Kathmandu Enter Into Chinese Market Essay

With the rapid maturement of economy and society, Chinese foodstuff has attracted a great number of attentions from let onside(prenominal) companies. and then, how to enter into Chinese securities industry place and how to be a successful come with in China has become a realistic emersion confront by p atomic number 18ntage managers, entrepreneurs and consultants. This essay go out focus on introducing matchless Australian topical anesthetic brand capital of Nepal which is an outdoor(a)(a)(a) vaunt equipment telephoner into Chinese market. Thus, a detailed analysis of the accredited built in bed of the Chinese market and this unusual companionship is indispensable.Firstly, this paper ordain analyze the current situation of the Chinese outdoor edition market and the Chinese economy, and whence identify the strengths and weakness of the capital of Nepal ships community when entering into Chinese market. Subsequently, survival of the fittest of entry modes a nd furnish and recommendations leave behind be departd to deal with or to lose weight the risks when enter into the Chinese outdoor athletics market. 2. BACKGROUND ABOUT capital of Nepal COMPANY capital of Nepal Holdings Limited was established by John Pawson and Jan Cameron in 1987.The beau monde started off as a small outdoor dress shop in New Zealand and in 25 historic period has pornographic to a multi-national brand primarily producing outdoor skylark clothing and equipment which commix with the advanced technology, spirited flavour and high comfort level. such(prenominal) as, tents and shelters, packs and luggage, quiescence gear, outdoor clothing, footwear and other accessories of outdoor. In 2006, one Australasian tete-a-tete equity partnership fully acquired capital of Nepal for NZ$275 million.Currently Kathmandu does the business in Australia, New Zealand and England. The company slogan aims to capture new and doughty individuals and the marketing strate gy has been built around this notion (Kathmandu, 2012). 3. OPPORTUNITIES OF CHINESE exterior commercialize 3. 1 Outdoor lark about in China on with the phylogenesis of economy and living stander, outdoor sport becomes increasingly popular in China. In China, outdoor sport was started at Beijing, Shenzhen and Shanghai in 1999(Chinese News, 2011).Currently, combing with pressure reducing, such sport increase quite card-playing and become one kind of society fashion. There argon four outdoor sport activities which embroil High Mountain, exploration, rock climbing and pedal in China (Chinese outdoor Sport Association, 2012). The outdoor sport is an headmaster sport activity not only require a cheeseparing physical quality however also good clothing and equipment to take surface the bad environment. Therefore, fast increase of the outdoor sport contributes to sharp attach on hire of outdoor sport clothing and equipment.As describe by China Outdoor Sport Association, the number of annual gross revenue from existing manufactories of outdoor equipment was 800 million RMB in 2010, while the number of that in 2000 was 60 million RMB, and the number of Chinese participation in the outdoor sport has reached one hundred million (China Outdoor Sport Association, 2012). Hence, along with the unbelievable development of the outdoor sport and the higher quest of outdoor products, obviously, the potential of the Chinese outdoor sport market is quite considerable. 3.2 Situation of Chinese outdoor market Basic the market research, currently, at that place are approximately 200 Chinese local outdoor sport brands and around 1100 outdoor clothing and equipment stores. Although the outdoor effort of China is at beginning phases, either year increase 50%. The CEO of the pierce ships company which is one of the beat 100 Ameri place outdoor equipment companies pointed out that such fast increase would chief(prenominal)tain at the least 5 years in China (Simone, 2002). It can be calculated that the Chinese outdoor sport market should be worth around cardinal billion.However, even though the outdoor sport is obtaining swift development, the outdoor market is relatively backward. The local manufactures only experience or provide chief(a) products or services, lack of the leading company and well- cutn brand is a serious issue in the local market. Therefore, it is a favorable luck for Kathmandu to expend to the Chinese outdoor market, because of the sharp escalation of market demand and inadequate supply of the local outdoor market. 3.3 Competitors in Chinese outdoor market China already had around 200 local brands in outdoor sport market. However, in such new industry market foreign companies occupied the main military strength. According to the research, on that point are four main competitors for Kathmandu in the Chinese outdoor market, which include The North Face that is an American company, it has a long history and produce fine wor kmanship products, one company of France named ALGLE which entered into China in 1997, and its products are practical and noble.OZARK which is a Switzerland Company and the design of their products is following the characteristic of the Chinese. The blend one competitor is Salewa from German (Chinese News, 2011). Compare with these foreign companies, the technology and quality of the local brands are at put down level, particularly, at the aspect of technology. Company is difficult to survive without advanced technology supporting, especially, in the outdoor sport market.Therefore, the outdoor market that has a small number of strong competitors will supply an opportunity for Kathmandu to obtain the biggest market share by adopting the advanced technology. 3. 4 Chinese economic situation For the monetary reason, the Chinese market is quite let for the Kathmandu to enter. According to the field of study function of Statistics (NBS) recourses, in 2010 the number of average dispo sable personal income of cities and towns was 21033 RMB, which was higher 11. 3% than that in 2009.Meanwhile, the recourses also mentioned that the number of average disposable personal income in cities and towns was 7414 RMB in the first quarter 2011, which was higher 14. 1% than that in 2010 ( guinea pig agency of Statistics, 2011). The increase of the disposable personal income of the Chinese offered an ideally material take on for consumption of the outdoor sport, which also means that Chinese has obtained higher buy power than before. The Nominal GDP per capita continues experiencing increase since 2001 to 2010 from 8. 3% to 10. 3% (National government agency of Statistics, 2011).Following the acceleration of the urbanization progress, increasingly Chinese has selected outdoor sport, particularly, the young mint. As the China Outdoor Sport Association report 2010, 90% of the participators already have chance oned high education degrees and the wages in the 65% of them ove r 5000RMB per month, 20 to 40 years old people occupied 84. 1% (Chinese News, 2011). China possesses the most enormous consumer groups which attract the ken of the world. such(prenominal) consumer groups will contribute more benefits than England and New Zealand for Kathmandu.According to the National Development and Reform Commission, there is a police of 5 years plant from 2011 to 2015, which will focus on inequality of wealth statistical distribution and shifting emphasis from investment to consumption (National Development and Reform Commission, 2011). Therefore more money will be spent in country and inland development. So that Kathmandu can expect a festering number of potential customers in the coming 5 years. Therefore, the current situation of the Chinese market is ideally for Kathmandu to attract more customers and to sales more outdoor products.4. STRENGTHS AND WEAKNESSES OF KATHMANDU IN CHINA Kathmandu has satisfactory experience on oversea expending. According to t he Kathmandu office report, currently, the company of Kathmandu has totally 107 retail stores, 65 located in Australia, 39 in New Zealand and 6 in United Kingdom respectively. In 2003 and 2004, the company entered into the market of United Kingdom, and speedy became one of the top dickens outdoor brands in the UK. The office report also mentioned that the Kathmandu Company made 237 million AU$ sales and obtained 7 million loot in 2011(Kathmandu, 2012).Therefore, the Kathmandu has sufficient expending experience, which enables to reduce risks that are bought by the insufficient of experience when enter into China. Furthermore, owning of advanced technologies is able to guarantees the leading position in Chinese outdoor market. Specifically, the technologies of anti-wind, anti-fire, waterproof and high heat economy are adopted by all of their products with high comfortable level. Such advanced technologies are what the Chinese local outdoor equipment market and customers need. Howe ver, there are around weaknesses of Kathmandu can not be cut in Chinese market.Firstly, lack of Guan XI (special relationship) will be the main issue for the company. In Chinese market, it is difficult to obtain long-term internet that making the business without a favorable Guan Xi, particularly, the closing relationship with the Chinese government. The Kathmandu may face some restriction from the Chinese Government. Such as, polices changing, law modifying and the exacting on some local resources, which will vex a great number of obstacles on operation of the Kathmandu company in China. Secondly, low brand awareness will lead to high live in Chinese market.Obviously, although there is an increase in the demand of western products for the Chinese customers, the products selection of customers is quite cautious, especially on uninformed brands. The Kathmandu may needs more patience to the Chinese clients to know more about the products of the Kathmandu, in other words, more time is necessary by the Chinese market. In addition, in such situation, more capitals will be spent by the company on advertising in order to build the name recognition. Thus, these weaknesses may bring some risks for the Kathmandu company operation in China. 5. HOW TO ENTER INTO CHINESE OUTDOOR MARKET 5.1 Selection of the entry modes The selection of entry modes is crucial for either company when enter into a new market. There are dickens major entry modes, which include non-equity modes and equity modes (Chen Hui, 2002). As a multinational company and has good expending experience in the UK and New Zealand, it is indisputable that equity modes is sequester to the Kathmandu when enter into Chinese market. The entry modes catch joint-venture, acquisitions and green-fields (Peter, 2008). Merger and acquisition can assists the Kathmandu directly entering into Chinese market by purchasing the company that already has established in China.However, a thumping number of capitals are required by the Kathmandu company to merger the Chinese local company, which means more cost will occur when choose this entry method. In addition, social-cultural environment issue should be considered by the western companies, acquisition entry method may be related to a sort of aggression by Chinese duo to the Chinese history, so that some threatens will be face up by the Kathmandu Company, for instant, anti-products and service of the company. The green-fields entry method also requires large number of capitals to support, and this approach is quite complicate to operate.While more license in designing the plant, selecting suppliers, and hiring a work force will be contributed by green-field (Ilkaka, 2007). Compare with acquisition and green-field, joint-venture entry method is more appropriate to the Kathmandu Company to enter into the Chinese outdoor market. The reasons as follow, firstly, cheerful pointed out that joint-venture is cheaper to exit compare with green-fie lds and also has the advantage that benefits the company to directly enter the market of other countries (Beamish, 2001).Secondly, the Kathmandu Company is not acquainted(predicate) with Chinese institutions and regulations, finding a Joint-Venture match can help escort rules of running business, and the Guan Xi of the Chinese partner can be employ by the Kathmandu in China. Moreover, such method will provide strong bargaining power with Joint-Venture partner for the company, as Kathmandu can provide high technical resources and product line which is the crucial issue facing by the Chinese outdoor companies. However, there are some disadvantages that lead to the risks to the Kathmandu Company from the joint-venture entry method.Firstly, the joint-venture may modify the partner to competitor (Swierczak, 1994). Specifically, it is dangerous that giving the advanced technologies to the partner to control. Perhaps the firsthand goal of the local partner is to control the leading te chnologies of the Kathmandu such technologies will be used by other local companies on their products in order to obtain the bigger market share and to compulsionon more expediency, which should be the most primary risk for the Kathmandu Company. Secondly, divided up ownership can lead to conflict over goals and control.The ownership and administrative power will become the main conflict between the partner and the foreign company (Swierczak, 1994). In order to control and make the biggest profit to their own company, both local and foreign company adopts various approaches to attain the beneficial position in the joint-venture company. Such as, increasing the investment and controlling the resources. Balancing the advantages and disadvantages for the Kathmandu Company to select the entry modes in Chinese market, joint-venture is the ideally entry modes for the company.However, which Chinese partner should be selected by the Kathmandu is another issue. 5. 2 Selection of the Chine se partner There are a great number of local outdoor or sport brands in China. However, it is difficult to find a well-known outdoor sport brand because of the new outdoor market. Thus selecting a famous sport equipment company as the joint-venture partner is the best selection for Kathmandu Company. The Chinese sport companies include 361, ERKE, ANTA, PEAK, DOUBLE STAR, Xtep and LI NING (Chinese sport research, 2011).According to LI NING annual report 2010, the capitalization of the company has reached 8. 387 billion and has had 8156 sales shops in 1800 cities in China, and The number of LI NING brand retail stores is 7478 Moreover, LI NING has the highest story as the company is sponsoring several of Chinese sport national teams. The company already cooperated with AIGLE, LOTTO and Kason using joint-venture entry modes, which means that LI NING has had sufficient experience on such entry modes, and the high experience will assists the Kathmandu to reduce the risks on joint-ventur e (LI NING, 2011).Therefore, LI NING should be the most appropriate joint-venture partner for the Kathmandu Company, the large number of LI NING sales engagement and capitalization will contribute the convenience to the Kathmandu to enter into Chinese outdoor market. 6. CONCLUSION China has become the biggest market for the foreign company duo to the rapid development of economy and society. Such development specifically expressed in the GDP and the average disposable personal income continually increase, which also represent high purchasing power in China.In the same period, the fast development of Chinese outdoor sport market contributes to the high demand not only for the outdoor clothing and equipment but also for the advanced technologies of the outdoor equipment in the Chinese outdoor market, and the lower strong competitors also provide a God-given opportunity for the Kathmandu outdoor equipment company to enter such ideally market. Hence, how to enter Chinese market will be the first issue faced by every foreign company manager.The joint-venture entry modes should be the possible modes selected by the foreign company, particularly, the Kathmandu Company duo to the lower cost, easily access the market. The Kathmandu enables to use the local resources and Guan Xi network of the LI NING Company, which are the weaknesses of the Kathmandu, via joint-venture in order to become a successful company operating in China after into the outdoor market. Both companies will obtain the benefits that they want from joint-venture entry modes. 7. REFERENCES Beamish, P.W. ,&Banks, J. C. 2001. Equity joint ventures and the theory of the multinational enterprise. journal of international Business Studies, 18(2)1-16. Chinese Customs, 2011, Export Procedure, viewed 20 may 2012, from http//www. customs. gov. cn/publish/portal0/. Chen, H. 2002, An analysis of determinants of entry mode and its impact on performance, Int. Bus. Rev. , 11 (2002), pp. 193210. 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