Download 11 The People`s Republic of China (PRC)

International Marketing
15th edition
Philip R. Cateora, Mary C. Gilly, and John L. Graham
The People’s Republic of
China (PRC) (1 of 2)
11
• Aside from the United States and Japan, there is
no more important single national market than
the PRC
• The PRC with a dual economic system,
embracing socialism along with many tenets of
capitalism, has produced an economic boom
with expanded opportunity for foreign
investment
• Its GNP averaged nearly 10% since 1970 and is
predicted to be around 8 – 10% in the next 10 to
15 years, equaling that of the US by 2015
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The People’s Republic of
China (PRC) (2 of 2)
11
• Two major events that occurred in 2000 had a
profound effect on China’s economy:
– Admission to the World Trade Organization
(WTO)
– US granting normal trade relations (NTR) to
China on a permanent basis (PNTR)
• Two steps China must take if its road to
economic growth must be smooth:
– Improving human rights
– Reforming the legal system
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Hong Kong
11
• After 155 years of British rule, Hong Kong
reverted to China in 1997, when it became a
special administrative region (SAR) of the PRC
• Hong Kong is given a high degree of autonomy.
It negotiates bilateral agreements (which are
then “confirmed” by the PRC0 and makes major
economic decisions on its own
• Hong Kong is a free society with legally
protected rights as the PRC continues to pursue
a generally noninterventionist approach to
economic policy that stresses the private sector
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Taiwan, The ROC
11
• Both Taiwan and China continue to implement
WTO provisions between themselves
• Taiwan companies have invested over %50
billion in China, and about 250,000 Taiwaneserun factories are responsible for about 12% of
China’s exports
• Trade helps out both countries: Taiwanese
companies face rising costs at home - China
offers a nearly limitless pool of cheap labor and
engineering talent; China’s SOEs are laying off
millions and Taiwan provides plentiful jobs
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Japan
11
• Japan’s fast growth in the 1970s and 1980s
amazed the world. Then came the early 1990s,
and Japan’s economy produced a stunning
surprise: it slowed, sputtered, and stalled
• Four explanatory themes have emerged:
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Faulty economic policies
Inept political apparatus
Disadvantages due to global circumstances
Cultural inhibitions
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Global Circumstances
11
• Japanese population is shrinking faster than the
U.S. In 2005, while American baby boomers
were at their peak of productivity, the Japanese
were about 10 years ahead to population declines
and graying hair
• Serious disadvantage in the information age: its
complex language (three alphabet system)
hindered software innovations
• With historically low real prices of oil and the
U.S. peak consumption level of SUVs, Japan was
late to tap this market
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The Cultural Explanation
11
• The lack of a national goal for Japan plagued
them after successfully building themselves from
the ruins of World War II
• The Japanese management culture such as,
lifetime employment, job promotion based not
on merit but on length of service, reciprocal
contractor/subcontractor loyalties, hindered
their adjustment to the new economic era
• Japan is expected to continue its slow-growth
economy; Toyota’s 2010 quality problems may
have disrupted its contributions to the economy
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India
11
• The following steps have already been taken:
– Privatizing state-owned companies ; reducing stake
to about 51%
– Recasting the telecom sector’s regulatory authority
and demolishing the monopolies enjoyed by SOEs
– Signing a trade agreement with the U.S. to lift all
quantitative restrictions on imports
– Maintaining momentum in the reform of the
petroleum sector
– Planning the opening of domestic long-distance
phone services, housing, and real estate and retail
trading sectors to foreign direct investment
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India
11
• India still presents a difficult business
environment
– Tariffs are well above those of developing world
norms
– Inadequate protection of intellectual property rights
– Anti-business attitudes of India’s federal and state
bureaucracies continue to hinder potential
investors and plague their routine operations
– Delay by policymakers on selling money-losing
SOEs, making labor laws flexible, and deregulating
banking
– Widespread corruption and ingrained bribery
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India
11
• But India presents a lot of opportunities
– Massive market (over 1 billion, second in size only
to China)
– Cheap and qualified labor
– Knowledge of English
– Educated middle class numbering 250 million
(college graduates, scientists, engineers, etc)
– Supplier and exporter of expertise in all areas of
information technology
– Time zone puts India in a competitive position with
their European counterparts (they work while
Americans sleep)
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Asia Pacific Trade
Associations
11
• Once a source of inexpensive labor for products
shipped to Japan or to third markets, countries
in the Asia Pacific region are now seen as viable
markets
• Three free trade associations in this region:
– Association of South East Asian Nations (ASEAN)
– ASEAN+3 (ASEAN members plus ministers from
China, Japan, and South Korea)
– Asia-Pacific Economic Cooperation (APEC)
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Association of Southeast Asian 11
Nations (ASEAN)(1 of 2)
• Goals of the ASEAN
– Operating within a free trade area
– The ability to sell in an entire region without
differing tariff and nontariff barriers
– Distribution can be centralized at the most costeffective point rather than having distribution
points dictated by tariff restrictions
– Pricing can be more consistent, which helps
reduce smuggling and parallel importing
– Marketing can become more regionally and
centrally managed
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Asia-Pacific Economic
Cooperation (APEC)
11
• APEC was formed in 1989
– Provides formal structure for major governments to
discuss mutual interests in open trade and economic
collaboration
– Includes all major economies of the region and the most
dynamic, fastest-growing economies in the world
• Common goal and commitment to:
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Open trade
Increase economic collaboration
Sustain regional growth and development
Strengthen the multilateral trading system
Reduce barriers to investment and trade without detriment
to other economies
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Marketing Opportunities in
Greater China
11
• Across this vast land of opportunity, there are extreme
differences in economic wellbeing, cultures, and
political structures
• The following sectors are great for American
exporters:
– Automotive components, cleaner coal, construction
equipment, education and training services, machine
tools, marine industries, healthcare, water and
wastewater treatment, rail equipment, renewable
energy, and green building
• Finally, the influence of national government policies
and regulations of marketing will often be minor
compared with that of their local counterparts
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