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The Case Of The Furniture Sector In China

3782 words - 15 pages

1.0 INTRODUCTIONToday, more and more transnational companies (TNCs) are seeking to take advantages of operating business in foreign countries. Founded in 1963, Hong Leong Management is one of Malaysia's largest conglomerates, with have companies in different sectors such as financial services, property, manufacturing and infrastructure. Though the conglomerate has already obtained success through its intensive business operations in different countries including Australia, New Zealand, China, Singapore, the Philippines, UK and US, recently it's eager to continue diversifying its assets abroad. Therefore this report is writing as the proposal exploring Hong Leong Group's internationalisation opportunities in China's furniture industry, and in the end a overview of strategy for will be recommendated for business setup.2.0 COUNTRY SELECTION'The overall attractiveness of a country as a potential market and/or investment site for an international business depends on balancing the likely long-term benefits of doing business in that country against the likely costs and risks.' (Charles W.L.Hill 2003) China's political and economic stability, sustainable natural resource policies, established global marketing network backed by sound foreign trade incentives, developed infrastructure including modern shipping facilities, competitive labor force as well as strategically located in East-Asia with well-developed costal cities such as Guangzhou, Shanghai and Shenzhen, make it the ideal location in the region for investors.2.1 AdvantagesChina's benefits can be elaborated by its market size, low cost and resource availability as well as the market growth, government regulations and policies.2.1.1. Market sizeFirstly, China's market potential mainly lies with its vast market size and rapidly-growing purchasing power. With one fifth of the world's population, China enjoys a household savings rate of more than 40 percent, one of the highest in the world. As incomes rise, newly empowered consumers represent an enormous market potential. Its higher rate of GDP makes it more attractive to the market-seeking FDI. (Exhibit 1 below shows that increasing trend of GDP) The economic growth of the recent decade has given birth to a middle class in China, particularly in the coastal cities, with notable purchasing power.Exhibit 1: Forecast of purchasing power2.1.2 Costs and resource availabilitySecondly, its increasing literacy and education rates suggest that its labor is more skilled, making it more attractive to efficiency-seeking investors. China offers one of the world's most competitive labor forces. While the cost of labor remains low, the quality of the labor force is improving dramatically. Nowadays, the supply of people with language capability is abundant. China has many young talented managers, engineers, software programmers and designers, and after proper training, China could become the most competitive provider of human resources in the world's high-tech...

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