Boost Juice's International Strategy for Expansion in China

This report suggests the use of wholly owned subsidiary strategy for Boost Juice's expansion in China. It also discusses pay rate, managerial roles, attitude of local customers, transfer of funds, public holidays, GDP, inflation rate and interest rate.

INTERNATIONAL
STRATEGY
Contents

1
Introduction...........................................................................................................................................1
Recommended Strategy.........................................................................................................................1
Wholly owned subsidiary..................................................................................................................1
Pay rate and managerial roles............................................................................................................2
Attitude of local customers................................................................................................................3
Easy or difficult to transfer funds......................................................................................................3
Numbers and timing of public holidays.............................................................................................3
Current GDP, inflation rate and interest rate......................................................................................4
Conclusion.............................................................................................................................................4
References.............................................................................................................................................5

2
Introduction
China is a politically and economically stable market and provides support to the business
that aims to enter into the nation (Jisi, 2011). There are larger numbers of skilled labourers
available in the country which makes it further easier for the companies to manage the
operations especially at the time of entry. Boost Juice Bar also has a tremendous scope in this
country as the lifestyle of the people is changing and they are demanding for the products that
are healthy. This report is going to summarise the strategy that Boost Juice is going to
implement while expanding their business in China.
Recommended Strategy
Wholly owned subsidiary
Among the different strategies that is being used by the firms so as to enter into any nation.
The use of wholly owned subsidiary can be the most beneficial for the firm. The major reason
for it is the fact that China has huge investors pools hence managing finances will not be a
challenge for the company (Ozy.com, 2018). The major reason for choosing wholly owned
subsidiary for this firm is that it will be able to enhance the speed of their operations and
growth in the Chinese market (Guthrie, 2012). Since there is cultural difference between the
two nations hence this would be an effective strategy to hold with the policies, standards and
organisational culture. The wholly owned subsidiary allows a company to maintain its
standards and at the same time it also improves the way in which organisations are dealing
with the problems that might arise in the expansion. This mode of entry allows the company
to make strategies according to their requirement. This helps the company in maintaining the
strengths of company in China and also ensures that quality of the products remains on the
higher side.
It is also to be understood that Chinese government is supporting all kinds of foreign direct
investments. The investment taxes are also on the lower side hence it will not be problems for
the companies to manage the finances (Yao and Daly, 2019). Setting up wholly owned
subsidiary also allows the company to ensure that they are providing training to the
employees as per their requirements (Govindarajan and Ramamurti, 2011). The strategies
such as pricing and product details can be improved with the help of these strategies. This is
because there will be no external parties to influence the decisions of the company. It allows
vertical integration of supply chains which is very much critical for maintaining the balance

3
between the demand and supply and at the same time it also reduces the failures in the supply
chain such as delays and over costing. Risk management also becomes easier in the case of
this strategy as it enables the firm to make contingency strategies as per their choice. Since
effective resource utilisation can be done with the help of this strategy hence it enables them
to improve the way in which they are dealing with the sustainability of the firm within the
country. This strategy also helps the firm in favourable tax treatment abroad as the operations
are done according to the company with less external influences.
Training and other kinds of strategies can also be developed by the company’s management
itself hence it will improve the way in which they are dealing with their operations. Wholly
owned subsidiary will also allow the company to place right persons at right positions which
will allow the company to grab the opportunities that is present in the market. It also has
positive impact on the value preposition of the firm as it allows improving all the aspects
related to business (Verbeke, 2013).
Pay rate and managerial roles
There are various job roles in the fruit juice companies having different kinds of pay scale.
From lower levels of management to highest managerial positions, the salaries are distributed
accordingly. The salaries of the employees of Boost Juice will be higher than average pay
rate of China 95000.00 CNY/year. The higher salaries will ensure that they will be able to
attract highly talented people in their workforce.
Job Roles Salaries in China Salaries in Australia
Production manager CNY 280,000 (Pay scale,
2019)
A$18-A$22 (hourly)
Sales and marketing managers CNY 240,000 (Pay scale,
2019)
A$17-A$19 (hourly)
Human resource managers CNY 290,000 (Pay scale,
2019)
A$15-A$18 (hourly)
Finance managers CNY 350,000 (Pay scale,
2019)
A$21-A$22 (hourly)
Store manager CNY 650,000 (Pay scale,
2019)
A$20-A$23 (hourly)

4
All these salaries have been decided according to the average pay scale in China and also by
comparing the salaries of the competitor company Huiyuan Juice Group Limited.
Attitude of local customers
People within China are highly attached with their own culture but in the recent years, the
acceptance of the products from outside market has increased. Since in the age of
globalisation China has become one of the attracting destinations for the companies hence
local customers are also letting off their loyalties and their main focus is just to buy quality
products that is available at lower prices (Ramasamy, Yeung and Laforet, 2012). Main focus
of the customers is on innovative products rather than the fact that company belongs to which
country. However it also depends on the way company projects its product in the market.
Marketing has a very much critical role in this.
Easy or difficult to transfer funds
It is extremely difficult to get funds out of China. China does not have a strict capital control
which also includes different restrictions on the way money can leave out of China. Still
money flows out in vast amount. There is trade agreements between China with Australia i.e.
chAFTA has made the process to be lengthy and hence it takes time of the businesses to
transfer funds. In case of FDI, companies are not allowed to take money out of the country so
easily. At the same time there is difference in the use of currency in both the nations hence
currency fluctuation produces much bigger problems for the companies working in China to
take out money. Except the banks that are operating in both the nations Australian banks
haven’t made any significant relationships or agreements with the banks in China (Clayton,
2016).
Numbers and timing of public holidays
There are seven public holidays in China. The timing tables are as follows:
Holiday Name Date
New Year Day 1st January
Chinese new year (Spring festival) 5th February
Qingming Festival (Tomb Sweeping) 5th April
Labour Day 1st May
The Dragon Boat Festival 7th June
The Mid-Autumn Festival 13th September
National Day 1st October

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Apart from this, there are certain holidays that are for certain people only. These are
International Women’s Day where adult female employees have half a day off. On youth day
i.e. 4th May, youth aged 14-28 years gets a half day off (China Highlights, 2019).
There is no specific season in which there is downfall in the economic activities or work
might be slower when compared with other seasons. It remains usual and uninterrupted in all
seasons. Multinational culture has gone into the routes of the Chinese society. It is also seen
that since many multi-national firms have established itself within China hence the work
culture has also developed accordingly hence people are focused towards doing their work as
per the changes in the global business environment and work throughout the year (Cavusgil,
Ghauri and Akcal, 2012).
Current GDP, inflation rate and interest rate
China is one of the fastest developing nations in the whole world. GDP of China is second
largest in the world i.e. 13608.15 billion USD in the year 2018 just behind United States
(Trading Economics, 2018). The inflation rate of China in the December 2018 was around 1.9
which was lower than economist’s expectation of 2.1%. The interest rate in China was
recorded at around 4.35% (Gan, Hernandez and Ma, 2016). However in the current scenario,
there is trade war going on in between China and USA. This will have greater impact on the
operations and entry strategies of the firm. Till now the significant impact was not seen on
Chinese market as it remains to be strong but it is expected that banks have to lower their
interest rates in China so as to attract new set of investors. It is this trade war that has reduced
the development of different industries within the country and so is the fruit juice industry. In
order to avoid trade war Boost Juice can take use of new investments sources. They can also
take use of lean manufacturing approach.
After analysing all these aspects it can be said that Boost juice needs to make investments in
the wholly owned strategy in an appropriate manner. The special consideration should be
made to investments and consumer behaviour.

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Conclusion
From the above based report, it can be concluded that China is an excellent destination to do
business. The use of wholly owned subsidiary strategy can be beneficial for the firm. With
higher numbers of internal and external investors available with the firm Boost Juice can
easily make investments in China. This strategy is helpful in better management of risks,
vertical integration of supply chain etc. Since the culture of the people have changed hence
people work in every season with same commitment and at the same time consumers in
China have also started to have positive thinking about international firms.
References
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Cavusgil, S.T., Ghauri, P.N. and Akcal, A.A., 2012. Doing business in emerging markets.
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China Highlights, 2019. China Holidays 2019/2020/2021. [Online] Available at:
https://www.chinahighlights.com/festivals/china-public-holiday.htm. [Accessed on 17th
August 2019]
Clayton, A. 2016. How Companies get Money out of China. [Online] Available at:
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[Accessed on 17th August 2019]
Gan, L., Hernandez, M.A. and Ma, S., 2016. The higher costs of doing business in China:
Minimum wages and firms' export behavior. Journal of International Economics, 100, pp.81-
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Govindarajan, V. and Ramamurti, R., 2011. Reverse innovation, emerging markets, and
global strategy. Global Strategy Journal, 1(3‐4), pp.191-205.
Guthrie, D., 2012. China and globalization: The social, economic and political
transformation of Chinese society. Routledge.

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Hartmann, E., Feisel, E. and Schober, H., 2010. Talent management of western MNCs in
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Jisi, W., 2011. China's search for a grand strategy: A rising great power finds its
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Ramasamy, B., Yeung, M. and Laforet, S., 2012. China's outward foreign direct investment:
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Verbeke, A., 2013. International business strategy. Cambridge University Press.
Ozy.com, 2018. China's savings pot teases global wealth managers. [Online] Available at:
https://www.ozy.com/fast-forward/chinas-savings-pot-teases-global-wealth-managers/91251.
[Accessed on 23rd August 2019]
Yao, K. and Daly, T. 2019. China to slash taxes, boost lending to prop up slowing economy. [Online]
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