Opportunities and Threats in the Chinese Market for Launching Danes Coffee

This paper explores the opportunities and threats in the Chinese market for launching Danes Coffee. It conducts a PEST analysis to determine the market profitability and identify potential risks. The analysis covers economic, political, social-cultural, and technological factors that can impact the success of Danes Coffee in China. The research concludes that China has an ideal market for doing business, but recommends using available e-commerce platforms and rebranding products to fit into Chinese cultures.

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Global marketing
Student’s Name
Course
Date

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Executive summary
The main aim of the paper was to explore opportunities that exist in the Chinese market
and determine whether China has an appealing environment for launching Danes coffee. The
PEST analysis (political, economic, social - cultural and technology factors) provided an
overview of opportunities and threats that exist in Chinese markets. The political and legal
opportunities in China included political stability, appealing market entry regulations, foreign
trade policy and government policies. The economic and financial opportunities included
economic growth rate, high GDP, availability of skilled and unskilled labor, economic trends,
attractive interest rates and consumer disposable income. The social and cultural opportunities
include high population, change in lifestyles, consumer patterns and attractive Hofstede's cultural
dimensions. The technological opportunities included the availability of technologies that can be
accessed by consumers, intellectual property regulations and automation incentives. The threats
and negative trends that exist in Chinese markets include the increase of taxation in the future,
the possibility of inflation and an increase in interest. After weighing opportunities and threats
that exist in the Chinese market, the paper concluded that China has an ideal market for doing
business. However, the research recommended the company to use advertise on available e-
commerce platforms and rebrand products to fit into Chinese cultures.

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Table of Contents
1.0 Introduction................................................................................................................................3
2.0 PEST analysis of China Market................................................................................................3
2.1 Economical and finicial environment analysis......................................................................4
2.1.1 Economical opportunities in China market.....................................................................4
2.2 Political and legal environment analysis................................................................................6
2.2.1 Political and legal opportunities in China market...........................................................6
2.3 Social and cultural environment analysis in China................................................................6
2.3.1 Social and cultural opportunities in China......................................................................6
2.4 Technological environmental analysis...................................................................................7
2.4.1 Technological opportunities in China.............................................................................8
3.0 Conclusion.................................................................................................................................8
4.0 Recomedations...........................................................................................................................9

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1.0 Introduction
International marketing involves launching a new product in foreign countries and
conducting thorough marketing for it to gain a market share. For a product to be launched
effectively in global markets, a macro environment analysis must be conducted for the
determination of market profitability. Through an effective environmental scanning, a company
is able to identify opportunities that will promote a product in the global markets. Therefore, the
paper seeks to conduct macro environment (PEST) analysis of the China market to identify
opportunities and threats in order to determine whether Danes coffee will be successful or not
after its launch.
2.0 PEST analysis of China Market
PEST analysis helps in evaluating how market entry strategy for launching Danes coffee
fits into China markets. Through deep analysis of economic and financial environment of China,
political and legal environment, social, cultural, and technological factors in China, it is easier to
assess the opportunities and threats for promoting Danes Coffee in Chinese market.
2.1 Economical and financial environment analysis
Economical and financial environment analysis determines how a launch of new product
in a market may be affected by economic factors such as international exchange rates, monetary
policies, growth rates taxation, unemployment rates, industry growth, economic trends,
recession, inflation and deflations, interest rates, consumer disposable income, labor costs and
international trade. Economic factors impacts on pricing, revenues and costs of a company or a
product.

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2.1.1 Economical opportunities in the China market
China has experienced a significant Gross Domestic Product (GDP) growth rate over the
last five years with current trends indicating that if the economy of China continues to grow at
this rate it will surpass the GDP of the United States (US) soon. The increase in GDP indicates
that the consumption of products in a country is very high. For example, in 2017, the GDP
growth of China was $23.12 trillion that accounted for 6.8 percent more than in 2016 (Tan, Wu,
Shan, Wang & Zhang, 2018,). The high GDP rate of China indicates that a high population of
Chinese is adding more economic value in the society that in turn increases the purchasing
power. The economic factors that have been associated with the significant growth of GDP
include potential urban growth, more export business, availability of disposable income and high
rate of savings. With the growth in urban centers, the promotion of Danes Coffee is likely to be
achievable due to the centralization of consumers. The centralization of consumers provides
wide coverage and therefore Danes coffee can reach targeted audiences effectively. Furthermore,
with urban dwellers known to have a more disposable income and eager to taste new products,
the Danes coffee can gain competitive advantage. With trends that China’s GDP will triple by
2030 (Liu et al., 2019), the Chinese market is likely to remain profitable in the future in terms of
economic perspective and also ideal for multinational companies to do business successfully.
Therefore, high Gross Domestic Product (GDP) offers an opportunity for Danes Coffee to be
launched in the Chinese markets.
A research conducted by Xu, Zhou & Li, (2018) shows that China has the second largest
economy globally on purchasing basis indicating that if Danes Coffee product is launched in the
Chinese market today, it is likely to make attractive profits despite the rapid competition that
exist in food and beverage industry of China.

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High unemployment rates in China have resulted in the availability of cheap skilled and
unskilled labor in China markets. Currently, big companies such as Apple and Amazon are
inclined to hire workers from China. Therefore, with this cheap labor, launching and promoting
Danes coffee in China is likely to be successful as local employees who are knowledgeable about
Chinese cultures and markets will influence a large number of consumers in the country.
The standard corporal income tax rate of 25% is favorable for launching Danes product in
Chinese markets (Chen, Liu, Suárez, Serrato & Xu, 2018). China’s poverty level has
significantly reduced despite the increase in population. Furthermore, only 3.3% of the entire
china’s populations live below the poverty lines that have been set as 2300 Yuan (Liu, Liu &
Zhou (2017). The reduction in poverty is an indication that people are getting richer and they
will tend to consume more, and therefore if Danes coffee is tailored to meet Chinese taste, the
product will be successful in the market.
Despite all economic opportunities of doing business in China, there are some threats that
impact how Danes coffee can be launched and promoted in the market. With the trend that
China’s economy is projected to decline by 2020 (Yang, Wang & Shi (2017) because of
weakening industrial production, launching and promoting Danes Coffee in China might result in
significant losses. Furthermore, the slow economic growth has significant threatened
multinational firms intended to invest in the market. For example, since the double-digit growth
rates before 2013, China’s economic growth has significantly slowed. The economy grew at
7.8% in 2013, 7.3% in 2014, 6.9% in 2015, 6.7% in 2016 and 6.5% in 2017 (Wong, 2018). Other
worrying trends that will affect profits of Danes coffee include high inflation rates and property
prices. With a trend that China will experience an increase in inflation and property prices, the
purchasing trends of consumers are likely to change with many people not able to afford the

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product. Currently, China is facing an increase in interest rates and there are trends that
government spending is likely to increase in the near future. Therefore, an increase in interest
rates indicates that consumers purchasing patterns will significantly change and consumers will
shy away from the product. Furthermore, the people’s bank of China has already increased
interest and the Central bank of China (CBC) is in negotiation with other banks to impose limits
on home purchases and lend less (Moreira & Libânio, 2018). With the imposition of home
purchases limits, many consumers are likely to spend less on food and beverage products.

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(Statista, 2019)
2.2 Political and legal environment analysis
Political and legal environment analysis consists of politically motivated factors that
impact the way a product is launched in a market. The political factors include foreign trade
policy, political instability and stability, government policy, tax policy, trade restrictions,
bureaucracy and labor/ consumer protection laws.
2.2.1 Political and legal opportunities in the China market
The constitution of China creates an opportunity for Danes Coffee to be launched in
Chinese markets. The decision-making process governing China adheres to socialists or
communism system political environment. With adherence to communism or socialists system,
the government has a high power of controlling all activities and actions that are done by an
organization or individual.
With China government being a one-party communist dictatorship, the country is
experiencing political stability. The one-party dictatorship form of government enables the
economy to be dynamic and contribute to national stability. The government of China is very
stable because it is not pressured through the internet or press. Therefore, the citizen’s
involvement in politics is very low because of the huge restrictions imposed by the government.
Furthermore, despite cheap labor rates that have facilitated China to achieve rapid growth in
industrial and manufacturing sectors, the government has resulted to demographic pressure,
extensive immigration of rural to urban areas and management of environmental degradation that
might affect business sustainability in the country.
China has low restrictions on foreign countries intending to invest in the country. The
licenses of doing business in China are easy to acquire and the tariffs for exporting goods are

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moderate despite the trade war between China and the US. Furthermore, the informal and formal
rules that companies must abide when launching products are impressive and therefore launching
Dana's product in Chinese markets will face limited political risks.
In terms of business freedom, China lowered restrictions on multinational companies
investing in the country. Currently, it takes 37 days to start a company or do business in China as
compared to other countries that take 38 days ( Estrin & Prevezer, 2010). Furthermore, with the
country entering into WTO, China has introduced super marketization that has indeed opened
markets for multinational companies to invest. In terms of trade freedom, the country has made
trade policies liberal for foreign companies as tariffs in 2008 was found to be 3.9 (Yang, Nie, &
Ji (2010).
In terms of tax policies, the income tax rate of China is very high despite its corporate tax
rate being moderate. China government offers more support to foreign countries to enter its
financial institution as a way of providing foreign currencies. Furthermore, China has
experienced increased in FDI due to the rise of foreign investors.
In terms of labor laws, China government has changed the structure of jobs and laws are
less strict that has currently created an opportunity for unemployed people like people. However,
the high rate of unemployed has resulted in social problems that have scared away foreign
companies. In terms of consumer rights protection, the government has created opportunities for
multinational companies by expanding a market for the middle level of consumers.

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(Contributor, 2019)
2.3 Social and cultural environment analysis in China
The social and cultural environment consists of social attitudes, cultures and trends that
influence the launch of a product. The social-cultural factors include population growth, lifestyle
trends, family structure and size, work, leisure, attitudes, beliefs, cultural taboo and religion.
2.3.1 Social and cultural opportunities in China
China is the populous country globally with a total population of 1.4 billion (Wang, Cao,
Zhao & Li, 2018). The rise in population provides a massive market for products. In addition, the
combination of both high population and disposable income in China is an indication that if
Danes Coffee product is promoted in the market, it will attract consumers.
China has experienced an increase in wages and a change of lifestyles. The growth of the
economy has contributed to an increase in wealth social class as currently most of Chinese are on
“medium- level income”. With an average wage level increasing, the spending level of
consumers in China has also increased. Furthermore, with trends that China government is
expected to review wages for civil servants in 2015 ( Pan, Mukhopadhaya & Li (2019), the

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consumer’s purchasing power is likely to increase and therefore, the market is likely to be very
profitable for promoting Danes Coffee.
The literacy level of China has significantly increased with China having a literacy level
of 96.4%. The increase in literacy level shows there is a reduction in poverty levels. According
to Hannum, Hu & Park (2019), China has been able to lift over 68 million people from the
poverty line. Furthermore, there are trends that China is aiming at reducing the poverty further
by 20% in 2020 (Liu, Yu & Wang, (2015) that shows that in the future high population of
Chinese will have disposable income.
For a product to be successful in China, it must dig deep into Chinese cultures. In terms
of cultural negotiation and communication, China has a power distance of (80), individualism of
(20) uncertainty avoidance of (30), the masculinity of (66) and long-term orientation of (87) and
indulgence (24) (Hofstede, 2019).
(Hofstede, 2019)
The average masculinity level of China creates an opportunity for launching Danes
product. High masculinity is an indication that in China, status, success, money and achievement
prevails (Shi & Wang, 2011) and therefore consumers are likely to switch to Danes Coffee

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product as a way of demonstrating achievement. With masculinity, Chinese’s’ tend to Switch
products with a hope of bringing high status. Therefore, there is no doubt that increased in
consumer spending and status symbol is an opportunity in China for foreign countries. The low
uncertainty avoidance in China is also an opportunity. With low uncertainty levels, people tend
to be more innovative, risk-taking, responsible and are flexible to adapt to future changes.
Therefore, when Danes coffee is launched in the Chinese market, consumers will be eager to
take risks for switching to the new brand.
The high power distance in China is a significant threat. For example, with China having
a higher power distance, consumers are likely to follower the behaviors of leaders and adapt
products of superiors. Therefore, promoting Danes coffee may face rejection in Chinese markets.
Chinese high long-term orientation culture also poses a threat of how Danes Coffee can be
successful in the Chinese market. The long-term orientation is an indication that Chinese people
think over the long term rather than a shorter time. Therefore, launching and promoting Danes
Coffee to China indicates the product might take long before being accepted. Chinese is a
collectivist society in terms of cultural dimension and therefore family relationships and loyalty
matters most. With most of Danes competitors having established customer loyalty, Chinese may
not switch to new product easily and therefore Danes may face rejection or low sales in China.
2.4 Technological environmental analysis
The technological environmental analysis consists of technological factors that impact the
way a product is promoted into the target markets. Technological factors involve automation
incentives, intellectual property regulations, technology and communication infrastructure,
emerging technologies, consumer access to technology and legislation around.

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2.4.1 Technological opportunities in China
In 2018, China was ranked highest in terms of online populations with 772 million
spending time on e-commerce platforms (Cai, Wang, Xia & Wang, 2019). The market consists
of big technology companies such as Alibaba. Furthermore, the companies are very powerful in
the country to the extent that big companies like Amazon have failed in China. The availability
of big e-commerce companies offers a great opportunity for Danes Coffee to be launched in the
market. For example, through effective advertisement on e-commerce platforms such as Alibaba,
the brand awareness will be created and many consumers will be encouraged to place an order
for the item online.
The trend that China has yet to become a global leader in science technology also offers
the opportunity for Dana's product. In 2015, China launched a “mass entrepreneurship and
innovation” program that aimed at spreading the rate of entrepreneurship throughout China
(Keane & Chen, 2017). With the program, China is likely to move from a labor-intensive
economy to an innovative economy increasing impacting the purchasing trends of consumers.
With Facebook and Twitter being blocked in China since 2009 (Qiang, 2011), marketing on
social media is a great threat that will affect how awareness of Danes coffee will be conveyed
over a wide geographical area.

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Summary of China macro environment
(Contributor, 2019)
3.0 Conclusion
China is an ideal place for doing business with considerations of both opportunities and
threats that exist in the market. Economical and financial factors are favorable for conducting
business although some threats such as interest rates interfere with purchasing patterns of
consumers. The social-cultural factors have a high possibility of affecting how Danes product
will be promoted in society. High population and increased in average wages increase consumer
spending. The long term-orientation, Chinese collectivism society and high power distance
facilitate product rejection in China. Low uncertainty and moderate masculinity create an

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opportunity in the market. The growth of E-commerce platform paves a way of creating
awareness of the brand.
4.0 Recommendations
Rebranding strategy should be adopted for the product to fit into Chinese cultures and
taste. For example, if Danes name to those of competitors, many loyal consumers of other brands
will be convinced to purchase the product. Furthermore, with a positioning strategy that includes
slogan like “a brand that reduces cholesterol” consumers will be tempted to switch because of
the increase in lifestyle diseases. Danes Coffee should also be advertised on a platform such as
“Alibaba. With platforms having a strong “customer loyalty base”, consumers will be able
convinced to purchase the product.

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Appendix 1
PESTLE Factors summary and scale (whereby 5 in
opportunity represents excellent, 4 very good, 3.good,
2 poor and 1. Very poor) and (-5 in threats represents
very threatening, 4 threating, 3, moderate threat, 2
low threat and 1 lowest threat)
PESTLE Factors summary and scale (whereby 5
in opportunity represents excellent, 4 very good,
3.good, 2 poor and 1. Very poor) and (-5 in threats
represents very threatening, 4 threatening, 3,
moderate threat, 2 low threat and 1 lowest threat)
Political and legal environment scale Economic and finance environment scale
Opportunities and strengths (4) Opportunities and strengths (3)

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Stable government
Impressive consumer and trade laws
Low corporate tax.
Threats and weaknesses
High government expenditure
High government restrictions on foreign products
Political and environment average score = 4 very good
for launching Danes product
5
3
4
-4
High GDP
Impressive tariffs.
Economic growth
Impressive FDI
Threats and weakness
Slow economic growth
High interest rates
Inflation
Economic and financial environment
average score 3 = Average economy for
doing business
5
4
3
4
-5
-3
-4
Social-cultural environment (3)
Opportunities and strengths
High population
High number of literacy levels.
Low avoidance uncertainty
Cheap skilled and unskilled labor
High masculinity society
Change of lifestyles
Threats and weaknesses
Long term orientation cultures
Collectivists society
5
4
4
5
2
3
-4
-2
Technology (4)
Opportunities and strengths
Increased number of e-commerce platforms
Mass entrepreneurship and innovation
Threats and weakness
Restriction of Social media.
Technology average score = 4.5 (attractive
environment for doing business)
5
3
-2

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Social cultural average score = 3 Moderate socio-
cultural environment for doing business
General score
Political and legal environment = 4
Economic and financial environment = 3
Social cultural environment = 3
Technological environment = 4.5
Conclusion - a moderate environment for doing business.