The Owl's Cafe: China Market Entry and Global Ethics Report

This report provides a comprehensive analysis of global marketing ethics and strategies, focusing on the potential market entry of The Owl's Cafe, an SME based in Malaysia, into China. The report begins with an executive summary and introduction to global marketing and marketing ethics. It then delves into an in-depth analysis of the Chinese market, utilizing PESTLE analysis to assess macro-environmental factors (political, economic, social, technological, environmental, and legal) and Porter's Five Forces to evaluate the micro-environment. The report examines cultural factors influencing consumer behavior in China and recommends strategies for market selection and entry mode. Key findings include the identification of both opportunities and threats within the Chinese market, considering factors like political stability, economic inequality, technological advancements, and environmental concerns. The report concludes with recommendations for The Owl's Cafe's market entry strategy, considering ethical considerations and cultural nuances. The analysis covers various aspects of the business, including the company's product offerings, target market, and potential challenges. Finally, the report provides a list of references used in the analysis.

GLOBAL MARKETING
ETHICS AND CULTURE

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................3
ANALYSIS AND FINDINGS........................................................................................................3
Macro environmental factors in China...................................................................................3
Micro environmental factors with Porter’s Five forces in China...........................................7
Analysis of culture in China...................................................................................................9
Strategy for market selection................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

EXECUTIVE SUMMARY
Marketing ethics on a global basis consists of certain principles that have to be followed
by organisations that want to grow and expand to different countries. They have to abide to the
different types of ethics, so that promotions and advertisements are done in a systematic manner.
This assignment studies an SME in Malaysia and how it will enter into a host country. It has
analysed various factors which include macro and micro environmental factors, cultures, market
selection criteria and entry mode into another country.
INTRODUCTION
Global marketing is the process of creating plans through which products or services of
an organisation are promoted for the purpose of entering into new countries. This is done so that
businesses can expand and grow with the help of marketing tools and techniques, on a global
level. Marketing ethics refers to a concept of social responsibility that consists of principles &
standards that explain acceptable conduct in marketing. Further, it is defined as an international
arena that highlights an increasing concern for ethics in general. Also, they are considered vital
in marketing because it implementation will lead to fair practice standards in the company.
Moreover, culture is a crucial factor that determines buyer’s behaviour.
The Owl's Cafe is an SME in Malaysia, that provides services and products to customers
in their shop. They have a wide variety of coffee selection and is located in a famous area of
Kuala Lumpur. This assignment will analyse PESTLE analysis in China for the Cafe so that it
gets aware about the current macro factors affecting various organisations. Further, it will
demonstrate factors of micro environment that affects company diversely. It will assess their
culture and how people behave to different types of products and services. Moreover, report will
recommend strategies for selection of the market and how to target customer. It will also study
the market selection for The Owl's Cafe and the mode of entry that they will use for setting up
business in the host country of China.
ANALYSIS AND FINDINGS
Macro environmental factors in China
The Owl's Cafe can analyse the macro environment through PESTLE analysis of China,
so that they are able to determine certain opportunities and threats for their business.

Political The factors of china as per political are to be
considered as are-
 Stable political environment, it is
standardised (Leonidou and et.al.,
2018).
 Cheap labour cost, it is adapted in order
to bring improve manufacturing process
(Kim, Park and Lee, 2014).
 Improved infrastructure (Taormina and
Kin-Mei Lao, 2007)
Economical The factors as are-
 High inequality (Morgan and Pritchard,
2018)
 Rapid urbanisation, firm has started to
develop their operational activities at
some other place (Kim, Park and Lee,
2014).
 Environmental damages (Charter and
Polonsky, 2017)
Social factor Under, social following things are needed to be
considered as are-
 Changing taste of customers,
(Taormina and Kin-Mei Lao, 2007)
 Poverty alleviation and development,
it was adapting due to reduction in
the poverty (Etzioni, 1987).
 Increased customer spending. The
china is highly developed country so
that the customer is becoming the
aware about the product and services

(Joly, Milcu and Hättenschwiler,
2017).
Technological Under this, following factors as are-
 Labour intensive economy, it has been
adapted in order to bring systematic
economic conditions (Joplin and et.al.,
2003).
 High literacy rate in China, which has
been found to be 96.4% (Hennart,
Sheng and Pimenta, 2015.).
 Technical advancement is at a greater
pace in China ( Bivona, 2018).
Environmental factor China rapid economic development has
impacted on following key factors as are-
 Water and air pollution (ExCain and
et.al., 2018).
 Deforestation (Sharma, Pathak and
Sinha, 2017)
 Climate change (Leonidou and et.al.,
2017)
 Biodiversity losses etc (Leonidou and
et.al., 2018).
Legal In this, following things are need to be
considered-
 Labour standards (Bae, 2017)
 Employee remuneration, it will be
helpful in terms to bring systemic
business activities.
 Labour Disputes (ExCain and et.al.,
2018)

 Various administrative regulations
(Taormina and Kin-Mei Lao, 2007).
China is the one of the most powerful countries in the world. It is also 4th largest country
in the world by the land area. The china has stable political environment, cheap labour and
improved infrastructure. Thus, the lack of political freedom is an area of concern. Stable political
environment is favourable for The Owl’s Café in terms of operating with no need of changing or
modifying the policies again. Cheap labour cost is also an added benefit for the cited company to
allocate a minimal budget for making payments. Improved infrastructure is referred to be yet
another significant aspect to attract a large set of consumers. However, in china there is adaption
of cheap labour cost so that overall activities can be conducted effectively and efficiently. It will
helps to process the things effective and products can avail to customer at affordable manner.
There were standardisation in two term as stability in government and improved infrastructure.
Though the coffee industry can get affected by the number of political factors inclusive
government attitudes and trade relationship between the country that produce coffee and the area
in which that can be exported. The Owl cafe has planned to expand their business operation in
the china but is seems quite typical due to cheap labour to set fire in those kinds of countries.
Economical- Another factor is that it can affect the coffee industry in the huge context that is
spending power in the particular area affect the operation function of marketing (Shen and Bae,
2018). Thus, exchange rate of the country can also impact over the pricing strategies. The GDP
rate of china suggest that each citizen is adding more and more value to the society. The main
reason behind this expansion is that there is rapid urbanisation and it is helpful in terms to proper
conduct the all business activities. In addition to this, high inequality and environmental
damages can impact the working of the enterprise. Thus, it also enhancing the consumer
purchasing power. As per this factor, the Own cafe can expand their operations in China as there
is effective consumer purchasing power. High inequality is stated to be a major drawback for the
firm. Rapid urbanisation will also necessitate them to make accordant changes in their
infrastructure and other related things. Environmental damages is also suspicious factor to be
taken care by The Owl’s Café.
Social- In this, it can be said that social and culture aspect of the consumption of coffee is
consideration for the health. The coffee is high in caffeine and that can lead to sleep disorders,
irregular heartbeats and issue of migraine to some people. The demographical condition of the

country is constantly change as population growth and age distribution fluctuate. The china is
developed country and it is very much focus towards the technological implementation. In
addition to this, it can be said that the customer purchasing power is quite high as this will help
to set up the business function. In this, it can be said that in china baby boomer generation is
retiring and this can lead to spending by older consumer will decrease. Changing taste of
customers is both favourable and unfavourable for the entity where it will also give them an
opportunity to innovate along with a mandate clause of modifying their products and services, as
per the changing needs of the consumers. Increased customer spending is unfavourable for the
enterprise that will hinder one of their major concern of attracting large set of consumers.
Technological- The one of the major technological issue in china is that development of B 2
C does not have the safe and stable online payment system. In china, there was standardisation
in High inflation rate and good literacy rate. This both are the effective factor in terms to expand
the business operations in new area. Thus, firm is taking various initiative in order to develop
services so that things can be undertaken in the better manner. The owl cafe is in good position
to enjoy the beneficial aspect of emerging mobile wave. In addition to it, the internet is essential
to the customers (Gorgoglione, Petruzzelli and Panniello, 2018). The china is growing in the use
of emergence of innovative, biotechnological developments and development in agriculture.
China has a set vision to be global leader in the science and technology.
Environmental- The development in the coffee machines means the manufacturing
operations are not limited to larger companies. In this, there was adaption in the factors as are
deforestation, climate changes measure so that things can be conducted in the better and efficient
manner. This will be helpful in terms to sustaining the business activities in the well and proper
manner. The rapid economic development in china has impacted natural environment severely.
Thus, water, air, industrial waste, climate change and biodiversity are some of example of
environment changes facing china today. Thus, it can be said that firm quantity of the coffee
beans available can turn affects the supply of the coffee.
Legal- There are number of the laws and legislations than can affects the expansion of coffee
industry in china. Thus, china has adapted one law as labour standards so it will be helpful in
terms to provide the beneficial aspect so that all things can be conducted effectively. In addition
to this, employment remuneration, labour dispute and various administrative legislation will be
helpful in terms to run the all function effectively and efficiently. The coffee manufacture

imports his raw material and other stuffs or exports coffee to another country then they must
regulate the imports and exports. The Owl industry can be affected with the issue as introduction
of stricter and trade regulations and licensing terms as per the industry.
Hence, it can be said that there are number of the factors that can impact the working of the
enterprise in China. Thus, the most of the external environmental factors are can impact the
working of enterprise in huge context.
Micro environmental factors with Porter’s Five forces in China
Micro environment refers to those factors that are inside the organisation that affects
company's performances & decision-making process. The basic forces of micro environment are
described below:
Threat to Competitors [High rivalry] Competition is high when:
 Players are of same size (Wei, Dai and
Costin, 2018).
 They have comparable strategies
(Demil, Lecocq and Zott, 2015)
Bargaining power of Customers [Moderate]  They procure larger volume, need to
adapt in new market.
 Switching product is easy with
substitute, and the cafe already
experience it (Pham, Nguyen and
Tang, 2017).
 Price responsiveness, need to adapt in
new market (Yuan, Wang and Dong,
2017).
Bargaining power of Suppliers [Moderate]  Market is conquered by themselves,
standardised fact (Fredendall,
Letmathe and Uebe-Emden, 2016).
 No alternative goods are available, new
in the market of China (Fabbri and
Klapper, 2016).

Threat to new entrant [High]  Brand loyalty, standardised (Feng, Li
and Swenson, 2017).
 Cost benefit of existing players,
standardised (Yusoff, Fauziah and
Ramin, 2015)
 Access to raw material is controlled by
existing companies, adaptive (Joly,
Milcu and Hättenschwiler, 2017).
Threats of substitute products [Low]  Brand dependability, adaptive in China
(Yunna and Yisheng, 2014)
 Switching cost for customers,
standardised (Zhao, Zuo and Zillante,
2016.).
In China the competitive environment includes some basic things that every company has
to concern about. Competition under micro factor occur when other firms sells similar products
or services as The Owl's Cafe does then it is company's competitor. However, the cafe has
already experienced some facts in the country where it currently operates i.e. competitors are of
same in size. Therefore, the Cafe needs to be aware of its competitor's other facts which it needs
to adapt in China in order to stay in the market for longer period (O'Grady and Morgan, 2017).
Consumers are considered as a vital part of any business organisation as they seek for
them to increase their sales. There are various types of buyers such as; local, international, B2B,
etc. If The Owl's Cafe wants be successful and want to expand in China, must identify buyers for
its products and services. Although, it has been observed that customers obtaining larger volume
and switching product is easy with substitute are those factors which are the standardised one for
the cafe. Other one i.e. price responsiveness of buyers is a factor which it will face in global
market. Moreover, they must also understand that the sale of the product depends on level of
customer satisfaction.
It has been observed that success of the business is under suppliers’ control when they
hold the power. Further, the suppliers are supposed to have power when they are the only
supplier of the company's goods and market is conquered by themselves is a factor that is

considered standardised for the Cafe. Therefore, The Owl's Cafe need to maintain a strong
relationship between its suppliers and itself in order to avoid any disruption in the business and
to adapt to new changes like no availability of alternative product.
In China, barriers to new entry is little high and Cafe is already experiencing brand
loyalty and cost benefit of existing players in the current market. Also, in China barriers to new
entry is little high as new business can hardly enter into the marketplace. However, when barriers
to new entrance are low than new business can take advantage of it. Therefore, The Owl's Cafe
must be aware of the situation like access to raw material is controlled by existing companies,
which I will face in global market.
There are chances for The Owl's Cafe that there may another company in China selling
similar products and services as of Owl' cafe, then customer may choose those with lower prices.
Analysis of culture in China
Power distance  Authority is distributed
Uncertainty avoidance  Private domestic, adaptive (Bellis,
Hildebrand and Herrmann, 2015)
 State-owned enterprise and,
standardised (Atchley, Shi and
Yamamoto, 2014).
 Foreign invested entities, adaptive
(Zhang and Zhou, 2014)
Masculinity vs. Femininity  Structural and, (Zheng and Zheng,
2016)
 Legal reforms efforts, (Schösler, Boer
and Aiking, 2015)
Individualism vs. Collectivism  Company who seek to meet
organisational goals (Triandis, 2018.)
Long vs. Short term orientation  Reduces tariff on imported products,
adaptive (Lahmiri, S., 2015)
 Removes limitation on foreign
investment ,standardised (Tao, Lin, Jin

and Li,2016 )
It has been determined that in cultures with low power distance, organisations expect that
authority is distributed instead equally which will be a new factor for the cafe to expand in
China. It has been observed that, the China market offers range of opportunities for growth &
development of new companies that expand to China and also existing companies.
It refers to a deficiency of tolerance for ambiguity & a requirement for formal rules &
policies. Both economic & market reforms in China have helped and given rise to organisations
with 3 distinct types of ownership; private domestic which cafe need to adapt in China, state-
owned enterprise is a standardised factor and foreign invested entities will also be new to it.
Additionally, the country offers a technological environment with important transfers of
information from overseas.
Apart from this, it has been discovered that its structural and legal reforms efforts are
considered well and also will be adaptive facts for the Cafe to expand in China, it is predicted a
positive future for China. This is only possible when it maintains a successful balance of Golden
Straight-jacket with its cultural (Hennart, Sheng and Pimenta, 2015).
Under this individualistic cultures states that organisations are supposed to show
themselves as a company who seek to meet organisational goals and this factor is already applied
on Owl's Cafe in the current market. Culture refers to a collection of accepted values, behaviour
patterns, shared similar experiences and belief. It has been determined that, culture is considered
extremely vital from a business point of view because it gives shape to employee behaviours &
expectations. Further, the country's culture is identified on 2500-year-old Confucius teachings of
“the importance of society, hierarchical relationship, and group within a society”. China further
is making the private sector the key source for its economic growth, maintaining a lower
inflation rate and price stability.
Apart from this, China is also maintaining as balanced budget as possible and if it is not
as surplus, then reduces tariff on imported products which cafe needs to adapt in new market,
removes limitation on foreign investment which the company experiences already in the current
market and so on. Therefore, all these changes are considered as of great advantage for
expectations. The Owl's Cafe to expand its business in China. Also, it is important to know that
as the country evolves, there is a 2500-year-old culture that will possibly stay a vital factor of the

business environment (Kim, Park and Lee, 2014). Long term orientation states that, company
may take time to achieve their goal.
Strategy for market selection
With the increasing growth of China economy, the country is playing a key role in world's
economy (Bhasin, 2018). The Owl's Cafe wants to segment for its products and services as this
will lead to develop a long-term competitive advantage by effectively aligning customers with its
products. China Below is the strategy for The Owl's Cafe for market selection in China:
 Demographic segmentation strategy to target Chinese customers: - this strategy of
segmentation divides customers in different groups with similar features. The factors of
division include; age, gender, income, education, etc. It has been observed that in China
this strategy is greatly implemented when companies want to target based on this factor.
The Owl's Cafe can make use of this strategy in order to segment its customers for it
Cafe. The organisation can create group on the basis on age and gender, also it can attract
young aged people to its cafe (Stone, and Vaillancourt, 2016).
 Geographic segmentation: - it divides consumers on the basis of location. For example;
The Owl's Cafe can segment customers into tier-1, tier-2, or tier-3. On the other hand, it
can be coastal area i.e. is highly developed.
 Behavioural segmentation: - Under this strategy, division is done on the basis of
consumers buying behaviour i.e. consumption, purchasing, usage, etc. For example,
younger consumers may tent to have fast food at The Owl's Cafe while older may prefer
healthier meal. Psychological: - This strategy considers the psychological aspects of buyer’s behaviour
by segmenting markets on the basis of lifestyle, value, opinion, etc. However, this
strategy is not much useful for The Owl's Cafe (Laufs, and Schwens, 2014).
Entry mode for The Owl's Cafe in China
Foreign market entry modes are different based on the degree of risk they present, the
requirement of resources, and the return on investment. Further, the modes are divided into two
main parts i.e. equity and non-equity. Equity modes consists of joint venture and entirely owned
subsidy, whereas non-equity involves exports. Entry mode for The Owl's Cafe in China is:
Type of entry Advantages