Factors Affecting Retail Business Expansion in China

The assignment discusses various economical and environmental factors that affect the expansion of retail businesses in China. These factors include political, economic, social, technological, legal, and environmental considerations. It highlights the importance of local protectionism approach by the Chinese government, economic structure, social structure, and environmental legislation for foreign companies like Asda.

PESTEL Analysis
of China Market

Table of Contents
INTRODUCTION................................................................................................1
PESTLE ANALYSIS OF CHINA MARKET..............................................................1
Conclusion.......................................................................................................4
References.......................................................................................................5

INTRODUCTION
Asda is a British supermarket/retail store with headquarter at Leeds,
West Yorkshire, England. Asda was operating since 1965 in UK. It has 642
stores all over world. After its great success in UK, company wants to expand
its business in China. China has become one of the largest economies in the
world. Due to globalization it brings opportunities for expanding business and
take advantage of country's economic growth by investing in them. For
investing and expanding business economic environment is been studied
through PESTLE analysis. PESTLE analysis is an analytical tool for making
strategic planing to understand external influence of various environmental
factors like Political, Economic, Social, Technological, Legal and
Environmental on business.
PESTLE ANALYSIS OF CHINA MARKET
PESTLE analysis is used for determining and analysing Chinese market
environment. It helps in determining various components like political,
economic, social, technological, environmental and legal factors. Below
discussed are China market's PESTLE analysis:
Political Factors:
China's political system consists of Communist dictatorship party,
which contributes in bringing economic stability in nation. Political condition
in China has brought stability and suitability. China’s government focuses on
giving priority to local businesses instead of whole country advancement.
When economic system was moved from command economy to market
economy It has led to increased decentralize in management of economy,
due to which regional economy faced rise in issue of uncoordinated
development. Government of China reduced gap through implying different
efforts. Like reducing taxes and excise on businesses, providing land for
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establishing new business. Local protectionism approach adopted by
dictatorship Communist party of China have influence on Asda to enter and
expand their business in China's market and make it difficult to survive (Song,
Sun and Jin, 2017).
Economic factors:
Among the world's most economically developed countries. China has
been in the rank of second largest economy in world which exports about
10% of world total. Manufactures in China keep an attitude of optimistic for
their future. China has its most powerful resource as a double edge sword
that is their labour resources. They have a huge number of human resource
which is required to do different tasks, it has large population and all are
skilled. Large human resource in China, contributes in progress of labour
intensive industries. Asda can earn profit or revenue easily as it is one of the
largest exporter as wells as greatest consumer. It creates an opportunity for
Asda for expanding its business in China and earn profits (Grünig and Morschett,
2017).
Social factors:
Strong private relationship for communicating are maintained with
their stakeholders which is the key to success for establishing business in
China. Maintaining this structure of private relationship building is expensive
and is also very time consuming and conflicts in interest may also occur.
Corruption is also an issue in China, as it is being ranked 79th among 176
countries in context of Corruption Perceptions Index, 2016. Large hidden
expenditures and injustice are barriers for operating business in China's
market due to corruption. For smoothing network of business it implies huge
expenses other than cost of normal operations to have more quotas and for
paying less tariff. China have huge population which could be an opportunity
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for Asda to expand their business, as huge supply of workforce and large
customer base would be an opportunity (Kahn, 2018).
Technological:
China have a great opportunity in the field of technology and which
provides a chance of doing innovation. Since 2000, China had significant
development in the area of technology. Chinese government has also
invested a huge amount for innovative technologies at industrial sector. For
technological purpose research and development are conducted by
establishing a number of regions for high tech development. There are more
than 17,000 technologically advanced enterprises are operating and these
companies have 2.5 million employees. China has become one of the most
technologically advanced country. Most of its workforce are technically
skilled (Zhiyong, 2017). Due to which most of technological products are
manufactured or assembled in China. Vast opportunities is been created in
Chinese market and can gain advantage of the latest technologies. Asda can
enter and expand their business in China and can gain benefit from
advanced technologies for promoting their business.
Environmental:
Due to rapid development in industries have negative impact on
environment: for instance, rise in pollution and reducing natural resources.
Greenhouse gases like carbon dioxide and other gases are been emitted by
China the most in the world. Most of nation's rivers water is polluted and half
of China's population does not have clean water for drinking and other
purposes. It has become a serious threat on sustainable growth. Considering
this serious issue environmental legislation of China has been strengthened
and some considerations regarding environment is being made. Government
and industries to reduce pollution and climate change, together
implemented conman strategies and plans. For expanding business in China
it could be a risk for Asda, as climate change can also affect its operations
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and products. They have to follow all environmental legislation for
conducting business and take measures for sustainable environment (Pestle-
Analysis-Of-China-2016).
Legal:
China have established complete different law system for encouraging
investment by foreign companies. Series of laws and legislation have been
formulated by Chinese government regarding establishing, operating,
termination and liquidation of foreign companies. There are certain laws that
have to be followed by a foreign business that are; the company law of
People's Republic of China, Income tax law for Enterprise with foreign
investment and Foreign enterprises; interim provisions concerning
investment within China of foreign invested enterprise, Industrial catalogue
for foreign investment, etc. For expanding business in China, Asda have to
follow all those laws related to foreign investment. It would be difficult for
Asda for expanding their business, as they have different laws for Chinese
company and different for foreign company (Grünig and Morschett, 2017).
Conclusion
From the above report, it can be concluded that there are various
economical and environmental factors affecting expansion of retain
businesses in China, such as political, economic, social, technological, legal
and environmental. Local protectionism approach by political government
can influence the retail business of foreign companies as more importance
are given to local businesses. Economic structure of a country helps in the
progress of foreign companies. Social structure also has influence on
business., if there is more population, it would be easy for employing
workforce at low cost. A business should focus on environmental factors for
protecting and conserving them. There are some legislation and laws in
country that would affect or restricts the expansion of business.
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References
Books and Journals
Grünig, R. and Morschett, D., 2017. Determining the Target Markets. In Developing
International Strategies(pp. 85-104). Springer, Berlin, Heidelberg.
Kahn, M., 2018. Prospects for Cooperation in Science, Technology and Innovation among the
BRICS Members. BRICS and Global Governance, p.168.
Song, J., Sun, Y. and Jin, L., 2017. PESTEL analysis of the development of the waste-to-energy
incineration industry in China. Renewable and Sustainable Energy Reviews, 80, pp.276-
289.
Zhiyong, X., 2017, August. PESTEL Model Analysis and Legal Guarantee of Tourism
Environmental Protection in China. In IOP Conference Series: Earth and Environmental
Science (Vol. 81, No. 1, p. 012092). IOP Publishing.
Online
Pestle-Analysis-Of-China-2016. [Online]. Available through: <https://www.lucintel.com/pestle-
analysis-of-china-2016.aspx>
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