PEST Analysis of China
Political and Legal Forces
Table 1: PEST analysis of China
(Source: Based on views of Statista, 2019)
China has implemented a large number of important programs related to change and has made extensive improvements in many field. China is second largest economy across the globe in terms of GDP nominal. This influencing factor of China has made the company to launch their product in order to give it a boost.
China is a member of Security Council of United Nations as well as the 4th largest country in the world as per the measurements of land area which is exciting factor that the launch of Rubicon drink can really make significant success in China. Rubicon drink is going to set up their new initiative in Beijing which is the capital of China. For this China is stable in context of political environment. However, in China it can be seen that political freedom is lacking and Rubicon Drinks is potential of facing negative consequences as a result of this. Huang (2016, p.885) stated that this problem of lack of openness can be overlooked by improved infrastructure and cheap labor. So, China can be considered to be a great place for foreign direct Investment (FDI) which directs the management of the Rubicon Drinks to initiative the business venture in China. China has the record of 139 billion USD in the year of 2016. By achieving this record China has secured third largest place of FDI destination in the world (Salike, 2016, p.66). Being a dominant overseas investor China is able to direct its foreign direct investment to reach many countries over the past years and also directing in recent time in order to achieve more height which can attract more business to China and from overseas as well. United Kingdom is one of the major countries where Chinese investment is significant.
Economic environment is the second element that can be measured in terms of starting a business with any country. Rubicon drinks has focuses more on economic environment of China as it is the most important part of this initiative to set financial perspective of their business. China is holding its position in second place in context of second largest economy in the world by nominal GDP. So, it is the largest economy in world on the basis of purchasing power which is a positive factor in order to start any business in China.
This country has improved its economic culture by shifting from centrally-planned to a market based economy with an interest rate of 4.35% (Trading Economics, 2019). However, this economic growth also brings some challenges for China. The country need to maintain its economic stability which has been caused by rapid urbanization, high inequality and environmental damages. These factors are potential of affecting Rubicon Drinks positively once they enter the market of China in terms of profit as well as brand recognition. One of the main reasons due to which many global companies as well as SMEs are willing to manufacture their products in China is cheap labor facility. (Refer to appendix)
Wu (2017, p.48) opined that labor is an important source to set up any company and run it in structured way. Due to the availability of cheap labor China has gain a competitive advantage over other countries. Thus it is a great opportunity for Rubicon Drinks to manage their company set up with the hap of labor source with other advantages. Rapid economic growth of China has given the rise in wages in the country. Government has taken the initiative to cut the rate of corporate income tax from 25% to 15% for the business which are qualified by China government (Trading economics, 2019).
In order to set up a business in a country, the social environment of the country is also an important area of focus. China has the total population of 1.4 billion approximately (Worldometers, 2019). Due to this reason China has become a massive market for consumer products which is positive for Rubicon Drinks to launch their business in China’s consumer market.
As mentioned above the average wage is increasing due to spending on consumer products. So it can be seen that it is a great opportunity for the outside companies such as Rubicon Drinks dye to increase of consumer spending. The literacy rate in China has been increased progressively by 94% and consequently poverty reduction has been remarkable in the country in the last decade. Due to this increase the country has also made significant progress in poverty reduction as well (Trading Economics, 2019). Thus Rubicon Drinks is potential of attracting a wide range of consumers once it strategically enters the Chinese food and beverage market.
In the year of 2018, China has been reported to have the greatest online population across the globe which is about approximately 772 million users (Worldometer, 2019). There are many tech giants in China such as Alibaba, Baidu and Tencent. Due to the powerful position of these companies Rubicon Drinks can easily make their online market in order to promote their business in China. This country has taken the initiative to launch ‘mass entrepreneurship and innovation’ by which China can achieve their vision to be a global leader in technology and science. So, it can be seen that there are such big opportunities which are waiting for domestic as well as for international companies to set up their position in market of China.
A detailed SWOT analysis of Rubicon Drinks has been discussed below:
Table 2: SWOT analysis of Rubicon Drinks
(Source: Based on views of Salim et al. 2018, p.529)
Rubicon Drink strength has been identified by its healthy drink option. This company also has its huge domestic market in the market of UK in which they are mostly operating with an increase of 5.3% increase in sales in 2018 (Rubicon, 2019). Rubicon Drinks is known for their safe drinking options that is good for all age and can be consumed by the patients during their treatment as well. They have a good network of online marketing and advertising by which they can able to reach more people beyond UK. Their excellent branding strategies have done a serious difference in their marketing and customer gaining. Weakness refers to internal elements of the company that cause some disadvantages to achieve the objectives that the company has set to. However, Rubicon Drinks need to expand their market in order to gain more revenue and expand their business.
Though this company has a huge market in UK but there market is limited in the popular areas. They need to start operation to set up their business and services in rural areas as well. External elements are lies in the opportunity section by which the company can be achieved their goal and success. They have gain the opportunity to expand their business in China for their reputation in delivering low calorie drinks which is good for all age groups and their comparatively low pricing make them more demandable. Threats are current or emerging elements that can be changed the performance of the company. However, they still have various difficulties in order to set up their business in China as there are already many big fresh juice companies exists in market and there is huge competition as well.
China’s fruit juice market has already witnessed a huge growth in recent time. The Market produces total sales of 3.5 billion GBP and also represents a compound annual growth rate (CAGR) of 7.6%. The main operating juice companies of China are Kong, Coca-Cola, Pepsi and several other local brands. These companies are holding their market in China so well that Chinese juice market has been grown by 8% and has been reach a value of 3,475.8 million GBP. However in this context, China Huiyuan Juice Group Limited is the top most players in the Chinese juice market. This company is able to generate 19.9% of market volume which considerably huge (Statista, 2019).
Rubicon Drinks will be taking the market entry strategy of direct exporting in order to expand their business in China and place their market in the Chinese juice market. Exporting can be considered as one of the most traditional ways of being launched in an international market. In this method direct manufacturing of the products are necessary within a country that is overseas. An easy fact about this strategy is not much detail is required as compared to manufacturing in marketing country. Rubicon Drinks has placed their product, price, promotion and distribution of their target product and other research elements according to this strategy. The type of exports dependents on the pressures by which decision makers are perceived. Advantages of exporting are:
It is less risky as manufacturing is home based.
This strategy helps to learn about overseas market before investing.
Reduce the risks of operating overseas.
Rubicon drinks has decided to launch their best selling product The low-calorie juice namely ‘Fresh-Factor’, which has experienced a great success in UK market. The main features of this product are that it is low in calories than other juices which are great for the patients as well as for the children. This product has achieved a huge response in the UK juice market which enables the company to launch this in China Market. On top of that the company is providing the safe combination of components which is good for consumption of the patients as well. Rubicon Drinks have done detailed analysis of the area in which they have been targeted to launch their product. The area is consisting of several corporate sectors and schools. Along with that they have set the price comparatively low than other existing health juices which enables them to operate in rural places of Beijing as well. They are targeting the people from age 15-25, who focus on products with a cheaper price.
To launch the product ‘Fresh-Factor’, in the food and beverage market of China within 2020
To increase the overall sales of the product by 22%
To increase 10% in their overall organizational profit by 2022
To expand more in the food and beverage market of China and establish as a pioneer company
Target customer segment for Rubicon soft drinks in China
Rural and Urban
Irrespective of Gender.
Irrespective of education
Irrespective of category
Irrespective of family size
Irrespective of life style
Irrespective of personalities
Cheap product price
Table 3: Target market for Rubicon Drinks in china
The product that has been chosen by Rubicon Drinks is their famous ‘Fresh-Factor’, which is a low calorie drink. It has blend of freshly extracted fruit juice and other important components that can be used for the patients as well. This product has achieved a huge success in UK market and also achieved huge consumer’s response for its freshness and healthy factors that is included as per the safety level.
As Rubicon Drinks is launching their product on the target market of Beijing as well as on rural and urban areas they keep their prices significantly low as possible to reach more people. Along with that as they are targeting the age group of 15-25 so they have planning to keep the price of ‘Fresh-Factor’ in range of the teen as well as the college goers. They are planning to undertake penetration pricing strategy in order to provide the product at an affordable price.
Rubicon drinks have a huge market in advertising which help them in this venture of launching their product in China market. However they have done extensive research on the marketing of other companies as well to take the strategies of marketing effectively. As Chin has a significant market of online business they have decided to launch a website especially for China. The developer team of Rubicon Drinks has developed a website with some exciting features which will attract the people of 15-25 age groups and other age group as well. They have included the information of health benefits and components of the product as well as the safety features which can attract the higher age group as well to try their product.
They are planning to launch their products at the supermarkets and departmental stores in the areas of Beijing and in other rural and urban areas where health drinks are necessary and can attract people to buy it.
Huang, Y., Ma, Y., Yang, Z. and Zhang, Y., (2016). A fire sale without fire: an explanation of labor-intensive FDI in China. Journal of Comparative Economics, 44(4), pp.884-901.
Rubicon (2019). Rubicon’s official land of the exotic Available at: http://rubiconexotic.com [Accessed 01/04/2019]
Salike, N., (2016). Role of human capital on regional distribution of FDI in China: New evidences. China Economic Review, 37, pp.66-84.
Salim, H.K., Padfield, R., Lee, C.T., Syayuti, K., Papargyropoulou, E. and Tham, M.H., (2018). An investigation of the drivers, barriers, and incentives for environmental management systems in the Malaysian food and beverage industry. Clean Technologies and Environmental Policy, 20(3), pp.529-538.
Statista (2019) GDP Growth Rate in China Available at: https://www.statista.com/statistics/263616/gross-domestic-product-gdp-growth-rate-in-china/ [Accessed on: 28.03.2019]
Statista (2019). Food & Beverages China Available at: https://www.statista.com/outlook/253/117/food-beverages/china [Accessed 01/04/2019]
Trading economics (2019) China Inflation rate Available at: https://tradingeconomics.com/china/inflation-cpi [accessed on: 28.03.2019]
Trading Economics (2019) China’s Interest Rate Available at: tradingeconomics.com/china/interest-rate [Accessed on 28.04.2019]
Worldometers (2019). China Population Available at: http://www.worldometers.info/world-population/china-population/ [Accessed 01/04/2019]
Wu, W., (2017). Agglomeration Economy and Input-output Linkage: Evidence from the Entry of the Agro-food Industry in China. Japanese Journal of Agricultural Economics, 19, pp.48-53.