Assignment 1: International Expansion 1. Develop a revised international product life cycle plan. Introduction Phase The introduction phase is when the public first sees or hears about a product. The product appears in stores for the first time, and people start seeing print and television ads. As the global manager of a retail company, the prices of product will be set high to recoup initial expenses that went into producing the product. For innovated products, a retail company with new products could introduce products 10 percent to 20 percent above the prices of same kind of products.
The higher price is because of the hype and anticipation of the new technology (Doha, Das & Pagell, 2013). For the same products, company could gain new customers through reducing price. Growth Phase The growth phase is when sales and profits for the new product start rising. A company will usually keep product prices about the same during the growth stage to maximize earnings. Product quality is also maintained. However, a company will usually expand its product distribution during the growth stage.
To increase marketing share, the stages in growth phase includes 1) providing new customer service, such as free guarantee for three months; 2) increasing number of outlets and stores in main cities of China, like Beijing, Shanghai, and Guangzhou, and 3) a set of promotion strategies, such as increasing advertising through TV, magazines and radio. Maturity Stage Success inevitably leads to increased competition. Other companies eventually will start introducing similar products, especially if the initial product is highly successful.
Consequently, the demand for the product and its competitors will peak at some point. Sales growth will start to decline. The plan in maturity stage are following: 1) developing new product features to differentiate its products from the competition’s; 2) enhancing its customer-service department to establish itself as the service leader in the industry; 3) company may reduce prices to capture additional market share or new customers (Sy ;amp; Mascle, 2011). Decline Stage Demand for the product will eventually wane as newer technologies are introduced.
Hence, companies need to maintain the product, sell it at heavily reduced prices or discontinue the product. A company that maintains the product may continue increasing sales by finding new uses for the product. In detail, marketing department could discover new market target through marketing research to identify new customers and more demands of customers. 2. Visit “Geert Hofstede” located at http://geert-hofstede. com/countries. html and compare the cultural differences in China to the United States based on the “ 5-Dimensions of National Culture. Through the Greet Hofstede, the significant difference between China and US are in power distance (PDI), individualism (IDV), uncertainty avoidance (UAI) and long-term orientation? (LTO). Compare with the US, China is higher in PDI and LTO, and lower in IDV and UAI. Power distance – Power distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. Compare PDI of United States, at 80 China sits in the higher rankings of PDI.
It means the society that believes that inequalities amongst people are acceptable. The subordinate-superior relationship tends to be polarized and there is no defense against power abuse by superiors. Individualism – The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. At a score of 20 China is a highly collectivist culture where people act in the interests of the group and not necessarily of themselves. In China’s culture, people belong to ‘in groups’ that take care of them in exchange for loyalty.
In the U. S. , individualist societies people are supposed to look after themselves and their direct family only Uncertainty avoidance – The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in the UAI score. Compare the U. S. , China has a low score on uncertainty avoidance. Truth may be relative though in the immediate social circles there is concern for Truth with a capital T and rules (but not necessarily laws) abound.
Long-term orientation? – The long-term orientation dimension is closely related to the teachings of Confucius and can be interpreted as dealing with society’s search for virtue, the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view. With a score of 118 China is a highly long-term oriented society in which persistence and perseverance are normal. Relationships are ordered by status and the order is observed. 3.
Analyze the economic, social/cultural, technology, and political/legal impact of your company doing business in China. Economic impact – In late 1978, Deng Xiao-ping initiated an “open door policy” to modernize China by encouraging foreign investment and trade. The economic reforms that flowed from the open door policy have created an economic system often referred to as a “socialist economy with Chinese characteristics”. Since China officially joined the WTO on 11 December 2001, China’s accession has bear great significance for the country’s economy and the future of global trade.
Many industries that were previously restricted only to domestic enterprises are now open to foreign investors (Tim, Morgen ;amp; Chao, 2009). These industries include banking, telecommunications, distribution, construction, engineering insurance, plus professional services including legal, accounting, and architectural services. Furthermore, restrictions on domestic sales by foreign manufacturing companies will also be lifted. Social/cultural impact – In Chinese, the development of long term business relationships is referred to as Guanxi.
The concept works in both Western and Eastern cultures; however the difference exists in how it is actually performed. For example businesses in the Western world do not, typically, involve the exchange of gifts. In China it is considered an acceptable practice and sending a gift can only enhance your business relationship (Niu ;amp; Kaufman, 2013). Technology impact – In order to acquire foreign technology, capital and know-how, Chinese domestic enterprises recognize the importance of entering into joint ventures with foreign enterprises.
However, there are restrictions on the extent of foreign participation allowed in certain sectors and in some sectors foreign investments not permitted at all. Such restrictions, however, are gradually being phased out with China’s accession to the WTO. In addition to joint ventures, WFOEs are also allowed, provided the sectors in which they operate are not subject to 100% equity restrictions. Political/legal impact – China has passed an anti- monopoly law, which came into effect on 1 August 2008.
Foreign investors doing business in China need to consider the immediate impact of this new law on their businesses. Merger and acquisition transactions in China involving foreign parties will be subject to review and can be halted due to antitrust reasons. Acquisitions of domestic enterprises by foreign investors that may have implications for national security shall be subject to more stringent review (Ip, 2012). Reference Doha, A. , Das, A. ;amp; Pagell, M. (2013). The influence of product life cycle on the efficacy of purchasing practices.
International Journal of Operations ;amp; Production Management, 33(4), 470-498. Ip, E. C. (2012). Judicial review in China: A positive political economy analysis. Review of Law and Economics, 8(2), 331-66. Niu, W. ;amp; Kaufman, J. C. (2013). Creativity of Chinese and American Cultures: A Synthetic Analysis. Journal of Creative Behavior, 47(1), 77-87. Sy, M. ;amp; Mascle, C. (2011). Product design analysis based on life cycle features. Journal of Engineering Design, 22(6), 387-406. Tim, A. , Morgen, W. ;amp; Chao, X. (2009). Doing Business in China, 3rd. NY: Taylor ;amp; Francis Group.