MGT704 Global Business Environment

Added on - 12 Sep 2021

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Expansion of Private Aviation in China
Name of the Student
Name of the University
Author note
Executive Summary:
The paper shows macroeconomic conditions in the host countries play great role in
foreign expansion of multinational companies. Adverse political conditions can pose serious
threats to the expansion and sustainability of the foreign companies. Finally it can be pointed out
that foreign companies should take steps to adapt to the market conditions in the host countries to
take advantage of the market of the latter.
Introduction or case background:
The case opens against the backdrop of aviation industry in China which is strictly
controlled by the government. The case study which acts as the nucleus of the paper provides a
unique blend of two macroeconomic factors acting against one another which is ultimately
proving disastrous for the growth of private aviation industry in the country. China hast a vast air
space and second largest number of billionaires lagging just behind the United States. The
country is the third largest country in the world as far as area is concerned and has an increasing
consumer base. These two economic factors are capable of boosting private business jet industry
in the country. However, the airspace in China is largely under the control of Chinese defence
forces. The bureaucratic nature of the aviation control in the country prevented dynamic approval
of flight plans supported by private jet owners. Moreover, the main airports of the nation like the
Beijing Airport hindered smooth private jet operations by restricted the number of flights to two
an hour. The government of China followed a stringent anti-corruption system. The government
imposed heavy taxes on the importers importing private jets and also had a future strategy to
impose a luxury tax on users of the private jets. These intense control and taxation measures
jeopardised the growth of the Chinese private aviation industry. The scope of the study would
rests on two issues which are opposing the growth of the private aviation industry in China. The
first being intense government control and the second being lack of private investments. The
analysis of the two issues would lead pointing out alternative solutions and recommendations for
management of Airbus, the luxury jet company which is eyeing China to revive its own business.
Body of the analysis:
This section would analyse the problem prevailing in the private aviation sector in China
(i) Problem identification:
An analysis of the case study shows that the private aviation industry in China faces
several impediments in spite of the fact that the country has a second largest number of
billionaires behind the United States. The following are the problems which the development of
the private and luxury aviation is facing in China:
Strict control of the Chinese Government:
The Chinese Government exercises strict control over the private industry which impedes
fast growth of the industry in the country in spite of the profitability which the latter can earn in
the country. A leading Chinese daily, The China Daily reports that the poor administration and
strict regulation of the private aviation makes it difficult for the private aviation companies gain
permits to use China’s air space ( 2018). The same is echoed in one of the
editorials of the Diplomatic. The Government of China imposes strict control on private and in
fact the Chinese economy in spite of being one the richest economies in the world is far from
liberalism (The 2018). The strict control of the government is effective not only
in case of foreign companies but also on the Chinese companies seeking foreign expansion.
Beijing imposes limitation on foreign investment in order to prevent flowing of large amount of
Chinese capital out of the economy. The government even tries to control Chinese firms
operating in other other economies. As far as the private aviation industry is concerned, the
leading manufacturers of private jets are headquarters in foreign countries. For example, Airbus
is based in Leiden, Netherlands ( 2018). The Government of China imposes high
taxes in goods and services imported from foreign countries ( 2018).
The outcome of these strict government control and taxation on foreign companies including
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