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Global Marketing
1. The China Perspective
Industrial production and retail sales of consumer goods in China achieved a steady growth, and
consumer prices continue to rise. After China joined the WTO in 2001, China’s GDP (gross domestic
product) growth rate increased steadily, from 7.5% in 2001 to 9.4% in 2007; The (GDP) growth rate fell
to 10.1% in 2008 and fell to 7.9% in 2009 due to financial crisis. China's GDP grew 10.3% in 2010. The
world demand to trade with China has also increased.
Table: China GDP growth rate chart from December 2008 to December 2010
Household Consumption
(100million Yuan) rate:1Yuan=6.7Peso
Item 2006 2007 2008 2009
Total 82103.5 95609.8 110594.5 121129.9
Rural Household 21261.3 24122 27495 28833.6
Food 8735.7 9998.7 11581.7 11732
Clothing 1206.2 1392.6 1534.3 1667.29
Residence 3867.7 4415.8 5102.2 4916.7
Household Facilities, Articles and
908.5 1073.5 1260.4 1468.65
Services
2. Health Care and Personal Articles 1405.7 1571.6 1880.9 2355.8
Transportation and
2072.7 2364 2609.2 2889.3
Communications
Recreation, Education and Culture
2190.3 2200.3 2278.5 2442.5
Articles
Financial Service 303.1 405.5 505.4 474.9
Insurance Service 103.8 156.7 186.7 283.5
Others 467.6 543.4 555.6 603.1
Urban Household 60842.2 71487.8 83099.5 92296.3
Food 17725.2 21239.4 25568.6 27152.2
Clothing 5136.4 6100.1 6998.1 7785.8
Residence 10760.3 12306.1 14565.3 16165.7
Household Facilities, Articles
2839.3 3523.1 4152.4 4770.8
and Services
Health Care and Personal
5262.1 6156.5 7580.9 8867.4
Articles
Transportation and
6533.9 7946.6 8505.9 10335.6
Communications
Recreation, Education and
6852.3 7781.2 8152.9 9046.9
Culture Articles
Financial Service 1397.2 1711.2 2132.9 1995.8
Insurance Service 988.9 1344.5 1528.8 1582
Others 3346.6 3379 3913.9 4594
3. Basic Statistics on People's Living Conditions
Item 1990 2000 2008 2009
Life Quality
Household's Engel'sCoefficient
(%)
Urban 54.2 39.4 37.88906 36.51614
Rural 58.8 49.1 43.67 40.97
Significant Rise of Food Prices
In 2011 the typical rural Chinese worker makes about USD 5,000 a year and spends half of that on food.
The cost of Chinese staples, such as garlic, peppercorns, potatoes (80%) and ginger (300%) prices, had
significantly increased in 2010. Government estimates reported overall food inflation reached a two-
year high in November.
The risk that faces China is that spiraling food prices could lead to instability, which China will avoid at
all costs – and the party is taking inflation seriously. At the Communist Party of China’s Annual Economic
Conference, President Hu Jintao said that the government’s goal in 2011 would be to “combat inflation
without jeopardizing growth.” State media headlines read “China to Shift to Prudent Monetary Policy,”
indicating that Beijing is quietly moving away from its previous “moderately loose” stance. To combat
inflation, the People’s Bank of China increased the required reserve ratio (RRR) for the fifth time in 2010,
equivalent to keeping 350 billion yuan out of the economy.
Encouraging Domestic Consumption
The Chinese people are saving up to 50% of their income. If inflation is a priority for the Chinese
government, getting China’s 1.3 billion consumers to spend some of their impressive savings is priority
number two. As China enters a new phase of economic development, the government is taking steps to
transform the current growth model, which is largely driven by exports and inventory investment, to
one that is more sustainable.
Driving domestic consumption is the government’s primary focus. In December 2010 at the Central
Economic Work Conference chaired by President Hu, China’s top leaders vowed to increase efforts to
get people to spend more.
4. Beijing, as an example, chose to start with cars and appliances as they tend to be big-ticket purchases.
Targeting rural consumers, the government gives out 13% subsidies on about 200 kinds of household
appliances of designated brands. For urban-dwellers, tax breaks for smaller-engine cars and green cars
has been the hook.
Critics warn that one-time incentives cannot help China achieve long-term growth in consumer
spending. Instead of focusing narrowly on cars and appliances, China needs to find more ways to court
its 1.3 billion residents.
Urbanization
By 2016, China’s urban population will reach 700 million and for the first time in China's history surpass
the number of rural residents. Meanwhile, the migrant workforce is expected to hit 350 million by 2050,
larger than the entire U.S. population today. Such a vast migrant labor force and the policies and
directives issued by the government to manage this group will remain pertinent. The country’s
guidelines for the 12th Five Year Plan specifically said that China will enhance its enforcement of labor
laws and improve working conditions, while bringing a healthy mechanism supported by labor unions
and enterprises into full play.
Educational Environment
China is experiencing a rise in education according to data from the Ministry of Education. Between
1999 and 2008, the annual enrollment of undergraduate students has increased by more than 500%.
Looking back to 1977, when China first re-opened its annual nationwide university entrance
examinations after a ten-year suspension, university enrollment stood at 420,000. Thirty years later in
2008, the number was 5.99 million. Correspondingly the acceptance rate went from 4.8% to 58% at a
much higher speed than China’s GDP growth rate.
As China’s domestic education boom continues, quite ironically, more and more Chinese students are
opt to study overseas. The United States remains the top destination: according to data from the
Institute of International Education, in 2008-9 more than 26,000 Chinese students were studying in the
United States, up from about 8,000 eight years earlier. Today’s children of middle-class Chinese families
are free to choose among Ivy League schools, regional colleges, state schools or even community
colleges overseas. Unlike their parents’ generation, studying abroad is no longer linked to elitism; it is
now an extension of economic consumption.
(Quincy, can we find out if you have data on the number of Chinese nationals are studying in the
Philippines)
China’s education booms will continue in both ways. On the one hand, the government will continue to
spend more on education. On the other hand, wealthy Chinese families will continue to send their
children abroad because, despite all the insecurities and fears that come with economic privilege in
China, an international education is an investment that cannot be lost. There is still a significant number
of “sea turtles” or Western educated Chinese nationals who return to China.
5. Food Preference and Traditions
Medicinal Value of Food
For Chinese cooking, nutrition is the first concern. A theory of the "harmonization of foods" can be
traced back to the Shang dynasty's (16th to 11th century B.C) scholar Yi Yin. He relates the five flavors of
sweet, sour, bitter, piquant, and salty to the nutritional needs of the five major organ systems of the
body (the heart, liver, spleen, lungs, and kidneys), and he stresses their role in maintaining good physical
health. In fact, many of the plants used in Chinese cooking such as scallions, fresh ginger root, garlic,
dried lily buds, and tree fungus have properties of preventing and alleviating various illnesses.
This explains why the Chinese have a traditional belief that food and medicine share the same origin and
that food has a medicinal value. This view explains why the Chinese people are at the forefront of non-
traditional medicine.
Food Preference
The food style of a culture is certainly first of all determined by its abundance in the specific area. It is
not surprising that Chinese food is above all characterized by an assemblage of plants and animals that
grew prosperously in the Chinese land for a long time.
Some staples are as follows:
Starch - millet, rice, kao-liang, wheat, maize, buckwheat, yam, sweet potato.
Legumes - soybean, broad bean, peanut, mung bean.
Vegetables - malva, amaranth, cabbage, mustard green, turnip, radish, mushroom.
Fruits - peach, apricot, plum, apple, jujube date, pear, crab apple, mountain haw, longan, litchi,
orange.
Meats - pork, dog, beef, mutton, venison, chicken, duck, goose, pheasant, many fishes.
Spices - red pepper, ginger, garlic, spring onion, cinnamon.
Mangoes are not significantly indigenous to China as shown by this list.
One important point about the distinctive assemblage of ingredients is its change through history.
Concerning food, the Chinese are not nationalistic to the point of resisting imports. In fact, foreign
foodstuffs have been readily adopted since the dawn of history. Wheat and sheep and goats were
possibly introduced from western Asia in prehistoric times, many fruits and vegetables came in from
central Asia during the Han and the T'ang periods, and peanuts and sweet potatoes from coastal traders
during the Ming period. These all became integral ingredients of Chinese food. At the same time, milk
and dairy products, to this date, have not taken a prominent place in Chinese cuisine.
6. Curious, inventive, adventurous
The Chinese are curious, inventive and adventurous. This is perhaps based on the same cultural values
that make them so interesting in gambling. A consequence of this trial and error mentality for product
innovation is that the route between conception and prototype is often considerably shorter in China
than in Europe.
Novel products are often tested by throwing them on the market and see how consumers react.
Combined with other traits of Chinese culture, like playfulness, curiosity, etc., makes that more peculiar
products are launched in China than in any other market in the world.
Peter Peverelli Euroasia Consult cites some examples showing the various ways in which Chinese culture
can lead to novel foods. There:
Food Type Manufacturer Market Position
Pineapple crisp pie Qiqi Healthy Food Co., Ltd. This product is positioned as a
(Xiamen, Fujian) low fat pineapple flavoured
healthy snack. Its main
ingredients are: starch, maltose
Male female fruit juice Xinyuan Shunxing Science A special fruit juice beverage for
Trading Co., Ltd. (Beijing) male and female consumers. The
manufacturer does not provide
details as to the difference
between the two varieties.
Biscuits & jam Guanghe Food Co., Ltd. A pack of biscuits includes a
(Shandong) small pack of jam. The biscuits
should be eaten dipped in the
jam.
These examples are Western in nature and but considered “new” in the market. The male / female
drinks can be classified as beverages variants for specific purposes such as sports drinks, energy drinks,
leisure drinks etc.
Food has Social Purposes
Another important China food culture is that they eat together. Chinese food is meant for sharing. In
restaurants, diners don’t order for themselves. It is traditional to order for everyone and shared with
gusto. Family meals are much the same. This can be attributed to their strong and extended family ties
and clannishness as well.
7. Consumer Behavior
The Chinese have low level of involvement when purchases are for private consumption but this is
observed otherwise when buying products for their social or symbolic value. The Chinese greatly value
social harmony and smoothness of relationships. The social significance of products are highly important
be it to express status, gratitude, approval or even disapproval.
Consumers are loyal, not really brand conscious and are not really used to cross product comparisons
except for the urban consumers who have a wide recognition of foreign brand names. On a national
level, consumers prefer to buy domestically manufactured products rather than comparable foreign
made goods. But consumers in big cities are less likely to favor domestically produced products than on
a national level.
Typical Chinese consumers do not want to be among the first to try a new product especially if it is
expensive and unrecognized in terms of brand.
Online shopping could drive the next wave of China’s consumption growth. China has a population of
450 million internet users and one third of them already shop online regularly. They shop for products
like clothes, car batteries, furniture, airplane tickets, meat and diamond rings. It is a practice to compare
prices on Tabao.com. Tabao.Com is China’s answer to EBay and launched in 2003. The site generates
annual sales close to USD 60 billion today and has 75% of the online retail market share in China. Its
rapid growth is part of the China trend in thinking of the Internet as a giant shopping mall, just like the
traditional “brick and mortar” stores in China.
A growing portion of Chinese online shoppers live in second- and third-tier cities. For the same reason,
brands such as Lenovo, Adidas, Uniqlo and Kappa have set up virtual stores on Taobao.com, with the
objective of gaining access to consumers in lower-tier cities. Lenovo claims its virtual store on
Taobao.com generates 10 million yuan a day during peak months in the summer. Looking at 2011 and
beyond, the boom of e-commerce will continue. Goldman Sachs predicts that the annual sales could
grow 275% over the next five years, and reach an estimated USD 300 billion in 2015.
8. Business Practices
It's important to realize that how important the business practices works in doing business in China. The
following words will present the key points of Chinese business practices.
1. Make friends first, do business later.
China is a people-based rather than a law-based culture. People in China build trust by
“profiling” one another. They observe one another’s behavior over time before they’ll do big
business. The Chinese are perfectly willing to sign contracts; but only after people have achieved
a reasonable level of comfort and understanding. They want to learn more about you.
Therefore, initial meetings are rarely expected to produce results. Chinese salespeople routinely
wine and dine prospects before they sit down to talk business. Let people feel that they are
"connected" with you before you close a deal with them.
2. Businesses need help from the government.
In China, you have to have relations with the government because lots of approvals needed
usually, family affiliations within the Communist Party is the most important factor for success.
3. Arrange one-on-one meetings
The Chinese political system is a one-party system. People have learned not to challenge their
political leaders. This is why Chinese people tend not to express what they have in mind in
public. But when they’re with you on a “one-on-one” situation without other people around,
they’re direct and straightforward. If you want to know the truth—and how you can compete in
the China market—learn to pull people aside and talk with them privately.
4. Let people save face, especially in public.
Chinese aren’t accustomed to revealing much about themselves, especially in public seminars. If
someone is vague about a particular issue, or unwilling or unable to give a straight answer, don’t
force the issue. Avoid forcing people to tell the truth in public against their will.
5. Superstitions often play a part in business and decision making
Fortunetellers are consulted today by supervisors making hiring choices; and by store owners
picking names of their business, the most auspicious time to open, and the best floor plan and
orientation of the rooms. According to one survey, the majority of business people believe in
the god of fortune
9. The Snack Food industry
Recent years, Chinese consumer’s consumption style changed. In 2009, although the Chinese snack food
market capacity has reached 400 billion yuan, per capita consumption is only 23.6kg, so from this we can
see in China, there is a huge snack food consumption market. With the improvement of consumption
capacity of the customer, snack food industry will increase 20% every year and total demand up to
thousands billion yuan. At the same time, with the development of the economic, Chinese's
consumption level from low to high , specially demand for the import snack food, which has huge
potential space.
Source from China National Food Industry Association(CNFIA)
Among snack food industry , there are mostly eight parts in China, they are dried fruit, meat-egg-fish,
cereal-puffed food, fried-nuts, potato-chips, non-fried nuts, grain, freed-cereal. And dried fruit has most
potential space in the future because it is easy to process and more natural, also, it is the green food
(food contains no toxic or harmful elements for human health).
Dried
Fruit
Fired- Meat-
cereal egg-fish
Snack Cereal-
Grain puffed
Food food
Non-
Fried-
fried
nuts
nuts
Potato-
chip
11. 12 Anhui 54.2 37.9 35.8 30.3
13 Jijin 49.2 21.1 11.1 3.9
14 Heilongjiang 44.2 26.3 31.4 37
15 Sichuan 44 37.2 12.3 1.5
Source: Ministry of Commerce of the People’s Republic of China Department of Foreign Trade
Target Market
According to Orit Gadiesh in his article “The Battle for China’s Good-Enough Market” in the Harvard Business
Review, the Chinese consumer market has been roughly structured into two main segments, either low-
end local brands or imported premium brands. The large low-end segment has served the masses with
low quality, low price and undifferentiated products while the global brands, either imported or locally
produced, have targeted the small but profitable premium market. Most international companies
entering China are lured by the quick growth and relatively high disposable incomes in areas such as the
Pearl River Delta in the south or the Yangtze River Delta around Shanghai (Chen &Vishwanath,2005).
In Magni &Atsmon article “A Better Approach to China’s Market”, there are another ten areas around
China have a projected growth over 10% per annum and recommend marketers to consider setting up
sales forces, distribution channels and supply-chain mechanisms in these areas. In the past few years, a
new market segment has appeared which Gadiesh et al. (2007 p.81) describes as the ‘good-enough’
market and this segment is the fastest growing in China.
Among the 15 provinces, Beijing, Shanghai, Guangdong and Fujian would be an ideal target market
because of its convenient traffic and flexible trade style. Especially in Fujian and Guangdong where
people share the same snack eating habits with Filipinos. Even domestic dried mango sells very well in
these areas. Shipping by sea will not pose a problem because there are ports in Shanghai, Guangdong,
Fujian and even Beijing. There is also a famous port in Tianjin near Beijing.
12. Entry Strategy
Prior to China's accession to the WTO, the government had maintained tight control over import-export
trade. Foreign companies generally were not permitted to import goods for sale in the mainland. In
2003, with the merger of the State Economic and Trade Commission and the Ministry of Foreign Trade
and Economic Cooperation (MOFTEC) into the Ministry of Commerce (MOFCOM), domestic and foreign
trade began to come under unified management. In 2004, China fully liberalized foreign trade. At the
end of 2004, foreign commercial enterprises were allowed to be established, making it possible for
foreign companies to import goods for sale in China
Chinese cultural values on the other hand are largely formed and created from interpersonal
relationships and social orientations. They tend to rely heavily on personal (Guanxi) in business dealings.
“Guanxi” means connections or relationships and is essential in the initial stages of entering the Chinese
market.
It is imperative to find a trusted partner or agent and set up a joint venture. The partner should know
the appropriate channels of distribution for the product.
These professionals would also assist the company to navigate through local regulations and further
understand the market.
13. Market Position
A healthy snack that can be shared.
Cite the healthy attributes of dried mangoes like dietary fiber and vitamin C. Relate how this can
contribute to one’s health. Though it has no cholesterol, the Chinese market may not find any value in
this attribute because of their cholesterol rich foods like duck and pork.
It can be specially packed as gifts or “pasalubongs” for Chinese tourists and students from the
Philippines.
Packaging should not be solo sized as the product is meant to be shared with others.
Marketing Mix
Product – Dried mangoes of course…
Price - How do we make sure we lower the price?
Promotion
Promotion in China is a tricky business because of cultural differences and understanding of the market.
Promoting a product, in a country as big as China, would require huge investments to accomplish brand
recall. A modest budget requires guerilla marketing techniques for the product to gain valuable market
exposure.
On-line Marketing
1. Invest in a trade portal like Alibaba.Com
2. Search engine marketing using Baidu Phoenix
3. Join Chinese social networking sites like douban.com, 360quan.com, kaixin.com. Explore other
sites like 51.com and renren.com.
4. Press releases in authoritative portal websites like sina.com, sohu.com, 163.com is a great way
for branding. It will be convincing and it is about company image.
5. Microblog. Create account on sina and promote the account. Supplementary, create accounts
on second-tier microblog websites like sohu microblog, 163 microblog. Sina is leading the game,
but other microblog sites will catch up. The one Fanfou you mentioned has been closed already.
6. Join leading consumer review sites like koubei.com and dianping.com.
7. Q&A sites like baidu zhidao, tianya wenba, sina iask has large user base, they also enjoy high
ranking in search engine.
8. Video sharing site like tudou.com, youku.com, 6.com, video.sina.com, etc.
9. Post ads in on-line recruitment services. According to the Chinese online recruitment company
51job Inc., online recruitment services revenues for the fourth quarter of 2010 were CNY156.0
14. million, representing a 60.4% increase from CNY97.3 million for the same quarter of the prior
year. The increase was primarily due to a greater number of unique employers using the
company's online recruitment services as well as higher average revenue per unique employer.
Gain Product Exposure by Effectively Tapping Chinese Tourism Market in the Philippines
Tie up with the China National Tourism Administration (CNTA) to promote and give away samples to
Chinese tourists who would like to visit the Philippines. By doing this, the product could hopefully creep
with its way to their families and gain necessary product exposure. Department of Tourism figures show
that tourist arrivals from China grew 18.54 percent from the period January to April 2011. The
Department of Tourism (DoT) offices in China and top tour operators in the Philippines alone expected
close to 3,500 Chinese tourists in the Philippines for the Spring Festival week, with arrivals expected
within the first week of February 2011.
Do the same approach to students who are here in the Philippines for their education.
Place
The product should find its way to the retailers and consumers through agents.
References
China in 2011 What to Expect in the Year of the Rabbit
Jamie Moller, Managing Director
Global Public Affairs Practice at Ogilvy PR Worldwide
Food in Chinese Culture
Adapted from K.C. Chang, Food in Chinese Culture: Anthropological and Historical Perspectives, New Haven, CT:
Yale University Press, 1977.
Trends in Chinese Food Innovation
Peter Peverelli, Eurasia Consult
The Failure of AMWAY Corp’s Marketing Strategy in China
http://aesplus.net/The-failure-of-AMWAY-Corp-s.html
The Battle for China’s Good-Enough Market
Orit Gadiesh, et al.,
Harvard Business Review, September 2007
Expanding in China
Ann Chen and Vijay Vishwanath
Harvard Business Review 2005
A Better Approach to China’s Markets
Magni, M. and Atsmon, Y
Harvard Business Review 2010
15. Honk Kong Trade Development Council website
http://www.hktdc.com
http://www.stats.gov.cn
http://wms.mofcom.gov.cn/
http://cache.baidu.com