Australian Ugg Boots: PEST Analysis for Market Entry in China

This article provides a PEST analysis of the Chinese market for Australian Ugg Boots. It covers the company's history, quality standards, and potential risks and benefits of entering the Chinese market. The article discusses political, economic, social, and technological factors that may impact the company's operations in China.

Running head: AUSTRALIAN UGG BOOTS 1
Australian Ugg Boots
Student’s Name
Unit code
Student ID
Campus
Date

AUSTRALIAN UGG BOOTS 2
Table of Contents
Introduction
Briefly History of Australia Ugg Boots
Political factors
Economic factors
Social factors
Technological factors
References

AUSTRALIAN UGG BOOTS 3
Introduction
Australian Ugg boots began by sourcing boots from local manufacturers (Kinkhabwala,
2011). However, things changed overtime as suppliers began cutting corners, others interfered
with the selection and other suppliers moved their production facilities abroad aiming to cut the
cost of production hurting the operation of Australian UGG boot company (Australian Ugg
Boots, n.d.). In most instances, the quality and variety of raw materials was inconsistent and at
times it was not satisfactorily for the company as it failed to meet quality standards set by the
firm. So, the firm decided to establish its own premises. The company selects components that
are of the highest quality for instance natural sheepskin that is premium, quality threads and
wearing soles that are hard enough. With all these products, it is apparent the firm manufactures
best boots in terms of quality.
Brief Description of the company and the country of operation
Australian Ugg boots is a registered enterprise in Australia that specialized in providing
sheepskin boots that are purely Australian (Australian Ugg Boots, n.d.). The enterprise was
established over a decade ago and is located in Braeside in Melbourne. It is in Braeside that the
company has its manufacturing, distribution facilities and factory outlets. Australian Ugg Boots
is a proud member of associations such as the Australian Sheepskin Association Inc.
China has become an emerging economy and thus offers many market avenues for
international investments. Though China offers substantial potential for economic prosperity
yielding access to a large market and large savings with regards to labor costs, extreme care and

AUSTRALIAN UGG BOOTS 4
caution has to be taken due to variations in political and cultural environment as such variations
are the recipe for risk and uncertainty for investors.
Political factors
Some of the political factors that may impact Ugg Australia™ in China include aspects
such as government regulations (Pestle Analysis, 2015). China exercises rules and regulations
that are both formal and informal that firms must abide by thus impacting the operation of the
firm. Studies conducted reveal that political force is the most volatile force. Over the past few
years the government has put emphasis and frameworks that support the development and
establishment of e-commerce. Legal issues on the other hand in China provide the legal
framework for the establishment of e-commerce though the concept is at its early stage. China is
a tyro in matters of drafting legislation pertaining to e-commerce in topics such as intellectual
property rights and taxation issues (Gupta, 2013). As far as conducting business in China is
concerned, there are no regulations that support the privacy and recognition of signatures
digitally, rights of consumers and validating contracts electronically.
One of the marketing concepts is that it is always prudent for enterprises to have their
trademarks registered in a bid to protect their enterprises (English, 2017). As a matter of fact,
there has been a fairy tale that has been going around particularly targeting UGG boots that
Australian companies should not be an Ugg, they should have their trademarks registered before
things become ugly (Turkiewicz, n.d.). Though it appears that there are many companies that are
using the trademark UGG in one way or another in Australia, the situation however is ambiguous
when the word applies in the U.S. markets (BBC, 2017). The primary message being sent from
the use of UGG trademarks is that in a global environment it is always critical to have
intellectual property rights protected in any nations that are located overseas where the company

AUSTRALIAN UGG BOOTS 5
wishes to sell its products. Fights over the usage of the word have a long history that dates back
in the 70s (Cormack, 2016).Back then the name UGH BOOTS was registered by an Australian
surfer by the name Shane Stedman for purposes of marketing sheepskin boots. It is thus
important that Australia Ugg Boot should extreme caution as it moves to China on the issue of
patent rights.
Economic factors
Over the past years, the economy of China has experienced a substantial rate of growth in
GDP. Economic reports suggest that if China maintains the same pace at this rate, it may surpass
the GDP of U.S. soon. The GDP rate of China indicates that each citizen is adding more value to
the economy. This also means that the purchasing power of people is high due large portion of
disposable income making it possible to purchase products. The cost of labor in China is also
low compared to other nations in the world (Gupta, 2013). This is the primary reason why
companies such as Apple are moved in hiring workers from China. The average wage of Chinese
laborers is low. The salaries of workers working in Chinese factories are considered meagre
compared to those in either Europe or the U.S., for instance, the hourly pay in China is about 75
cents (Gupta, 2013). The workers in China commit themselves to long hours aiming to satisfy
the clients of the company making firms earn high profits. Ugg Australia in such a case will be
able to capitalize and maximize on using Chinese workers to minimize production costs.
There is also an impressive growth rate in China amidst fears of slowing down. Some of
the factors that need to be analyzed as risky is the high rate of inflation and exorbitant property
rates in China (Gupta, 2013). Recently, there was increment of interest rates by the People’s
Bank China affecting commercial banks as the reserve requirement is nine times higher. The
Central Bank is also urging banks to limit their lending capacity and impose limits on people

AUSTRALIAN UGG BOOTS 6
borrowing money for home purchases. As such Ugg Australia may be adversely affected by such
moves as people will be limited to purchase home products as banks limit them from borrowing
money to purchase home commodities. However, the strong economy as indicated by the growth
of GDP is good sign of a good market as people have large disposable incomes that they can
spend on purchasing commodities from UGG Australia. The low cost of labor in China is also
important for UGG Australia as it means that the cost of doing business in China will be low
making the firm maximize its profits (Harrison, 2015).
Social factors
The social and cultural frameworks in China play a critical role as demographics are
highly dynamic (Agee, 2018). For instance, population growth and composition of age keep
fluctuating. Such changes can distort social trends and cultural norms. The size of the family and
social behavior also impacts on decision making process. Other social factors entail consumer
lifestyles, religion and education (Lucintel, 2016). According to Hofstede’s dimensional values,
China can be classified as a collectivistic culture. The level of literacy in China is estimated to be
over 90% (Gupta, 2013). The policy in China prioritizes on education making the majority of the
citizens in the nation to be literate.
China has over 420 million users of the internet. Since there is access to the internet, most
of the consumers in China shop online (Gupta, 2013). For instance, Taobao is ranked as one of
the China’s largest website where many Chinese people spend their time purchasing online
products. According to predictions by the Boston Consulting group, the number of people using
the website is expected to increase in future.

AUSTRALIAN UGG BOOTS 7
E-commerce has transformed the way local consumers do their shopping (Czinkota,
Ronkainen, & Moffet, 2011). Conversely, there is a number of consumers who are risk averse
when it comes to online shopping and they prefer physical shopping where they have personal
contact with the sellers of the products.
As such UGG Australia is better positioned in establishing e-commerce as it is an area that the
company has invested heftily. The use of e-commerce in China is a good ground for UGG
Australia to conduct its business as the company has been using this strategy by displaying the
products it sells in its websites and the consumer are tasked with the responsibility of shopping
online.
Technological factors
One primary problem is the issue that in China the establishment of business to consumer
market does not provide a safe and stable means of online payment (Dlabay & Scott, 2011). The
fact that many Chinese people are risk averse based on long term orientation, this exacerbates the
problem. According to reports and findings it is apparent there has only been 1% penetration of
credit card usage in China indicating that the most common method of payment has low
acceptance in China and thus payment systems that support online transactions face low usage in
China (Gupta, 2013). The lack of safe methods when it comes to making online payments in
China has been attributed to be the key reasons why there is low usage and penetration of online
payment systems.
Conclusion
In conclusion, based on the above factors it is evident that China provides a flourishing
market that only needs minor changes. Companies such as UGG Australia can reap great benefits

AUSTRALIAN UGG BOOTS 8
by understanding China’s macroenvironment factors in which they function and operate. The
rapid growth rate of the economy and political stability makes the development of e-commerce
industry makes it lucrative to investors. However, there are other risks such as mistrust and lack
of a secure and stable systems of making online payments. Also, the legal systems fail to give
and accord proper protection. All such factors lead to uncertainties and exert challenges on the
market players.

AUSTRALIAN UGG BOOTS 9
References
Agee, A. (2018, April 20). PESTLE Analysis. Retrieved from School of Management:
https://libguides.sjsu.edu/SofManagement
Australian Ugg Boots. (n.d.). About Us. Retrieved from Australian Ugg Boots:
https://www.australianuggboots.com.au/en-au/company/about-us
BBC. (2017, October 17). Ugg: The battle over an iconic Australian boot. Retrieved from BBC:
http://www.bbc.com/news/world-australia-41464142
Cormack, L. (2016, 23 May). Australian ugg boot manufacturers fighting to use the word 'ugg'.
Retrieved from The Sydney Morning Herald:
https://www.smh.com.au/business/consumer-affairs/australian-ugg-boot-manufacturers-
fighting-to-use-the-word-ugg-20160523-gp1pwt.html
Czinkota, M., Ronkainen, I., & Moffet, M. (2011). International business. Hobonken(N.J):
Wiley.
Dlabay, L., & Scott, J. (2011). International business. Mason,OH: South-Western Cengage.
English, C. (2017, June 27). The company that makes Ugg boots is under attack. Retrieved from
New York Post: https://nypost.com/2017/06/27/the-company-that-makes-ugg-boots-is-
under-attack/
Gupta, A. (2013). Environment & PEST Analysis: An Approach to External. International
Journal of Modern Social Sciences, 2(1), 34-43.
Harrison, A. (2015). Business environment in a global context. Chicago: Macmilan Publsihers.

AUSTRALIAN UGG BOOTS 10
Kinkhabwala, A. (2011, September 12). Unlikely Pair: UGG and Tom Brady. Retrieved from
The Wall Street Journal:
https://www.wsj.com/articles/SB10001424053111904265504576564950268469030
Lucintel. (2016, October). PESTLE Analysis of China 2016. Retrieved from Lucintel:
http://www.lucintel.com/pestle-analysis-of-china-2016.aspx
McDonough, M. (2017). Understanding a PESTLE Analysis and its Components. Retrieved
August 22, 2017, from Brighthub Project Management: http://www.brighthubpm.com
Pestle Analysis. (2015, March 23). PEST Analysis of China. Retrieved from Pestle analysis:
http://pestleanalysis.com/pest-analysis-of-china/
Professional Academy. (n.d.). Marketing Theories-PESTEL Analysis. Retrieved August 22,
2017, from professionalacademy.com: http://www.professionalacademy.com
Tradestart. (n.d.). Market entry strategies. Retrieved October 7, 2017, from Tradestart.ca:
http://www.tradestart.ca
Turkiewicz, J. (n.d.). The Story of Ugg Boots. Retrieved from Word Press:
https://fspstoryofstuff.wordpress.com/the-story-of-ugg-boots-by-justine-turkiewicz/