International Marketing for Managers: Sukin's China Market Analysis

This report provides an overview of the macro environment influencing Sukin, an Australian cosmetic firm, as it explores expanding its business into China. It includes a macro environment analysis, Porter's Diamond Model, and Porter's Five Forces analysis to depict how Sukin can achieve its long-term mission and vision. The report also explains market entry modes for entering the foreign market, and utilizes SWOT and PESTLE analyses to evaluate the strengths and weaknesses of competitors. A geographical discussion about China is also included, covering economic, social-cultural, political, and legal environments, offering insights into the opportunities and challenges Sukin faces in the Chinese market. Desklib provides access to similar solved assignments and past papers for students.

Running head: International marketing for managers
International marketing for managers

International marketing for managers
Executive summary
The paper provides a brief overview about the macro environment which could influence
the business actions and operations of Sukin. It is cosmetic firm which is founded in Australia. It
provides various attractive and beauty products to the customers in the country. The firm tries to
explore and expand its business in China to gain rivalry benefits globally. Along with this, macro
environment, porter diamond model and porter five forces analysis have been explained in the
tasks. Moreover, it depicts that how the firm achieves its long term mission and vision by using
porter five forces model. Additionally, the paper explains the market entry modes to enter in the
foreign market. SWOT analysis, pestle analysis and porter five forces analysis are done by Sukin
to analyze and evaluate the strengths and weaknesses of the competitors. Here is the
geographically discussion about the Chinese country.
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Table of Contents
Executive summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Economic environment analysis of China....................................................................................................5
Social-cultural environment of the China....................................................................................................6
Political and legal environment of the China...............................................................................................7
Competitive analysis of the country............................................................................................................8
Porter diamond model............................................................................................................................8
Porter five forces model........................................................................................................................10
SWOT analysis...........................................................................................................................................11
Entry modes..............................................................................................................................................12
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13
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International marketing for managers
Introduction
The main aim of this task is to explain and analyze the external environment of the China
to initiate new business operations and activities. Sukin is a skincare and cosmetic company
which is incorporated in Australia in 2007. The firm has decided to setup the business in China.
For this purpose external environment analysis is done by the company to attain objectives and
goals in this country. The paper explains that how political, social, cultural, legal and
environmental factors may influence the profitability and growth of Sukin in China. Along with
this, it explains that how the company can gain competitive advantages by using porter five
forces analysis and porter diamond model. Additionally, here is the discussion about the various
entry modes, as it also explains that which entry mode has been selected by the company. Further
detail of the task has been discussed below.
China is a unitary sovereign state in East Asia and the country is most populous country in the
world. In addition, the country is one of the biggest explorers of goods and services. The country
is not counted in LDC and it is not a developed country as it is a developing country who is
introducing new and innovative technologies. Moreover, the country is a part of BRICS and NIC
(Newly industrialized country). The major industries of China include coal, machinery, mining,
transportation, petroleum, cement, textiles, automobiles, manufacturing and agriculture industry.
China maintains physical diversity and it is the third biggest country after Canada and Russia in
the world. Along with this, the country has enormous lakes, rivers and mountains. In this way,
China is unique and strong on the basis of geographically.
In 2007, Sukin was launched in Melbourne, Australia after analyzing and identifying a
gap in the marketplace for high efficiency and effectiveness, environmentally sustainable and
affordable natural skincare. After then, Sukin has become number one brand in the Australia.
The head office of the company is located in Dandnong south, Victoria. The company utilizes a
plenty of botanicals, antioxidants and essential oils to restore the natural radiance and vitality of
people skin and hair. The firm is offering natural skin and beauty products in the Australia. All
the skins and beauty products launched by Sukin are Australian made with ingredients that are
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naturally derived, vegan and cruelty free. The company’s brand is loved and liked by children,
men and women in all over the world. The main mission of the firm is to expand and explore the
people knowledge in natural skin care, create exceptional products, educate and give back to the
community across the world. The vision of Sukin is to be a most attractive and influential natural
skin Care Company in the world. The core values include passion, ethics, empower, excellence
and innovation which help to overcome the competitors in the global market. In today’s modern
world, Sukin is increasing its profits and revenue in the Australian market. There are approx 617
employees employed in Sukin. The estimated revenue of the company is approx $ 37.9M.
Jurlique and Organic pharmacy are main competitors of the organization which may influence
the long term growth and success of the company.
Economic environment analysis of China
Any economic development might have a major impact on the business activities and
operations of Sukin. The GDP growth rate is 6.9% in China. The GDP per capital in the country
is equivalent to 55% of the world’s average. GDP per capital in China averaged 1562.61 USD
from 1960 until 2016, reaching an all time high of 6894.50 USD in 2016 and a record low of 132
USD in 1962. The average inflation rate of China is 2.13% (2018) that is higher than previous
year rate. It can influence the revenue of Sukin in China. Along with this, Beijing plans to finish
and complete by year’s end negotiations on the regional comprehensive economic partnership
(RCEP), which is a trade agreement between ASEAN, New Zealand, Korea, China, Japan and
India. In addition, various reforms have been initiated over the past 2 decades affected the new
business activities in such country. It is noted that inflation rate and property prices are high in
the country that may affect the growth of Sukin. The people’s bank of the country has increased
interest rate (de Beer et al 2011).
China maintains second largest economy in the world therefore; the company can take
various advantages in the country. Along with this, private sector is main driver of development
and growth. In 2016, the country’s economic growth slowed to a 26 year low of 6.7 %. In
addition, the country maintains reciprocal relationship with its neighbor countries which could
help in exploring and flourishing Sukin business in China. The country also implements market
oriented reforms to increase and enhance the productivity, living standards and technological
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quality but not lead to adverse impact on budget, unemployment and inflation. Moreover, the
high economic growth of the country will lead demand of the skincare products and services.
Along with this, workforce are skilled, experienced and potentials in the country. Hence, the
company can be benefited by using of talented and skilled labor force in the market. No
company can survive its business in the international market without effective and potential
employees. Additionally, labor cost is low in China as compared to other countries. The labor
costs in the country increased to 104.50 index points in the fourth quarter of 2017 from 104
index points in the third quarter of 2017. Furthermore, population can also influence the
profitability of Sukin Company positively. The population of the country is 137.87 crores
therefore; Sukin can attract more and more customers in the marketplace. For this purpose, Sukin
needs to analyze and identify the needs, requirements and desires of the Chinese people to
introduce new and innovative skincare products.GDP based on purchasing power parity was
23,122,.03 billion international dollars in 2017. Purchasing power of consumers also influences
the sale of the skincare products in the global market. Now it shall be noted that the firm should
focus on economic factors to overcome the competitors in Chinese market as it also help to
maximize the profitability of the company (Otmazgin 2013)
Social-cultural environment of the China
The social cultural factors play a significant role in the china to attract more and more
companies in the market place due to constantly demographics change. The demographics
changes also affect the tastes, preferences and choices of the customers (Ragnedda and Glenn
2013). The social cultural factors include custom, values, belief, loyalty and morale of the people
that have direct impact on the choices and requirements of the customers. The social behavior
and family size generally impact that how and why decisions are taken in the marketplace
(Cooley 2017). Some other social factors include education, religion, lifestyle, emigration that
may affect the progress of the firm positively as well as negatively. China is a collectivistic
society based on the Greet Hostede value dimensions. The literacy rate is over 90% in china, it
means the country emphasizes on education and majority of the nation are literate. Along with
this, China is the biggest country for cosmetic players due to highest population. Sukin can seek
various opportunities in Chinese market by analyzing and evaluating the trends and lifestyle of
the people. Moreover, gender imbalance also influences the revenue and returns of the company.
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One child policy has been implemented in the country which may have direct impact on the
productivity of the firm. There is discrimination between male and female therefore, it can arise
various difficulties in the marketplace (Li, Hiroshi and Terry 2013). Apart from this, income
inequality is also appearing and growing in the country. Due to income inequality, the country
has not been able to maintain good relationship with some other countries. Due to gender
inequality, the country does not involve women’s in decision making process. Thus, the
company is unable to know and understand the ideas and opinion of women’s. Additionally,
language and communication barriers also are existed in the Chinese market because Chinese
speak their own language in the global market. If Sukin wants to start new business activities and
operation in China, it needs to measure and understand the communication system and language
of the country (Cao and Daniele 2013).
Along with this, there are various issues raised in the China in terms of Hofstede’s
cultural dimensions. Let’s talk about the power distance, power distance is 80 in China it means
there is culture inequalities in the country. There is a difference between wealthy and poor that
could affect the progress of Sukin negatively. Apart from this, the country maintains low
individualism; it means Chinese people like to work in the groups rather than the individual.
There are dependent on the groups and they do not prefer to act as individualism. In addition,
China surpassed the number of males over the females. It means Chinese do not give importance
to women’s. On the other hand, China has a low score on uncertainty avoidance; it has ranked 30
in uncertainty avoidance (Laruelle and Sébastien 2012). The Chinese people show their emotions
and nervousness to other people and there are strict rules, religious and legal laws to keep out
uncertainties. Moreover, Chinese are high in long term orientation at 118, it means they focus on
persistence and long term success. However, it seems that long term orientation is time
consuming process and the people are unable to focus on the short term goals. Thus, it can
influence the growth and progress of Sukin Company adversely. Apart from this, China is a
multi religious country including Islam, Buddhism, Taoism and Protestantism. The religious
activities are protected by the constitution. It is noted that China’s luxury market is optimistic
due to its female population aged 16 to 45. Sukin needs to monitor and analyze the socio-cultural
factors of the country to attain long term mission and vision (Guthrie 2012).
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Political and legal environment of the China
Currently, China government is ongoing to promote and encourage rule of law. After the
Cultural Revolution, a legal system of revolutionary and official authority has implemented in
the country (Yabuki 2018). In addition, legal framework for e-commerce is still in its early stage
which influences the success of Sukin. It is noted that approx 90% of China high end cosmetic
products are foreign brands and mainly imported from Japan and Europe (Heggelund 2017). In
today era, most of the brands are presented in the Chinese market (Kwong 2015). Since a long
time, it has been observed that the process of importing increases the challenge and issue for the
cosmetic and skin care companies including various difficulties such as custom duty and tax
treatment (Zhong 2015). Apart from this, progressive taxation system is followed by the country
whereas the tax rate for freelancer’s income progresses in three levels from 20% to 40% and the
tax rate for the regular workers in seven levels from 3% to 45%. The political system affects the
activities and operations of the organization positively and negatively as well because the
company will have to follow rules and legislation of the China. Sometimes, it becomes very
difficult for the country to follow rules and legislation of foreign country (Zhong 2015).
On the other hand, the country has set up a relative complete law system to encourage
and motivate foreign companies to invest in China. The main basic laws and legislations include
three common laws including the law on chine foreign contractual joint ventures, the law on
Chinese foreign equity joint ventures and the law on wholly foreign owned enterprises (Gillespie
and Liesl Riddle 2015). Recently, the government of the country is considering its existing laws
and statutes in accordance with the model of the world trade organization. Moreover, tax law is
one of the significant issues in front of Sukin while initiating business activities in the China
(Day 2016). The company needs to understand the tax laws and legislations that have direct
impact on the business activities and operations. On the other hand, it is noted that the China is
well known and reputed for attractive incentives package in Asia (Wang 2011). The tax
incentives and other benefits are provided by the country for the promotion of investment. If the
company wants to set up skincare business in the country, Sukin has to take approval from the
government (Axelrod and Stacy 2014). Additionally, socialist rule of law is followed by the
country. The legal system of country is based on the model of civil law. Intellectual property
issues also influence the growth rate of Sukin in various ways. China still does have a problem
and issue with corruption and that needs to be considered while initiating business in China. It is
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dependent on the patent holders to defend their products against illegal generic manufacturers
that are very complex process (Pound and Marshall 2017)
Competitive analysis of the country
Porter diamond model
Sukin Company can use the porter’s diamond model to analyze and measure the
competitive benefits in the international market. The company believes that porter diamond
model plays a significant role in the generating of various benefits in the global market (Huggins
and Hiro Izushi 2011). The porter diamond model includes the following:
Factor condition: It is a situation related to the production elements such as infrastructure and
knowledge. Under this factor, the company focuses on the various factors such as human
resources, labor, costs, commitment, qualification of the workers, and infrastructure. These
factors help in creating competitive position in the international market.
Related and supporting industries: The success of the skincare company depends on the
presence of the suppliers and related industries within a region. It will help in maintaining good
and effective relationship with neighbor countries. The competitive suppliers also reinforce
internationalization and innovation. Besides suppliers, Sukin also focuses on the organizations
that are operating and managing same business activities in China. It will help to know and
analyze the plans, policies and strategies of the competitors to attain rivalry benefits in the
foreign market. Along with this, Sukin is also able to differentiate its products from the
competitor’s products and services.
Home demand conditions: Under this stage, size and nature of the market can be analyzed by
the company to achieved goals and objectives. Interaction between economies of scale and size
of the market are existed in the market. If Sukin can realize sufficient economies of scale, this
will help to provide several advantages to serve the market from a single location. Under this
stage, demand of the market and choices of the customers can be evaluated by the firm to build a
good image in the foreign market.
Strategy, structure and rivalry: This element is related to the way in which Sukin is managed
and organized, its corporate objectives and goals and measures the competitors within the
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organization. Along with this, the company is focuses on the conditions of the China to
determine and evaluate the place to starts new activities and operations. Culture plays a
significant role to make unique strategies and policies within the organization. It also helps in
understanding and knowing the religion and language of other country in which the company
wants to start new business. In this way, this factor provides advantages and disadvantages as
well in foreign country (Zhang, Sufang 2012).
Government: The government plays an empirical role in encouraging and inspiring the
development of industries and companies in home country as well as foreign country. The
government allows the companies to initiate business activities in foreign country. If Sukin wants
to set up new business in China, it needs to take prior approval from the government because
government helps to provide finance and other facilities to the firm (Chang 2013).
Opportunities: This factor plays a powerful role in porter diamond model because it helps to
provide enormous opportunities to Sukin in China. Various opportunities are taken by the
company while implementing new operations in such country. Along with this, unique strategies
and policies are made by the firm to beat the competitors in the international market.
(Source: Liu, Zhang & Xu 2010)
In this way, it is assumed that porter diamond model provides various competitive
benefits to Sukin in China. It helps to evaluate and analyze the plans of the rivalry in the global
market. Furthermore, it makes easy market entry for the firm in the universal market. By using
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this, the firm has been able to build and develop strong relationship with competitors
(Shambaugh 2013).
Porter five forces model
The porter five forces model is propounded by Porter to analyze and identify internal and
external factors which influence the competitiveness of a product and industry. As the same way,
Sukin also use this model to evaluate the competitive advantages in the Chinese market (Yunna
and Yang 2014). The porter five forces analysis has been detailed below.
Threat of new entry: The cosmetic company has a low threat of new entrants in the country.
This is due to several factors such as high cost of market entry. Along with this, lot of resources
is required to enter in the foreign market. There are some cosmetic companies already existed in
the china such as Dior, LANCOME and Guerlain which can influence the operations of Sukin. In
this way, Sukin needs to focus on the existed rivalries which may affect the outcomes and results
of the organization.
Bargaining power of customers: The cosmetic company has a high bargaining power of
customers. This is possible because cosmetic products are available in every country. High and
immense competition also exists in the Chinese market. Along with this, firm makes substitutes
products to reduce the prices of the products and services. Bargaining power of customers is a
biggest challenge in front of manufacturer across the world.
Bargaining power of suppliers: Sukin has a low bargaining power of suppliers in China. It can
be possible due to the high number of market leaders are existed in Chinese market. Suppliers
supply diverse products in the marketplace. Due to the large supply, customers have the power to
affect the market prices as opposed to the vendors (El Namaki 2012).
Threats of substitutes: In the skincare and cosmetic industry, there are various rivalries
presented in the global market. It is seen that threat of substitute is high in cosmetic company.
The cosmetic companies sell their products at higher prices or if the products are of low quality
then the consumers prefer to buy the substitutes products in the marketplace. It influences the
sales and profitability of the firm.
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Barriers to entry exist: High cost is comprised with developing cosmetic products, as it is
complex for Sukin to leave the industry without attaining the costs for production. Therefore,
various factors influence the position of the firm. In this way, it is observed that porter five
forces model renders enormous benefits to the company (Liu, Zhang & Xu C).
SWOT analysis
SWOT stands for strengths, weaknesses, threats and opportunities which have been stated
below Lu, (Weisheng, Roger and Carol 2013).
Strengths Weaknesses
 Quality of products is one of the
biggest strength for Sukin Company.
 Offering the products at an affordable
price.
 It offers attractive and unique product
in the market.
 Brand portfolio is one of the significant
strengths of the firm.
 Widespread distribution is possible in
cosmetic company.
 Weak delivery system can be
considered as one of the weakness of
the firm.
 Unskilled staff and delivery officers
can also be counted under the list of
weakness.
Opportunities Threats
 Diversification in the products range
can be one of the biggest opportunities
for the business corporation.
 Establishing the products to new
market regions.
 Adoption of open communication
system and contemporary distribution
mechanisms.
 Intensification in competitive
environment.
 Changing marketing trends and
consumer behaviors will be one of the
biggest threats for business
organization.
The top three strengths include followings:
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International marketing for managers
 Widespread distribution can be possible.
 It offers beauty and attractive products to people.
 Brand portfolio is significant strength of the company.
Entry modes
There are various entry modes to enter in the foreign market such as exporting, joint
venture, outsourcing, and franchising, strategic alliance, contract manufacturing and foreign
direct investment. Contract manufacturing is one of the significant entry modes to enter in the
foreign market for cosmetic company. Under contract manufacturing, a foreign firm hires and
appoints local manufacturers to produce and manufacture their products and services, it is called
contract manufacturing. This method utilizes the skills and talents of a local manufacturer and
help in reducing cost of production (Scuttari 2014). The marketing and selling of the cosmetic
product is the responsibility of the international company. Sukin can use this method to enter in
the Chinese market because it is suitable method for the organization. It helps in reducing the
production cost and develops the small and medium industries in the global market. Under this
method, the company needs to hires local manufacturers to introduce new products in the foreign
market. It also helps in improving and enhancing the skills and knowledge of Chinese people
(Terpstra, James and Ravi 2012).
Conclusion
On the above mentioned study, it can be concluded that Sukin is the biggest skincare and
cosmetic company in Australia. The firm offers enormous beauty and skincare products to the
men, women and children across the world. The organization wants to enter in the Chinese
market to maximize the profitability. Along with this, the paper explains that how macro
environment factors affect the success and growth of Sukin in china. Pestle analysis and SWOT
analysis is done by the company to analyze and evaluate the risks and challenges of the market.
In addition, the firm uses porter five forces model and porter diamond model to gain competitive
benefits in the Chinese market. On the other hand, market entry modes also have been explained
in the tasks. Contract manufacturing entry mode is used by Sukin Company to avert the
production cost and maximize the revenue. By using this method, the company can easily enter
in the international market.
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