British retail chains are concentrating spreading outside the boundaries of Britain into the emerging nations. This forms the backdrop of the assignment with China as the new market for study. The assignment starts with a study of the external environment analysis of China followed by a delve into the resources and competencies of Morrison’s as its spreads into the country. The fourth section delves into the strengths, weakness, opportunities and threats of China market which Morrison should consider juxtaposed with its own visions and missions mentioned in the third section. The study ends with business level entry strategy which Morrisons should use to enter the market of China.
External Environment of Chinese Market:
According to the researcher, China has become even more integrated with various parts of the world and it has implemented various strategies to facilitate cross border economic activities. To understand and evaluate the external factors of Chinese market the researcher has critically examined the following factors (Quian, Cao and Takeuchi 2013). They are as follows:
Political Factors:
Political factors play pivotal roles in international and consist of policies and agreements of national and international importance. There are various government regulations that are already existing in the Chinese Market (Hoskisson et al., 2013). It consists of both formal and informal rules that all the companies that are doing business in China must abide as it influence the economy of the country. The political force is the most disquiet force that is not controllable in nature (Li and Lui 2014). Moreover, it is been observed that the government of China has focused in the development of international trade by implementing and supporting e-commerce. There are also less number of regulations that supporting the consumer rights, privacy and the validation of electronic contracts (Zhang, Shi and Wu 2017).
Over the past decade or so, the economy of China has already experienced a significant amount of growth. According to the researcher, if China continues to grow at this rate they will be soon overcoming the US GDP very soon (Holtbrugge and Baron 2013). The main factors that are helping China to increase their GDP are as follows:
The GDP of China highlights that each of their citizen is adding more and more number of values in the society. Therefore, it is increasing the consumer purchasing power drastically. Moreover, the labor cost of the country is very low which attracts most of the foreign companies to expand their business within the Chinese market place. Moreover, with all the added advantages there are also some disadvantages regarding the Chinese market as there is a high inflation rate existing within the economy of the country and the prices of property is very high as compared to different countries (Yamak, Nielsen and Escriba-Esteve 2014).
The cultural and social factors of China plays a vital role as demographic of China is evolving and changing constantly. The literacy rate in China is more than 90%. Therefore, there is a huge availability of working age population in the country. It is been observed that there has are approximately 430 million Internet users in the country so it will be very much beneficial for the retail organization Morrisons to sale their products online (Zhang, Cui and Zheng 2016).
Morrisons should take into account the business laws of China in order to enter its market. The country is very strict with visas and deals very strictly with European companies who do not follw Chinese laws. The country is very cooperative with new foreign companies deals very strictly with corruption (Forbes.com 2017). Moreover, China has all the necessary tools and innovative technologies that make it one of the finest places to expand and run business operations smoothly (Tongying, Peng and Bo 2015).
The government of China has announced the environmental policies as the basic laws in the country. The government is the second largest growing economy and carbon emitter in the world. The government has given more power to the environment authorities to penalize polluting bodies. China is very much concerned about its environment and has strong legal backing. The international retail chain must act more sustainably in the new market and use green supply chain to obtain its goods (Kaiman 2017).
New markets are profitable and attract international chains of companies. This poses threat for both the domestic and the international companies. Morrison must consider the fact China is also one of the target markets of Aldi and has its own resident markets. The government laws like existence of barriers and other factors that decide entry of new entrants.
The existence of substitutes has strong impact on the market share and profit sharing of firms. The substitutes compete to get market share and reduces each other’s profits. Morrison will sell products which are also available in the local markets which compete with the retail chain. A good news for Morrisons is that Marks and Spencers is withdrawing from China which is an opportunity (Ft.com 2017). The prospective entry of Aldi in the same way poses threat to the retail chain.
The presence of multiple options and high disposable income increases the power of the consumers. The consumers are able to choose between the products of a particular type and these forces those companies to lower their price. The retail chain must consider the substitutes and the consumer profile to decide the pricing to get competitive advantage.
The power of suppliers increase when there are low number of substitutes in the market. The manufacturers can use techniques like product differentiation which gives their products a distinct identity compared to its substitutes. This gives the manufacturers power to charge high price for their products.
Rivalry among companies is an important factor in the international market space which decides several things. The rivalry force firms to maintain uniform prices for its products and bring about new products. The competition makes companies conduct continuous research and innovation in the industry which ultimately profits the buyers. For example Morrisons has strengthened its online presence like Aldi and M&S. This allows the consumers to order goods online which ultimately helps them.
The resources of Morrison consists of all their commercial operations that includes subsidiaries like Morrison produce, Farmer Boys, Vegetables, Neerock and Bos Brothers Fruit. The Morrison retail chain buys and packs fresh fruits and vegetables and they sold it in different stores. The organization has created temperature-controlled warehouses to deliver fresh products to their customers. The company also owns and operates several numbers of fresh food factories that mainly produces cooker meat, pizzas, sausages and packed beacon (Morrisons-corporate.com 2017).
Morrison Supermarket retail chain specializes in the physical distribution of goods through a sound network of supermarkets. They also have a strong financial resource as they earn an operating profit of approximately £265 in the current fiscal year. Therefore, it provides them an ideal opportunity to expand their retail business sector within China.
The core competencies of Morrsions lie in the capability to produce different types of products at affordable prices. The retail chain can provide packing services like foils following the grades set by the government. They manufacture food products combining various nutrients like starch and proteins in the food items. These competencies are the core competencies which add value to the purchase of the consumers.
Being More Competitive: Consumer satisfaction and competitive strategies contribute to growth of companies in the long run. It facilitates the customer to save more money while they do not have to travel everyday to buy what they need and want (Morrisons-corporate.com 2017). Morrison uses their expertise as best food makers and shopkeepers that will provide them a competitive advantage while expanding within the Chinese market place.
Serving the Customers Better: The organization always listens to the different wants and needs of their valuable customers and they make product according to their preferences. Morrison always put focus on the improvement of their shoppers by implementing the right amount of services in the right place and time.
Finding Local Solutions: The organization produces products keeping in mind the want and preferences of the local community and prefer to change its product line according to the various demands from different communities. Therefore, Morrison while expanding in China will do a market research on the taste and preference of the local Chinese consumers and thus will provide efficacy in doing their business operations successfully.
Developing Services: The primary aim of the organization is to offer their customers and one stop shop and give them more number of services while they are on a shopping trip. The organization always refreshes their stores with practical services that are generally enjoyed by the customers while they shop.
Simplify and Speeding Up: Morrison retail chain focuses on the simplifying and speeding up their services respectively. They are always trying to build a cultural based teamwork that will enable them to work with a clear and consistent way of working. The primary aim of the organization is to take cost conscious measures and make efficient business operations that will attract responsive customers towards them (Morrisons-corporate.com 2017).
The business vision of Morrison stands on the two pillars of strategy and its corporate social responsibility. The British retail chain is planning to expand into the emerging market of China which brings it into the contact with new external economic situations.
An analysis of the macroeconomic scenario of China reveals that the country has a very strong political system. The country is ruled from Beijing and has trade relations with most of the countries in the world. The British multinational retail chain Aldi has already declared its expansion into the Chinese market which is evident of the profitability of the Chinese market (Retailgazette.co.uk 2017). This shows that Morrisons should enter the Chinese market which promotes competitiveness, which is one of the clauses in the business strategies of the retail company (Morrisons-corporate.com 2017).
Speaking of the international climate concerning China, it must also be pointed out that Sino Indo relationship has soured. India is one of the biggest markets to Britain both in terms of raw materials like tea and rice and also a huge market for British companies like Unilever and Vodafone. Morrison should simultaneously open its branches in both India and China so as to take advantage of both the emerging market.
The external economic conditions are of great consideration in case of expansion into new markets. One of the most tough factors in operation in new host countries is the difference in the prevailing accounting systems. According to European system of auditing, every firm need to get their statements audited by external body of auditor. The same is not compulsory in China which will necessitate the accounting methods of Morrisons to adapt to the Chinese system and integrate it with its worldwide chain (Lehman 2017).
The economy of China is very rich in culture having its own traditional clothes and dishes. The Morrisons must incorporate goods from China in the product line in the stores in China to appear Chinese.
As far as the society and tastes of the Chinese are concerned, they demand new products and enjoy touring the malls. They Chinese customers outshine their British and American counterparts in demand new products. Hence, Morrisons must stock new products in its Chinese stores to attract new customers.
China is a technologically advanced nation and the people there have more access to technology. The Chinese prefer shopping products online which goes along with their demand for new products. The management of Morrison should increase its presence online and make ordering of products online possible to sustain in the Chinese market(Lin and Xie 2014).
The above discussions proves that Morrison does not need to change its business vision as it is already competitive and has as good knowledge about the Chinese market.
SWOT Analysis of Morrisons:
Strengths:
Morrisons is financially strong and has a huge network of stores and caters to a great customer base.
The retail chain has an extensive product line consisting of medicines, toiletry, food products and so on.
The retail chain has over four hundred and fifty stores in the United Kingdom and employs over a lakh people.
Weakness:
Morrison has a smaller geographical expansion compared to several British and American retail chains which limits competitive advantage and profitability.
The retail chain often encounters product recall.
Opportunities:
Morrison should enter into new segments like organic products which are considered as a status symbol due to high prices. As a result, the chain will be able to attract wealthy Chinese customers and earn high revenue. For example, the demand of organic food is rising in China and Morrison must exploit the demand to enter the Chinese market( Zhang, Zhang and Ren 2016, June).
The international retail chains are expanding into new countries to cater to new markets and earn more revenue. Morrison must expand into emerging economies like China and India to gain more competitive advantage (Caniato et al. 2014).
The next area of strength of Morrison is its association with multinational brands like Pears Colgate and Head & shoulders. The retail chain stocks high priced branded goods and offer them at affordable prices thus attracting a wide consumer base (Hong and Li 2015).
Threats:
The major threat faced by Morrison is the already presence of competitors like Aldi.
The change in government and the difference between the condition prevailing in the British and Chinese markets also threat the company’s expansion. These differences demand huge initial change in strategic management and expenditure from the part of the company.
The above study reveals that Morrisons must enter the market the Chinese market. The international retail chain must enter the Chinese economy through joint venture and alliances model. This will allow the retail chain to reduce the business risk of expansion because it will be able to partner with a domestic company. Morrisions can use the market and knowledge base of the domestic company to gain expertise in the Chinese market. The retail company can utilize the technical knowhow, supply chain and other competencies of the resident company till it develops it won power. This can allow the retail chain to enter new emerging industries and sectors which will allow it to take advantage of the emerging Chinese markets (Yao et al. 2013).
Conclusion:
The assignment is evident that the Chinese market is a very profitable and emerging market. The market already boasts presence of several multinational brands like ALdi and Samsung. One of Aldi’s home grown competitors, Morrison want to enter the Chinese market. A PESTLE and SWOT analysis of the Chinese market and the company shows that it is prudent for the company to venture into China. The study also has the Porter’s model explained based on the retail chain’s market positions. The study points out that the retail chain’s values are competent for the Chinese market and it should enter the economy through joint venture mode.
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