that the Chinese consumer will simply be pushed in the direction of DIY as a cheaper option. But what will knock when Chinas sees a fall in construction and property? Will the DIY companies tolerate? This toilet be construed as a major economic threat to new European companies first appearance into China. Allience, 2007) Who are the majo r competitors? There is non one but galore(postnominal) already established competitors within the Chinese DIY market. B&Q is the major contender with it being the largest Western DIY retailer in the country. B&Q opened its first store in China in 1999 and has continued to establish strong bulls eye sensory faculty. As The Guardian reported, the local anaesthetic anesthetic culture did not fit with the DIY practices that B&Q already had and therefore B&Q had to adapt their once very successful European format to a Chinese one, hence making it a CIY ( micturate it yourself) strategy. Tran, 2007) Another competitor for an EU DIY seam to go up against is a well-established Chinese DIY fellowship called taper Homes. Orient Homes was founded in 1999 in Beijing. It receives its stock from local manufacturers consequently sinister the cost of the goods for consumer, thus making it a very large threat not just economically but be driveway it is so well established within its home market.It has develop to my attention in according to the China National Interior Decoration Association there is an estimate of much than than than 40,000 registered companies engaged in home improvement in China alone. (Unknown, 2009) The market is so densely populated that an EU confederation trying to enter the market is going to retain several(prenominal) major struggle. conjunction impale or Wholly Foreign Owned Enterprise (WFOE)? Many companies entering china have to ask themselves this very difficult question, its a difficult decision to grade as there are umteen gains and disadvantages to both. ledger entry into a WFOE I believe is a lot harder than a Joint Venture, because with no Chinese partner they are left to approach their chosen market alone. Its also difficult for the confederation to create a market for their chosen intersection points, especially when therere already local competitors. Sometimes even with a local sales and selling team it can enqu ire years to have a name on the Chinese Market (Bergonovo, 2011) . The culture of the market can be very diverse and for a WFOE it can be difficult to understand alone.There are advantages as well as disadvantages, unlike in JVs where therere unalike views because the different partners and the negotiations and compromises are the however key to keep the business alive. Especially for small-medium business it is much better to have a WFOE, in order to nullify getting stuck in cultural deviances with a local partner. So if youre a small business whitethornbe with sole ownership in your experience mobiliser that has a clear strategy for the Chinese market and can afford long term investment WFOE is the right quality. (Bergonovo, 2011) Joint Ventures an be very successful in some instances, because you will have the advantage of having a culturally and linguistically adapt partner, but its polar for strange investors to understand the purposes of the joint venture and weathe r their Chinese checkmate is capable of fulfilling them. The popular Chinese idiom same bed, different dreams has render the failed joint ventures mantra (Ireland, 2012) Trust is the major issue in this venture. My considerations for a DIY follow would be a Joint Venture because the attach to will have a stronger understanding of the market and I believe this is crucial for a successful move to the Chinese market.Are there barriers for new entrants? The key difference between domestic marketing and marketing on an outside(a) denture is the multi-dimensionality and complexity of the many foreign country markets a company may operate in. An international manager needs a knowledge and awareness of these complexities and their implications they have for (Doole & Lowe, 2001, p. 9)the company and the market they are entering. I will use the SLEPT (Social, Legal, Economical, Political and Technological) system to determine the various trends and environment for a European DIY compan y attempting to enter the Chinese DIY market.Social, Cultural problems and differences can really take a toll on a new immature company entering a country where religion and material culture flow a major purpose. The language would have the most pregnant role and impact to play on the way the products and go many be seen to the new consumers. Coca Cola had extensive problems when they first entered the Chinese Market, their soft touch name translated to kooke koula which in turn translated to A thirsty mouthful of wax light wax. Now with their new translation it means joyful tastes and delight, mistakes moldiness be made by one major company for another to learn from their mistakes. Over the next 20 years more people will migrate to Chinas cities for higher-paying jobs. These working consumers, once the countrys poorest, will steadily climb the income ladder, creating a new and massive middle class. (Farrell, Ulrich A. , & Stephenson, 2006) This fellowship has struggled t o come to terms with the phrase do it yourself because they are not educated in the home renovation area. It also seems to be giving off the wisdom that you are peasant like if you do it yourself. Its all to the highest degree social status right now n China, if you are seen doing manual of arms labour that you can subsequently hire someone to do hence you are seen as a scrooge. In recent years China has become the worlds number one country in terms of attracting foreign investments. As the second-fastest growing economy of the world it attracted USD 74. 6 billion of foreign direct investment in 2007. With a current position as the worlds fourth-largest economy (in nominal GDP), and an sightly annual growth of more than 8% for the last 30 years, only very few other countries in the world can liken the business opportunities present in China today. (Unknown, General Considerations before Entering the Chinese Market) In order for an EU DIY company to succeed in the market they ne ed to be aware of what direction the specific market they want to enter is developing economically in order to make a well-rounded assessment on whether it would be financially operable to enter and compete with firms already established in the market such as B&Q and Home Depot. (Doole & Lowe, 2001) The company may also locution some long term challenges with the rapid development it could put a strain on resources such as the infrastructure and the migration rates within the country.There are also some very appealing political reforms that have taken place in China that any international company would be pleased about. The reform and opening up policy has been a major boost to the Chinese economy and political system. These reforms policies were put in place between 1979 and 1984 and it was aimed at improving Chinese relations with neighbouring countries. disdain the success of this open door policy many companies have been confront with difficult obstacles in relation to owners hip rights and intellectual property.It was released this year that the CCP would falloff taxes for foreign companies entering China by 50% as they believed it would attracted more foreign investment in China. (Davies, 2012) The bigger picture is that because of the economic military post globally everyplace the past couple of years, China sees the need to create a friendlier environment for foreign investors, said Khoon Ming Ho of KPMG China. (Davies, 2012) This is a major opportunity for EU based companies to enter the market at lessen tax rates. Legal systems vary both in content and interpretation.A company is not just bound by the laws of its home country but also by those of its host country (Doole & Lowe, 2001) In the west business is based on careful negotiation in contracts and agreements, they may be enforced by a court of law, however in China business is based on personal relationships, they call Guanxi in China. both companies have to have guanxi before they can c ooperate together, the specifics of a contract me be discussed after they have agreed in principle and this could cause hassle for a European DIY company who base their laws on the west.Technology is shortly playing a major role in Chinese society and is a major driving force both in international marketing and the move towards the global marketplace (Doole & Lowe, 2001) China has the largest mobile phone and internet users with 420 million people using such services mundane (Ireland, 2012), leaving the market place wide open for a new EU company to market their products via smartphones and internet. However there are some censorship issues in China at the moment, it is implemented by the commie Party of China and goes for the whole mainland.Censorship is put into place to uphold and guard the law of the Communist Party of China it helps to stop unapprovedreformist,separatist, counter-revolutionary, or spiritual ideas. It also stops the citizens of China educating themselves on t he past, present and upcoming let-downs of the Party. market Mix Product With many new foreign products entering the Chinese market the consumers are becoming overwhelmed by the abundance and are relying on the image that the company has made in its producing country. Each region in China has differences in economic growth, subsisting standards and education.For foreign products, there are sharp differences between rural and urban attitudes. Typical Chinese consumers do not want to be amongst the first to try a new product. They are reluctant to be pioneers, especially for an expensive, un issued (in terms of brand), foreign product. (Doole & Lowe, 2001) My considerations for an EU DIY company would be not to take your companys products for granted, just because they have been very successful in the West does not mean they will be equally successful in the East.They must think of China as they would think of Europe, with its many different regions and its many different cultures it must adapt to what are culturally acceptable. They are entirely interested in products that are going to suit their needs, as I spoke of before, when new apartments are bought they are just a crush and need a lot of investment and renovation, if a company could introduction the Chinese peoples needs in this regard they might have a large opportunity. Price The setofaproductorserviceisnotaneasydecisionforanycompany.Therearemany issuesthatmustbetakenintoconsideration,especiallywhena internationalcompanyis enteringanewinternationalmarketsuchasChina. (Waller, 2012) The price must cover the manufacturing and distribution costs and in turn must not be too low as the company could sustain long term losses. There are many approaches that a company can take to decide on what marketing strategy to consider. For showcase Skimming This is where the product is introduced in the market at a high price, and because lowered over time. (Waller, 2012) Apple Inc. is a company that is partial to this method as they believe that people are willing to pay extra to have the newest technology on the market. prestige A company will use prestige, or premium determine as a strategy where companies with luxury products or exclusive brand image/reputation will price the product at the high end of the price range. Customers knowing that they are buying high prime(prenominal) will expect to pay the higher price. (Waller, 2012) Companies that use this such method are Louis Vuitton and Rolex.My sector specific considerations for an EU DIY companys pricing strategy is to introduce new products at a lower price to suit the Chinese market, leaving them with a competitive advantage over the companies that are already established. Place Rapidly improving infrastructure, high-tech facilities and an progressively well trained workforce mean there is greater prime(a) than ever before for investors seeking to expand, set up new regional headquarters or relocate key functions to new loca tions within China. (KPMG, 2012) The future of the companys success can rely on the choice of location that you choose. There is a growing number of young professionals with significant disposable income on the major coastal cities who aspire to higher standards of living and increased wages and thus are more likely to fleet credit for mid to high range consumer products (Ireland, 2012) With profit and manufacturing opportunities in major coastal cities this could lead to the start of a very successful DIY company.Promotion marketing plays a significant part in any companys success of their brands especially in the Chinese market. They must establish their rank market for example what Tier/Class, Age, and Income the company will market to and then once they have found their target market they must survey their market potential. A successful marketing campaign will recognise the various needs and wants of their target market in China for example it varies from region to age to cu lture values.As I previously mentioned Chinas internet usage is the highest in the world, by advertising online you could reach and provide a huge segment of your target market with the brand information they need. Finally, based on my above predictions and opinions I have produced this SWOT analysis for a DIY company entering into the Chinese market. Strengths * well established EU presence * grand Population and consumer base * wide variety of DIY products * High quality services * Cheaper than competitorsWeakness * Must incorporate Chinese culture * Less advertising and brand awareness than competitors * Little brand loyalty in China * inadequacy of innovation in product development for China * Lack of market information Opportunities * Property growth * Unfurnished houses * Income levels rapidly increasing * enormous internet usage * New middle class impressionable/ forthcoming * Cheaper manufacturing costs. Threats * Already some well established companies * Local cultures and values are unknown