PESTEL analysis on China PDF

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Part of mandatory presentation on International Marketing Strategy (from USA to China)...

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PESTEL analysis on China Since China with its current population for more than 1,4 B. inhabitants is by all means an attractive market for Oreo. In order to drive success of a business and acknowledge the risks a certain market has, it has to be investigated. The PESTEL analysis is a great tool we used to define the macroeconomic situation in China for Oreo. With the PESTEL analysis we are investigating Oreo in China through the following six different factors: Part of WTO and ASEAN POLITICAL FACTORS – political relations like with others? -

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People’s Republic – communist state is the form of government – leading society at all levels by XI Jinping, General Secretary of the CPC and President of the People’s Republic of China. This incorporate 5-year plans, current one being from 2016-2020. The socialist Chinese government is known for making unsettling changes to policies overnight and this affects both Chinese and foreign traders. As a result of this creation of long-term marketing plans becomes almost an impossible concept in China. Trade war - China part of WTO (2001) but was stealing IPs in USA (Huawei case) and the Trade war from year 2018 – where is the ongoing economic conflict going (possible extra tariffs and such). These has lead US manufacturers change location to countries nearby (Thailand, Kambodia) and could possibly lead even to US-goods boycotting

ECONOMIC FACTORS -

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GDP world 2nd or 1st largest economy of which 70 % comes from domestic consumption GDP growth over the past years - China has experienced a period of rapid economic growth, averaging almost 10% per annum for the three decades up to 2010 High inflation rate (2019: 2.28 % which is seeming to grow to 3 % in 2023.) Consumer prices raised on October to 3,8 %, mainly on the consumer goods (pork prices) industry. Inflation rate (3,8 % 10/2019) Government is trying to control. Gap between poor and rich Urban vs rular population: lack of education and tertiary skills (technology advanced China) China is getting urbanized: by 2020 60 % live in cities whereas 1996 when Oreo started 32 % were urbanized (small Oreo for poor people – Patricia ) Made in China 2025 1

Launched 2015 by Prime Minister Li Keqiang focusing on smart manufacturing. Goal to raise Chinese industrial capability. -> Shipping fast moving consumer goods

SOCIAL FACTORS – What impactful societal and cultural customs does the country have? -

Collectivistic culture (people are encouraged to do what is best for society and family is in a central role). This result how the people think, feel and act in the. How to market: Soft sell marketing - you’re very friendly and respectful towards your potential customer. You put a lot of time in creating a positive professional relationship and gaining trust. (som 2019).

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Literacy rate: 90 % - access to Internet (marketing)

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Consuming behaviour: small packages, convenient stores (having as well hypermarkets and medium-sized grocery stores), no space in local stores or at the kitchen

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Online Shopping habits – Singles Day (11.11.) growth tremendously, the world’s larger 24-hour shopping day (Alibaba). Chinese people easy following the trends

TECHNOLOGICAL FACTORS – Entering the “Digital China” -

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Worlds largest digital market – could Oreo take this advantage in marketing? The current value of China’s e-commerce transactions is estimated to be larger than in France, Germany, Japan, the United Kingdom, and the United States combined. (McKinsey) Especially targeting area along with the cities As China digitizes, industries will experience huge shifts in revenue and profit pools across the value chain. This creative destruction is happening globally as the world digitizes, but it is likely to happen more quickly and on a relatively larger scale in China given a combination of inefficiencies in traditional sectors and massive potential for commercialization. High e-comm (Alibaba, Beidu) Offering in the market mobile payments - growth Science & Technology most promoted areas of Chinese economic policies the three digital forces o Disintermediation – linking supplier and industries together “digital disruption” o Disaggregation – reinvention of industries – the turn of industries into services – conserning more on the shared economy o Dematerialization – access to products anywhere, any time

ENVIRONMENTAL - What is the country’s impact on the environment? -

Natural hazards: China is exposed to an array of natural hazards, eg. earthquakes, floods, typhoons, and volcanoes. This has caused a lot of losses in Chinese eg. Between 2000 and 2015, natural disasters affected some 1.6 billion people and caused about $300 billion in damages.

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Green development - China has relied for decades in huge energy consumption and excessive environmental pollution. To face the environmental issues this has caused the government has invested on industrial pollutant governance and environmental protection and incorporated it in the 5-year-plan. China is expected to become a world’s leader in developing a low-carbon economy

Zero-waste cities: In January, China’s Ministry of Ecology and Environment

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announced a pilot scheme to establish 10 zero-waste cities. The purchasing habits, including sales of single-use plastics, and recycling infrastructure for the 10 undisclosed cities will be overhauled and tightly controlled in a bid to create a blueprint that can be rolled out across China from 2020. Officials have said the scheme will also focus on encouraging people to live environmentally friendly lifestyles and minimize waste.

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Fun fact: The ancient Chinese philosophy advocates a unification of humanity and nature. Respect for and conformation to the laws of nature is in the very heart of the Chinese culture

LEGAL factors - What is the legal landscape like in the country? No proper legal protection from the government - Oreo should take legal advice when moving into a country like this. - Foreign Investment Law in 2019 On March 15, 2019, China passed a new Foreign Investment Law (FIL), a landmark legislation that’s stated aim is twofold: improve the business environment for foreign investors and ensure that foreign invested enterprises participate in market competition on an equal basis.  As a result this should make it more appealing for companies to make business in China and invest there  Environmental protection tax law in China goes into effect on 1.1.2020. air pollution, water pollution, solid wastes and noise are the four major categories of taxable emissions.

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Sources: Ambler, T., Witzel, M. & X, C. 2016 Doing Business in China. Routledge. Accessible: https://books.google.de/books? id=VqKuDQAAQBAJ&pg=PT217&lpg=PT217&dq=oreo+moving+to+china+in+1996&s ource=bl&ots=zuyUKQiwcM&sig=ACfU3U3BzbUV8Tp1jzpo9JW8_mmnU7seNg&hl=fi&s a=X&ved=2ahUKEwihp_KK9ILmAhVPJ1AKHSPIB1cQ6AEwGXoECA0QAQ#v=onepage&q =oreo%20moving%20to%20china%20in%201996&f=false Accessed: 24.11.2019. Crossley, G. 2019. China implementing new rules to make business easier: state planner. Reuters. Accessible: https://www.reuters.com/article/us-china-economypolicy/china-implementing-new-rules-to-make-business-easier-state-planneridUSKBN1X214N Accessed: 24.11.2019 Foreign & Commonwealth office 2019. Accessible: https://www.gov.uk/government/publications/overseas-business-risk-china/overseasbusiness-risk-china Accessed: 24.11.2019 ISDP 2018. Made in China 2025. Accessible: http://isdp.eu/content/uploads/2018/06/Made-in-China-Backgrounder.pdf Accessed: 24.11.2019 Jiang, Y. 2016. Green Development in China – Models and Discussion. Springer. McKinsey 2019. Accessible: https://www.mckinsey.com/featured-insights/china/digitalchina-powering-the-economy-to-global-competitiveness Accessed: 24.11.2019 PESTLE Analysis 2019. 23.11.2019. https://pestleanalysis.com/pestle-analysis-explained-with-examples/ Som 2019. Accessible: https://smart-online-marketing.nl/en/conversion/culturaldifferences-consumer-behavior-worldwide/ Accessed: 24.11.2019 Statista. China: inflation rate from 2007 to 2024 Accessible: https://www.statista.com/statistics/270338/inflation-rate-in-china/ Accessed: 24.11.2019 White Rose Research Online 2007. Using PEST Analysis as a Tool for Refining and Focusing Contexts for Information Systems Research Accessible: http://eprints.whiterose.ac.uk/78787/7/WRRO_78787.pdf Accessed: 23.11.2019

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Further Links

https://www.sjgrand.cn/china-issues-new-food-safety-guidelines/ https://www.thinkwithgoogle.com/intl/en-apac/trends-and-insights/mastersmobile-greater-china-report/ https://www.cnbc.com/2019/09/06/tariffs-are-no-longer-chinas-biggest-problemin-the-trade-war.html https://www.scmp.com/comment/insight-opinion/unitedstates/article/2161671/why-consumer-boycotts-us-brands-china-might https://books.google.de/books? id=gvAUiaw5BhYC&pg=PR31&lpg=PR31&dq=prep+moving+to+china+in+199 6&source=bl&ots=F13CfvTcqP&sig=ACfU3U082ANK6emAFEpPdwdjuBr3R9h2kg &hl=fi&sa=X&ved=2ahUKEwj3gI3384LmAhWPUlAKHdKBD3kQ6AEwCXoECAYQ AQ#v=onepage&q=prep%20moving%20to%20china%20in%201996&f=false https://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/ChinaPOLITICS-GOVERNMENT-AND-TAXATION.html https://www.usi.edu/media/3654697/Business-Environment-China.pdf https://www.swotandpestle.com/mondelez-international/ https://www.eastasiaforum.org/2011/03/28/chinas-inflation-problem/ https://www.marketingtutor.net/pestle-analysis-of-china/

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S1 Statista (2019a) Accessible at: https://www.statista.com/chart/19489/biggesteconomies-in-the-world/ Statista (2019b) Accessible at: https://www.statista.com/statistics/270338/inflationrate-in-china/ Statista (2019c) Accessible at: https://www.statista.com/statistics/271336/literacy-inchina/ The Zhongguo Institute (2018) Accessible at: https://zhongguoinstitute.org/the-greatdivide-between-chinas-rich-and-poor/ ISDP 2018. Made in China 2025. Accessible at: http://isdp.eu/content/uploads/2018/06/Made-in-China-Backgrounder.pdf

S2 Dezan & Shira Associates (2019). Accessible at: https://www.chinabriefing.com/news/china-new-foreign-investment-law-backgrounder/ Ernst & Young (2018). Accessible at: https://www.ey.com/Publication/vwLUAssets/eyenvironmental-protection-tax-alert-2-jan-2018-en/$FILE/ey-environmental-protectiontax-alert-2-jan-2018-en.pdf Ozy (2019). Accessible at: https://www.ozy.com/acumen/a-plastic-recycling-revolutionis-brewing-in-china/93680/ Jiang, Y. 2016. Green Development in China – Models and Discussion. Springer. McKinsley (2019). Accessible at: https://www.mckinsey.com/featuredinsights/china/digital-china-powering-the-economy-to-global-competitiveness Global Facility for Disaster Reduction and Recovery (2019). Accessible at: https://www.gfdrr.org/en/china

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