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The peculiarities of marketing strategy development in china - Реферат

Эстоно-американский бизнес колледж

кафедра менеджмента и маркетинга

Р Е Ф Е Р А Т

"THE PECULIARITIES OF MARKETING

STRATEGY DEVELOPMENT IN CHINA"

Исполнил: Торп Андрей

Группа ЕТ 402

Проверил:Шпилёв Андрей

Т А Л Л И Н Н 2003

СONTENTS

1.Introducing....................................................................................3

2.Lobbyng.......................................................................................5

3.Budget offer...................................................................................8

4.Technical discussions........................................................................9

5.Final offer....................................................................................10

6.Formal negotiations.........................................................................11

7.Managerial implications....................................................................13

8.Conclusions..................................................................................15

INTRODUCING

Since the 1970s,when China's foreign trade policy was liberalized ,many Western firms have been very enthusiastic about capturing this market of over one billion consumers.

On average ,throughout the 1980's ,China was visited by one Western government ad-

visor every week.This interest of Western authorities and businesses can be compared

with Western interests in Japan,a far more important trading partner.Western busines-

ses' interest in China decreased somewhat after the Tiananmen Square incident in 1989.

However,interest from trade and industry continued ,and increased even more in the

1990s.Lately,West European governments and businesses have also shown the interests

in China.The picture is not much different where American interests in this market are

concerned.In 1980s the trade between USA and China rose to more than US $ 5 billion

In these years,there was great demand in American goods.The trade relations between

the USA and China received a serious set-back after the 1989 incident.But the interest in China,both from the authorities and the business sector in the USA revived again when

it was given the ranking of most-favoured nation (MFN) in the mid-1990s.

Since 1979,when the new regulating joint ventures was introduced by the Chinese government ,there has been a tremendous increase in joint-venture agreements with

agreements with foreign investors.In 1984,China signed 741 equity joint-venture agreements with foreign investors.By the end of 1987,the number of enterprises with

foreign investment in China exceeded 10,000 with a total coctract value of almost

US $ 22billion and paid-in value in excess of US $8.5 billion.In October 1984,the government declared that central planning would no longer be used and that a system of interfirm contracts would be utilized to facilitate the distribution of raw materials and goods.During the same period four special zones Economic Zones (SEZs) were established to encourage foreign investment.As a result,foreign direct investment increased and attained real momentum in 199-1991.By 1995,it had reached more than

$ 30 billion.

In spite of this revived interest and fact that the Western companies have been dealing

with Chinese for almost two decades,these firms are now facing difficulties in negotiating

business deals with China.We believe that, basically,the problem is one of understanding

Chinese culture and perculiarities in behaviour .Such an understanding Chinese culture

is essential to do business in China and to maintain business relationships in the long

run.

We all know that negotiation process is considered as an interaction process of reaching agreements to provide terms and conditions for the future actions of the parties involved.

Being a process,it can be divided into distinct stages.For the purpose of this study

and consistent with earlier studies the process of negotiations between Western firms

and their Chinese counterparts is divided into six stages: lobbying ,budget offer, technical discussions,final offer,face-to-face negotiations and implementation.

LOBBYNG

The negotiation process starts with early contacts with the Chinese authorities,in which

customer is trying to establish whether or not the selling firm has the technology or

capabilities to deliver the particular project.The Western firms are normally expected to

China and present their technology and products.The firm has to conduct presentation

session for the number of people and groups.In these sessions the firm has to convince

the Chinese that it has a technology they want and that it is competitive as regards technology recources and realibility.At this stage,the firms should realize following:

Contents of deal:The first point to consider consists of identifying the implications of project;i.e,that the contents and objectives of the deal match of the firm.Questions such as

„what can the firm gain or lose in both tangible and intangible terms?" or „what is at stake?" should be answered.

The preparation and planning of negotiations takes a lot of time and the more information

a firm can gather at this stage,the better the of success it will the later stages.

The firm should gather information on both customer and the competitors,and on which

other alternatives are available to the customer.And the firm has to compare its strengths

and weaknesses,for the particular project,with that of its competitiors..If the competitors

are stronger,in one way or the other,the firm has to develop arguments to expose their

weakness.If the firm knows that a Japanese firm is also competing for the same project

and that the Japanese offer is cheaper than the firm is own,it has to develop arguments

explaining why the offer more expensive.For example,in one of the projects this was actually the case and the Swedish firm was also able to convince the Chinese negotiators

that althogh its price was higher,the capacity of its machines and that the technology

was better in terms of quality as well as its technolgy which would facilitate future

expansion.This argument was accepted by the Chinese as they do always rely upon

the best technology.If the company is able to convince that its technology is the best

one and up-to-date as regards precision and future development,negotiations become

easier.

In larger scope, the counter trades are quite common in China.The reason for this demand

is that the Chinese tend to save on the foreign exchange.Thus it is quite common for Chinese to demand that a percentage of the products to be produced by the project in question by the selling firm into its home market or into the third market.This is one of the objectives behind free zone policy.Despite the difficulty it also is considered as important .This step also helps to evaluate the effect of buy-back in monetary terms

and its effects on the firm's own production and marketing activites.It is quite possible

that the buy-back or counter trade demand is just a bluff ,so that the seller,seeking to avoid the expenses of buy-back,may offer a major cut-back in the price.

Find the costumer:In China ,foreign firms have to present themselves and their technology to several authorities.One has to endlessly repeat the same things to

different negotiators who suddenly,without any explanation,are replaced by another team.

Quite often,however,the first team reappears after after some weeks having „forgotten"

everything ,and one has to start explaining to them again ,from the beginning.It is,thus

very important for the Westerners to find out which team and who in a particular team

has the authority to decide.

The engineers and officials asking the most vigilant questions often turn out to be subor-

dinates with no decision-making authority.Finding the customer is therefore is quite

difficult.In lobbying stage ,a firm should try to find out who is responsible for what or

does one has the authority to take the decisions.

Presentation of capabiliteies:In this stage,the firm has to present itself,its technology

and its products.The presentation material and the presentation itself,very important.

The material should be professionally prepared and presented.The Chinese are very

particular about the details and the idea behind presentations is to convince them

of the quality and trustworthiness of the technology and the firm.It is advisable to present

all the technical specifications in English as well as local one.Most Chinese authorities

do not speak English and sometimes only one interpreter is not enough to get the real contact.Swedish Ericsson provided all the material in English and Chinese,and spent a lot

of time on correct translation.Having difficulties with duplications there was noticed that

it is quite difficult to get hold of good ,up to date office equipment and stationary and

that concerns to many cities,at that.

Build up trust:It is commonly known that the Chinese give sufficient importance to this trust and to individual relationships.Although the Chinese always stress on the importance of friendship ,it is quite diffilcut to develop a social relationship with Chi-

nese.They seldom invite anyone to their houses.In spite of this,"friendship" and „trust"

are common aspects of Chinese culture, rather not only in China ,but throughout Hong

Kong,Singapore,Taiwan and other countries.The impressions and trust that developed

through the mutual relations and social activities will be return a hundredfold later.

BUDGET OFFER

After all the presentations,questions,answers,and discussions a budget offer is prepared.

The purpose is to provide the customer with an idea of general principles,technology,

equipment,price and the terms and conditions as a whole.Usually a client gets a lot of

offers,many of them are similar to each other.Then the offers and the budget undergo

comparison .As this offer has to include a rough price,the firms should be very careful

in calculating all the possible expenses as it is very difficult to change the the total sum later.And the price for training,taxes,and other expenses should be included .Otherwise,

the company would lose its credibility.

TECHNICAL DISCUSSIONS

All the firms are invited for the technical discussions after the customer has studied all

budget offers and technical characteristics from different competitors.Here the firms

represent their technolgy and technical specifications,but strictly with in the framework

of budget offer.At this stage the firms which are dealing in Chinese market should try to get more information on the particular project,the priorities of the government,the buyer's

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