Strategic Management Report: China Market Analysis and Opportunities

This report provides a strategic analysis of the Chinese market, examining its external environment and the opportunities and threats it presents for foreign investors. It delves into the impact of globalization, the country's economic growth, and the challenges of operating in a politically and culturally diverse environment. The report analyzes the Chinese market, focusing on industry competition, and includes a SWOT analysis of Morrisons, a UK supermarket chain, exploring its potential entry into the Chinese market. It also discusses business-level international strategies and offers recommendations for navigating the complexities of the Chinese market, considering factors such as language proficiency, market access, and consumer preferences. The report highlights the importance of adapting to the dynamic business environment and understanding the competitive landscape to succeed in China.

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STRATEGIC MANAGEMENT
Strategic Management
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Course
College
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Abstract
China is an emerging and fast developing nation that provides opportunities for new investment
from foreign investors. Despite the country having great potential for economic growth and
provision of low labor costs, firms must be cautious of due to political and cultural environment
differences which cause risks and uncertainties for the foreign investors. This paper will discuss
the external environment in China and various opportunities and threats.
Table of Contents
Abstract.......................................................................................................................................................2
Introduction.................................................................................................................................................2
The Chinese Market External Environment Analysis..................................................................................2
Opportunities and threats.......................................................................................................................2
Industry Competition in China.................................................................................................................5
Morrison’s Vision and Statement................................................................................................................7
SWOT Analysis of Morrions.......................................................................................................................8
S: Strengths.................................................................................................................................................9
W: Weakness...............................................................................................................................................9
O: Opportunity............................................................................................................................................9
T: Threats....................................................................................................................................................9
Business-level international strategy.....................................................................................................10
Conclusion and Recommendation.............................................................................................................11
Bibliography..............................................................................................................................................12

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Introduction
Recently, China has started to make reforms in its foreign and has started opening its
environment to outside world. The issue of globalization has been a major factor to consider. The
country’s economy has developed to be second largest economy globally only coming second to
United States. This has been established through the measure on purchasing power parity. The
Chinese government has the aim of quadrupling its economy gross domestic product by the year
2020. It also has the goals of doubling its per capita (GDP World Bank Report 2008). The
Chinese government has reduced its involvement in the market and has been evident since 1978.
The government has encouraged a dual economic system that has developed from being socialist,
centrally planned economy to a being a socialist market economy system. The Chinese economy
has an economic system market with socialist characteristics. The rapid growth in the industrial
sector has been due increasing advancement in the field of technology, increase in productivity
and increase in foreign direct investments.
The Chinese Market External Environment Analysis
Opportunities and threats
Currently firms have been practicing offspring, outsourcing and relations. These have been
influenced by various reasons such as production. The revolution of globalization has established
both opportunities and threats for individuals, firms and countries. The environment of
international business is diverse from that of domestic business environment. There arise issues
since the business must carry out business operations in diverse international environment and
there arises issues such as exporting, importing and conversion of currencies (GDP growth rate).
There are a number of reasons as to why many international firms have relocated their business
to china. These reasons will also show how globalizations or the external factors to a country can

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influence business operations in diverse ways. China provides a skillful population in reverse
engineering. The Chinese skillful population has perfected this art which helps increasing
production at a low costs. This business environment also avails high quantity of skilled labor
which ahs help assure foreign companies to invest and run their business operations in the
country. For firms to operate internationally, it is essential to have enough skilled and technical
labor which is provided at low cost. For the international firms in China, there I provision of
labor at low wages and salary rate. For example it would be easy for Morrisons to operate in
china due to the availability of skilled cheap labor.
China offers an extensive land area for investment. This extensive land allows companies to
acquire land on lease basis and develop it. This ensures that the firms have the freedom to make
maximum use of land resource. Another opportunity factor is that China provides sufficient
infrastructure (GDP World Bank Report 2008). The country avails a vast high quality road
network and widespread infrastructure. The good infrastructure is good for firms. For efficiency
in the supply chain, the company has a great road networks and other facilities such as ports. The
country has an abundant source of raw materials. These ensures that companies can get high
quality raw materials at a low costs. For instance international individuals and firms move to
china to purchase affordable products and services. Unlike other countries, China has a
consistent and reasonable tax system. They taxes levied are affordable and reasonable. This
enables businesses to reduce cost of doing business hence high quality products and services at
affordable prices for the consumers.
As much as Chinese economy provides new prospects for international businesses, the
environment also provides threats. The Chinese economy has been growing at a fast rate in the
recent years. Most international companies wish to relocate their business operations in China

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but there are issues to face such as crisis, financial stability suitability of the market conditions
and other factors which earn organizations revenue for their investment. One of the threats to
doing business in China is issues in language proficiency (Huber and Ennis 2014). It has been
evidenced that a high section of the Chinese population is not conversant with the English
language and this brings issues with communication.
Another challenge for businesses in is the unfavorable market access. The buying habits of the
local consumers and regulatory requirements make the country an unfavorable place to invest.
Another issue that supports this tendency is that the market environment tends to be detached
from other global economics. For example evidence has shown that an approximately 37% of the
products from the United States tend to fail. The consumer preference in China is one of a kind
and due to class shift in the recent past. The consumer market is detached from markets
especially for products and services from international businesses. For new companies, it is
tough due competition from local firms. Many Chinese firms are trying to enhance the quality of
their products and services (Huber and Ennis 2014). There is increase competition which is
coupled with the fact that local consumers tend to prefer goods from native companies.
Industry Competition in China
Successfully competing in China market is the main aim of most international businesses and
they try to attract market share. For companies to adequately compete, they need to look at three
competitive issues as explained.
Fluidity
The biggest competitive issue for international companies in China is the dynamism of the
business environment. The company management can never get into comfort zones about their

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company’s competitive market position. The issue of fluidity is brought about by enforcement of
rules and regulations by the government which varies with the location of the business. Another
issue is some business partners can abandon contracts for better prospects and emerging
competitors and become threats. Information sharing is an issue in China and therefore firms
have no knowledge of changing tides in the market hence caught unawares. Creating good
relationship with government is not usually enough since laws and regulations change with the
region (IBISWorld 1999).
World Trade Organization Fallout
The accession to the WTO has increased competition in China more challenging for the foreign
firms. One may think that the aim of being a member is to create a level playing field for
business. The truth of the matter is that membership of China created avenues for foreign
competitors and the local firms had to strategize for survival. Most foreign companies in China
sight unfair competition and lack of protection of intellectual properties rights which does not
provide fair competition. The central government has tried to enact and be true to the country’s
commitment to its WTO commitments but the local governments find that elimination of such
practices would result to loss of job for the local population (IBISWorld 1999).
Talent Shortage
Despite the increase in the number of high education institutes, there seems to be shortage of
high-level talent. There has been increased competition between local firms and foreign
companies for the better qualified, internationally educated and experienced workforce. This has
resulted into talent war. The Chinese government pointed out its goal of reversing the brain drain
which occurred in the 1980s and 1990s. For example it has been witnessed that the provincial

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government and organizations are enticing professionals (IBISWorld 1999). The Chinese
Academy of Science and other big companies such as Huawei have been sending delegates in
other countries to try and lure Chinese scientific, engineering and managerial professionals so as
to come back home and help the country in its development (Huber and Ennis 2014). This trend
has resulted into competition of local and foreign firms for high qualified staff in the same talent
pool. It has made the recruitment, development and retaining of employees very hand due to
competition.
A company like Morrisons Supermarkets plc which trades as Morrisons is a company in United
Kingdom and the 4th largest chain of supermarkets. The prospect of this company entering the
Chinese market will be faced with stiff competition. This reason to this competition is the
availability of many supermarkets in China which provides the same products. For the company
to edge its competitors it will need to formulate a strategy to enhance its competitive advantage.
For instance due to technological advancement, the company can introduce online shopping and
also ensure it provides unforgettable experience for customers. This can achieved through the
provision of best customer service, range and low prices.
In today world globalization has revolutionized how business carryout their business operations.
Technology has been a great resource and has helped companies shape their competitive
advantage. Morrisons usually uses online services in marketing and selling its products.
Technology has enabled many people to own devices which can access the internet which means
that consumers can easily access and buy goods online instead visiting local stores. Due to the
high population in China, the company has the possibility of reaching a lot of people with
diversified needs. Due to its online presence, the company can make its name in China. Another
important resource the company has is its staff. The company invests a lot in training its

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workforce to ensure quality delivery and customer satisfaction. The company the approach of
career advancement in which it seeks to create new careers for fresh talent.
Morrison’s Vision and Statement
The mission statement and vision of any organization is related to its purpose and is usually
conveyed in a written from. These two are statements from the company that respond to the
questions at whom we are, where we are going and what we value. Research done by Bain and
Ccm which is consulting firm shows that approximately 90% of the 500 companies surveyed
provide mission and vision statements. These statements are clearly communicated, well
understood and collectively shared. Those organizations have the statements tend to have good
performance than those that lack them (Porter 2010).
The aim of the mission statement is to convey information on the company’s reason for being,
and how it seeks to serve the vital stakeholders. This includes consumers, staff and investors and
others such as government and the community the business operates. In most cases the mission
statement is made longer than the vision statement and sometimes also includes the summation
of the organization’s values. Values entail the beliefs of the organization in which they are
invested emotionally.
Morrisons’ Mission Statement
The mission of the company is to provide its entire customer base with the best value for their
money on their period shopping.
Vision
The company vision is to be the “Food Specialist for everyone”. Through this vision the
company the company can differentiate itself from its main competitors by ensuring:

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 The company has ownership of its own packing and production facilities.
 It has more staff in store preparing food in comparison to its retailers.
 The company also has more specialist butchers, fishmongers and bakers in comparison
with the competitors.
SWOT Analysis of Morrions
When one is doing a SWOT analysis of the company, one gets a holistic view of organization by
pointing out the strengths, weakness, opportunities and weaknesses.

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S: Strengths
 Efficiency in the distribution network
 A well organized supply chain
 Product portfolio
 Presence in the market
 Larger quality human resource
W: Weakness
 Does not have geographical presence
 Has experienced a large number of
recalls
O: Opportunity
 There is growing awareness on organic
products
 The potential of international expansion
 Increasing demands
T: Threats
 Increase in market competitor
 Tax issues
 Increase in the cost of human resource
The matrix above shows the SWOT analysis of the four areas of the company. It is evident that
the company is having a strong and reliable distribution network. In the development the
company has tried to develop its supply chain and distribution network since its main USP is to
avail fresh foods all over the country. For the better customer experience, the company ensures
that they deliver goods on time due to freshness and there they have designed a well managed
and monitored distribution system. Due to the age of the company, it has the ability to attract a
lot of diverse customer base. Research has shown that the company has approximately 12%
presence in the market and this has been made possible due to its ethical and qualified staff.

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It has been evidenced that the company has a small presence which is seen as weakness. The
presence of its products is also low. The company hasn’t had the ability to maintain a mean
presence in all its areas it delivers (Nowak and Anderson 2009). Due to lack of an average
presence, it has been had to enhance its market share in the United Kingdom which has
translated to less finance. Another weakness is that they have experienced and major product
recall based on questionable quality. This had an effect on its customers who thought generally
the company deals with low grade products and tarnished the brand reputation of the company
which has been evidence through decrease in demand in some stores.
A major opportunity for business development is that the consumer base is increasingly having
awareness in organic products (Porter 2010). This means that the company scope is also
developing. To have best returns, the company needs to market more on the essence of organic
products to invest in the growing trend. It is evident that big stores are tapping into this market
too. Morrisons has a head start in that they already have a wider number of company owned
organic products in their product portfolio.
As seen in the matrix above, the company is experiencing threats from the external environment.
This has made it not possible for the company to enhance its market presence for a longer time.
As noted the company holding 12% of the market despite being one of the oldest getting
competition from Tesco which has 30.10% market share. And this might have been from the
reduction in brand reputation. Another issue is that the company faces high taxation and its large
human resource base means high labor costs.
Business-level international strategy

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Due to the increased need for a global stage, the company should think of an international
strategy. It will help the company enhance its market presence. The company should consider
entry into the Asian market and particularly Chinese economy. The reasons to this are the cost
advantage and the higher disposable income in the Asian economy which is growing and
developing very fast (Nowak and Anderson 2009). The best option to get into such markets is
having a joint venture which will help sort out local legal issues and minimize the cost of
establishment. It should also open stores in areas where the supermarket culture has already been
accepted.
Conclusion and Recommendation
As evidenced in the report, the company is not doing too well despite having a 12% market share
in comparison to the competitors. It is possible to suggest that the company should make an
evaluation of their product mix which would help in increasing the market share. Another issue
to be addressed is how to improve its already doubtful brand reputation in order to attract more
customers.