Business Attractiveness of China: A PESTEL Analysis

Running head: INTERNATIONAL MANAGEMENT
International management
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Executive summary
The aim of this report is to discuss about the business attractiveness of China in the current time.
In doing so, this report used the data from World Economic Forum and The Global Economy to
compared and analyze the current business factors relevant in China. It is identified that China is
mostly having favorable business environments, which are helping them in becoming a global
business hub. On the other hand, a number of negative factors also being identified, which may
prove challenging for the foreign business organizations. This report concluded that joint venture
and Greenfield investment will be the most ideal entry strategies for the business organizations in
doing business in China. Two real world success stories are also discussed that proved the
effectiveness of the stated strategies.

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Table of Contents
Introduction......................................................................................................................................3
Identification of the external factors................................................................................................4
Political factors............................................................................................................................4
Economical factors......................................................................................................................9
Social factors.............................................................................................................................12
Technological factors.................................................................................................................14
Environmental factors................................................................................................................16
Legal factors..............................................................................................................................18
Justification of the entry strategies................................................................................................20
Joint venture...............................................................................................................................20
Greenfield investment................................................................................................................21
Conclusion.....................................................................................................................................21
Reference.......................................................................................................................................23

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Introduction
In the current business scenario, it is becoming more important for the contemporary
business organizations to enter in the foreign markets in order to enhance their business
potentiality. This is also increasing the competition among the countries across the world to
attract more foreign investments. In addition, they are also increasing their competiveness over
the other countries to enhance their attractiveness to the potential business organizations (Lepori,
Seeber and Bonaccorsi 2015). Business organizations are determining the different aspects and
factors of doing business in a foreign market prior to entering. Determination of the business
attractiveness helps in identifying the important factors that will have influence and impact on
the long term business operation. In accordance to these factors, it can be concluded whether the
particular country is attractive for the business organizations or not (Docquier and Machado
2016). It is also important for the business organizations to identify the both the positive and
negative factors of doing business in a particular country. Accordingly, they will design their
organizational strategies and approaches to leverage the positive factors and avoid the negative
ones.
In the recent time, China is considered as one of the most promising economies in the
world and is attracting a major chunk of foreign investments over others. There are number of
reasons, which are helping them to stay ahead in the global business scenario (Hsueh et al.
2013). Some of these factors are huge population and marketing opportunities, positive economic
growth rate, stable governance and lower cost of resources. In addition, China is also rapidly
becoming a global hub for the major multinationals across the world due to their favorable
business environments in place. However, further detailed analysis of the business factors in
China is required to have the deeper picture.

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This report will discuss about the major business factors in having operation in China
using the PESTEL approach. Both the positive and negative factors will be identified and
discussed. In addition, the idea entry strategies in doing business in China will also be discussed
in this report citing some of prominent real world examples of multinationals.
Identification of the external factors
Political factors
Political factors refer to the governance and stability in the country and the extent to
which the business organizations are having stable operating environment and assistances from
the governments. One of the key elements is political stability. According to the global economy,
China scored -0.55 in terms of political stability (TheGlobalEconomy.com 2018). This denotes
that China is having moderate level of political stability in the country. Thus, business
organizations operating in the country will have favorable political environment along with
having the risk for future negative consequences. It is also identified that political stability of
China is improving if being compared in last few years. This is a positive factor for the business
organizations in doing business in China (Lee and Zhang 2013).

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Figure: 1
Political stability of China
Source: (TheGlobalEconomy.com 2018)
It is also identified that China is also having favorable score in terms of government
effectiveness with having the score of 0.41. This denotes that government is effective in the
country in regulating the business environment (TheGlobalEconomy.com 2018). Business
organizations operating in the country will have the provision of having effective governance in
place.