Investing in China

Investing in China

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Investing in China

The money would be sufficient to open a store dealing with luxury jewelry in one of the urban areas such as Beijing. More people are moving from the rural areas to the urban areas in the country. Setting the business in one of the urban areas in the mainland and focusing on locations that are far from the coastal cities will ensure that I get more customers for my business. China is the most populated nation in the world. It has a rising middle class and established wealthy individuals who have money to spend on luxury items. However, the coastal cities are saturated with such stores and a move to the mainland will be an advantage as I will be able to penetrate the market and establish a loyal client base before competition stiffens (The Economist, 2013).

The Chinese market for high-end luxury products has continued to grow steadily over the years. People want to associate themselves with recognized brands and opening a store would enable me to reap the benefits. I would opt for a joint venture considering that I have no experience of doing business in China. This would involve identifying Chinese partners who understand the business and legal environment in the country. It would make the process of starting the business easier. Personal relationships are important for any business to succeed in China (U.S. Commercial Service, 2012). Moreover, one has to have good connections with wealthy people to succeed in the luxury jewelry market. The customers need to feel the difference when they walk to the store from other ordinary stores dealing with jewelry. Having a partner with the local knowledge and necessary connections will ensure that I reap the benefits of working in the store.

Several factors will influence the expected returns on the investment I put towards the business. On one hand, the business can kick off as expected, and the company will reap big benefits and profits at the end of the year. This will involve having a good business strategy and favorable market conditions. People spend more money on luxury jewelry when the economy is performing well. Advertising through the appropriate channels will ensure that more people learn about the product. Many Chinese have access to the internet, and they use it to research the products they are interested in before making the decision to purchase the product (The Economist, 2013). Using the internet as a marketing tool will ensure that more customers learn about it and that they visit the store.

A realistic scenario would involve recognizing the pitfalls that one experiences when he starts a new business in a foreign country while at the same time having hope that all the efforts that one has put towards the business will be worth it in the end. Despite the best efforts of creating a practical and workable business strategy, one has to be prepared of some of the challenges and obstacles along the way. Joint ventures do not always work, and I might not get a person who understands the business. This will compromise the performance and slowdown the company’s growth. Despite the marketing efforts, take up may be slow as customers learn more about the business and as they come to trust the products that are sold. This may create a situation where the business grows gradually.

Another possible situation would be for the company to fail miserably after opening. This will happen after much of the money has gone towards establishing the business by purchasing the products required and taking care of all the legalities. Customers may not respond to the marketing efforts undertaken by the company. The stock may remain in the store for a long time while I continue incurring additional operational expenses. In the end, I might end up selling the products at a loss to recover some of the money spent before deciding to close the shop.

References:

The Economist (2013, June 8). Luxury goods in China: Beyond the bling. Retrieved from http://www.economist.com/news/business/21579015-life-getting-harder-purveyors-luxury-china-growth-prospects-are-still

U.S. Commercial Service (2012). Doing business in China: 2012 country commercial guide for U.S. companies. Retrieved from http://export.gov/china/build/groups/public/@eg_cn/documents/webcontent/eg_cn_025684.pdf