Global Business Marketing: Political And Socio-Cultural Essay

Question:

Discuss about the Global Business Marketing for Political and Socio-Cultural.

Answer:

Introduction

Global marketing environment has been changing rapidly and competition among different companies has also been increasing. Therefore, the companies are trying to penetrate different market through watching the global business scenario. As stated by Rajogo (2016), new changes can be opportunities for the marketers and the organisation can direct use the strategy of global marketing in order to get the benefit. In this study, Ugg Boots is the chosen company and strategic analysis is done to show the impact of economic, political, socio-cultural and technological change in the company. In addition, I was a marketing manager have chosen China as a country to do the strategic analysis.

Background information on products of Ugg Boots

Ugg Boots Pty Ltd is the registered company in Australia and it is specialized in the sheepskin boots. Ugg Boots are specially sheepskin boots and these boots were originated in New Zealand and Australia. These types of boots are specially made of twin-faced sheepskin that has fleece on the inside and these boots have tanner on the outer surface with the synthetic sole (Australianuggboots.com.au, 2018). The boots makers are skilled and each pair of boots is made from beginning to the end by one handful employee. Ugg Boots are passionate about the team working and it keeps the great Aussie icon and it is Australian made products. Ugg Boots believe in quality before the quantity of the materials. Ugg Boots Pty Ltd is the member of Australian Sheepskin Association and Australian Made Campaign.

Background information on China as chosen country

According to IMF, China is the world’s largest economy in terms of Purchasing Power Parity (PPP). China is an Asian country that shows the GDP growth with 6.9%. Current GDP of China touched $13.3 trillion and GDP per capita is $10,300 (Day, 2016). China is considered as the fastest growing economy in Asia and it has more than 1.5 billion people's market. China has been experiencing the changes in the economy and business perspective. China offers entrepreneurial economy as the companies can expand the business and it can set the global benchmark for the prices. The labour cost is comparatively low in China and mainly with the development of Sichuan province; China offers vivid opportunity in business.

Economic environment

Global competitors and global markets have replaced the local markets and local competitors and volatile and unpredictable global economic environment will produce a threat to the company. China ranks 2nd in nominal GDP ranking and the inflation rate is 1.4% low (Cheng & Yiu, 2017). China has a labour force of 803 million. Service industry provides almost 51.6% and China industry provides 30% to the GDP of China. GDP rate in China suggests that each of the individuals provides values in China and it increases the consumers' purchasing power. UNCTAD published the World Investment Report and China was ranked third according to the largest FDI after the UK and the USA. China was ranked second as a selection for a most attractive place for multinational companies (Gilboy, 2017). The Chinese economy was ranked 77th out of the 190 countries for the suitable business climate for expanding the business, according to World Bank. FDI inflows in China grew steadily from 2012 and FDI rose to the high of 135 billion USD. China provides FDI in 11 free trade zones and it hit almost USD 16 billion in the year 2017 (Tang & Guo, 2017).

FDI

2014

2015

2016

FDI Inward Flow

128,500

136,610

133,800

FDI Stock

1,085,290

1,220,900

1,300,400

FDI Inwards

2.7

2.8

2.8

FDI Stock

10.3

10.9

12.1

Table 1: FDI in the figure in China

(Source: En.portal.santandertrade.com, 2018)

China has Chinese National Development and Reform Commission for better management of FDI and it addresses the relationship between foreign investment and national security investment. China joined WTO in the year 2001 and it showed the rapid growth in the field of import and the leading export material of China are antimony, tin, mercury, manganese and tin (Wu, 2016). China has good infrastructure to grow the business as it provides a considerably cheap human resource to Ugg Boots. World Bank expects the economic growth of China will touch 6.5% in 2019 (Guo et al., 2017). The growth is impressive and Chinese market might feel the worry in the trend of China with high property prices and reserve requirement in commercial banks in China is nine times higher than previous years.

Political environment

China is a socialist country under people's democratic dictatorship based on the peasants and workers and led by the democratic dictatorship. The government consists of the people's congress and political party system follows the multi-party cooperation (Lee, 2018). Communist Party of China (CPC) controls the leadership and government of China consists of a multi-party system. The government system ensures that there will be the only party to hold the power. China follows both formal and informal rules that must abide by the influence of the country. As stated by Meng, Pan & Yang (2017), political force in China are unsettled for the past few years. However, the government of China is mainly focusing on the development of e-commerce. The political condition of China is stable; however, China does not have a good relationship with all countries. China and Australia political relation are often called as Sino-Australian relations in business (Tsai & Dean, 2014). In China, if Ugg Boots wants to enter, the company should invest as much money as they can to maintain the market status and stability. The Chinese government took the initiative of Bolt and Road, where the government is going to invest US$4 trillion to develop the regional and infrastructure to access more foreign investment China (Yang & Jiang, 2015). China is trying to invest US$750 billion for the overseas investment and the strategic land with maritime routes. The Chinese government took International Green Finance Seminar in Beijing with seven international countries for environmental protection of foreign economic organisations. China has strong legislation for the foreign business and this framework is designed to mitigate the conflict among the organisations.

Small-scale organisations

10-15%

Standard rate

25%

High-tech organisations

15%

Companies engaged business in certain regions

15%

Table 2: Tax rate in China

(Source: En.portal.santandertrade.com, 2018)

Foreign companies in China can join in indirect business activities through a representative office in China. Representative Office (RO) is imposed as a similar tax in China and they are not permitted to sign the contracts or direct the business operations. Foreign organisations have to provide business tax (3-20%). The companies must provide 9 times of tax per year and the total share of taxes will be 68% of the profit (Lin & Du, 2017).

Socio-cultural environment

In China, the labour cost is lower than the other developed countries and many of the MNEs have its offices in China. Human Rights Practices showed that China has been continuing abuses to the human rights in violation of recognised norms (Zheng, Wang & Hu, 2015). Human Rights have been violated on speech, press, restriction on the association, religion, worker rights and limitation of birth. In China, age distribution and population growth fluctuate and these can change the social trends and values of cultural domination. Social factors are related to the lifestyles, religion, emigration and education. As stated by Li & Chen (2017), China follows the collectivist culture. Literacy rate in China has been crossed 90%, therefore, the customer's perception may change with time. Acceptable quality of life in China is a major concern as the population is high. The organisations may think that there will be maximum customers for the products. Ugg Boots can get the benefits of having large numbers of customers. China scores almost 87 in Long-term orientation culture that shows China follows the pragmatic culture. Chinese customers provide emphasis on the quality both real and perceived (Makri & Schlegelmilch, 2017). Chinese people provide importance to the family and travelling as well.

Technological environment

China is a technologically advanced country where the companies use high technologies for developing the products and services. Ugg Boots can take the help of Chiese technology in order to manufacture the products on time with quality. Ugg Boots has its manufacturing sites in Australia, it can start manufacturing the products in China also. If the organisation starts manufacturing in China, it would get the help of technologies and skilled employees of China (Zhu & Habisch, 2018). In technological factor, Ugg Boots can take the help of social media and internet media in order to do the publicity as China has more than 500 million internet users. Internet-based business will grow in China in next few years. New Production technology can be helpful for the business to grow with taking help of technology (Chan & Tong, 2014). Ugg Boots can take help of technology through new distribution mechanism, such as the internet. Technological development will be helpful when urbanisation and energy intensity will be done incorrect way. Technological advancement helps the business to grow taking the help of internet and mobile communication. On the other side, the major technological issue in Australia lies in a B2C industry where the customers do not believe in online payment method (Child & Mollering, 2013). The customers have high Uncertain Avoidance and Long-term orientation level.

Conclusion

The global business environment consists of distinct elements like globalization, international firm management, national business environment and international business environment. In a previous time, the Chinese economy was based on mainly agrarian and it has transformed now with the limited private sector. Ugg Boots will be profitable if they take the decision to enter Chinese market as China has been observing steady economic growth and stable politics. In addition, technological advancement can provide help to grow the business through internet. Taxes are higher in China and customers' perception is changing in China.

Reference List

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