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Introduction
- Increased focus on EMs by multinationals due to saturation of developed markets.
- Most MNCs have previously focused on the economic elite within the EMs.
- Examples of EMs are China, Brazil and Russia.
- Ems are characterized by low operating costs and a large population of highly increasing middle income earners.
- Main strategy should focus on innovation aimed at meeting the special needs of the market at affordable rates.
Purpose
- To analyze a major Emerging Economy (EM) and see the potential of investing in such an economy.
- The Chinese economy will be used as a sample an Emerging economy .
- To access the possibility of transferring an existing manufacturing plant from an already saturated economy in the developed world to a merging economy inoder to tap the potential of that economy in the fast developing third world .
Counrty Summary-China
- Existence of an excellent product market infrastructure compared to other EMs.
- China has a good product market infrastructure.
- China is very attractive to FDI.
- Domestic firms are dominantly SOEs.
- China is very open to FDI.
- Government policy is attractive.
SWOT Analysis
Streghts
- Market availability due to large middle income population.
- Access to cheap skilled labor
- An excellent market infrastructure
- Existing Production platform within region
- Good supply source of raw materials
Weaknesses
- There exists a gap in level between Chinese industrial products( mainly middle level) with the international level which are more advanced.
- Rigid management and operations
- There is creative spirit
- Lack of proper technical equipment
Opportunities
- Gradual reduction of tariffs on imports of raw materials
- Decline of import tariffs for some developed economies.
- Quota restrictions have since been completely eliminated
Threats
- Severe constraints in resources.
- Degradation of the environment has highly intensified.
- Increase in counterfeit products by rival companies.
- The market is open to new entrants who may eat into the companys market share.
- Overproduction of industrial products leading to reduction of profit margins.
- Increase of Emerging economies thereby slowly washing our the low labour strategy.
Pestle Analysis
Political
- There exists an open and stable political system in China.
- Gradual reduction of tariffs on imports of raw materials.
- Quota restrictions have since been completely eliminated.
- Investment into the domestic market by government to spur infrastructure development.
- Imperfect laws and regulations in China.
Economic
- Rapidly growing economy, GDP currently sixth in the world.
- Existence of low cost labor and skilled human capital.
- Increased purchasing power of the majority population due to the high economic growth rate in China.
Pest Analysis
Social
- Technology was initially restricted to industries but has since been adapted by even small scale home users.
- Development of internet has made the Chinese people have access to information thereby embracing technology due to high exposure.
- The Chinese people have found it economical to embrace technology compared to use of traditional methods to do their work.
Technological
- Chinese technology is fast evolving leading to innovation of better and cheaper technology.
- Technology has changed the structure of the product distribution channel, making it cheaper and more efficient to distribute goods.
The Business Proposal Car Manufacturing Plant
Having done both the PEST and SWOT analysis of the china as an emerging economy, it is imperative that we now make a proposal for a specific investment into this economy.
The company will manufacture affordable and cost effective motor vehicle to meet the needs of middle class economy in China and export the surplus to developing economies in Asia and Africa.
Projecteds Cash Flows
Strategy-Implimentation Plan
Development of new skills and management structure to meet the needs of the targeted market.
Provide autonomy in the local market thereby eliminating dependence on external sources.
Provision of unique products at dramatically low prices to meet the special needs of the majority who have lower , yet significant combined purchasing power.
Issues Benefits and Controls
The main emerging issue is reducing cost of production usually encountered in the developed economies which lead to high product costs which are unaffordable to the world markets.
Investment in an Emerging economy enhances company growth and sustenance as it aims at tapping into large virgin markets that have not been reached.
Necessary controls must be put to counter the social economic and political challenges that investment into Emerging economies pose.
References
Alvis, J. M. (2011). Business Strategic Planning. Houston: New American Publishers.
Coleman, G. (2011). Innovation in Emerging Markets. New York: Price Hall Publishers.
Hitt, I (2007). Strategic Management- Concepts And Globalization. Ohio: Thomas Higher Education.
Kachru, U. (2005). Strategic Management- Concepts And Cases. New Delhi: Excel Books.
Do you need this or any other assignment done for you from scratch?
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