A

Project

On

COUNTRY ANALYSIS OF CHINA

Presented to

PROF. PREETI SALVI

S.V.Institute of Management, Kadi

Hemchandracharya North Gujarat University, Patan

Prepared By:

PRIYANK SHAH DHIMANT VYASSHRUTI VELANI

SACHIN NANDHAMRUNAL VAZA

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PREFACE

As the part of the syllabus of MBA program in Sem-IV, We are assigned some practical and theoretical work in the partial fulfillment of the segments for the country analysis”, we have selected china to support our study.

In today’s era it is very necessary to keep our surroundings as well as ourselves to be updated by the latest happenings, especially when we are going to be future MBA’s .Keeping the same thing in mind, we have decided to do country analysis of china. The same procedure is being implied to every of the student with us. Such country analysis of a particular country makes us aware of the same in the fullest. Generally students select the country in which they are interested or they are able to get the maximum information on that industry.

Really this project enhanced our knowledge regarding country analysis substantially. This project will really helpful us in future also as if include almost each and every kind of data in it.

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ACKNOWLEDGEMENT

To make any such in – depth macro level project without the help of anybody is not at all possible. Moreover teamwork is more beneficial than the isolation. In other words there are so many external people who directly or indirectly help us in out project.

First of all we are very grateful to, Prof. Preeti Salvi, for their guidance whenever we called for. We have always been welcomed with very pleasant smile and full co-operation by her.

Working on the project is hard, need hard work and concentration but we made it possible with the support which we had received from those around us. We thankful to all the faculties of our college for giving us guidance encouragement and right path to work on it. We thank everybody who has directly or indirectly helped us in this project to make it successful. Grateful to the whole staff of S.V.Instititute Of Management, as they co-operate us in preparation of our project and keep the lab open as per our convince.

PRIYANK SHAH DHIMANT VYASSHRUTI VELANI

SACHIN NANDHAMRUNAL VAZA

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TABLE OF CONTENT

Map of China Histry Some basic Information Geographical factors Political factors Economic factors Socio-culture factors Reason for selection the country Product to be export in China STP Pricing Stratergy Distribution Strategy Promotional Management and Advertising Conclusion

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TOPOGRAPHY: With a broad area, China's topography is very complex. The out-

line descends step by step from the west to the east. Mountains and hilly land take

up 65 percent of the total area. There are five main mountain ranges. Seven moun-

tain peaks are higher than 8,000 meters above sea level. The Bohai Sea, East

China Sea, Yellow Sea and South China Sea embrace the east and southeast coast.

RIVERS: China has 50,000 rivers each covering a catchment area of more than

100 square kilometers, and 1,500 of them cover a catchment area exceeding 1,000

square kilometers. Most of them flow from west to east to empty into the Pacific

Ocean. Main rivers include the Yangtze (Changjiang), Yellow (Huanghe), Hei-

long, Pearl, Liaohe, Haihe, Qiangtang and Lancang. The Yangtze of 6,300 kilome-

ters is the longest river in China. The second longest Yellow River is 5,464 kilo-

meters. The Grand Canal from Hangzhou to Beijing is a great water project in an-

cient China. It is of 1,794 kilometers, making it the longest canal in the world.

LAND FORMATION: Mountains 33%; Plateaux 26%; Basins 18.8%; Plains 12%;

Hills 9.9%. 

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China is gold mine because the country needs 1000 sets of engines a year & must hold more than $100bn on power generating equipment. GE opened a service center in seventeen Chinese cities and also making office in Beijing

Ranking of risk of different countries:

Source : PERC’s Asian risk Prospectus for year 2009

on the basis of political & legal, economic, social-cultural factors Analysis china rank 5.5 to 5.6 risk out of 10 in year 2007-2008 & 08-09respectively. How it comes we will see in analysis of one by one factor.

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History

Optimum war and the decline of the Qing Dynasty (1839-1900): By 1900, the Ging dynasty had grown weak having been influenced by western power like Britain, France, Japan. it was only a matter of time before Chinese people called revolution.

Early years of the Republic: It is a time between1912 to 1928. At that time government was established. china continued to be suppressed by western power. Two forces across during this time that would change the history that is the communist party and the national party.

War against Japan and World War II (1937-1945): Between1937 to 1945 there is a war against japan and also world war-II is there. But despite of this bloodshed, china would find itself amidsta civil war.

Civil War (1945-1949): The inevitability finally took place in 1945. China’s divided government could no longer bear the strain of differences running through the core of the national & communist ideology. With the help of the people, the communists would win & a new era would lay ahead.

Early years of People’s Republic of China: It is a time period between1949 to 1966. After the establishment of PRC (People’s Republic of china), china went forward in the plan to create the perfect socialist society. Although the people welcomed communism in the beginning, it would soon tear their country apart once again.

Reforms of Economy: It is a time period between1976 to 1997. After the Cultural Revolution, Deng Xiaoping returned and began to reform china’s rundown economy. He brought china back from the dead so to speak. But, many human right issues still plagued the country.

Present: Today china still has many problems to sort over. In 1997 Hong Kong was returned to china. new talk of freedom is now taking place.

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Some basic information

Official Name: People’s Republic of China.

China is a Geocentricity: It means they might be thought of denationalization and they consider the whole world as target market rather than one nation.

Capital City : Beijing

Major Cities : Shanghai,Guangzhou, shenzhen, Tiamzin

Official Language : Mandarin Chinese, Other Major Language like Cantonese, Fuzhou, Shanghaiese

Currency :Renminbi (RMB),it means “People’s Currency” one, two, five, ten, fifty and a hundred Yuan; one, two and five Jiao; and one, two and five Fen.

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GEOGRAPHICAL FACTORS:

If we see the geographical location of china in map than it is surrounded by North Corea, Japan, Vietnam etc.

Natural Hazards : There are frequent typhoons, damaging floods, tsunamis, earthquakes, droughts, land subsidence etc occurs. so there is a high risk of natural calamities over there.

Climate : If we talk about the climate of china than it is extremely di-verse, hot in south to cold in north.

Mountains and hilly land take up 65 percent of the total area. so most of the area of china are covered by mountains.

Area = total: 9,596,960 sq km land: 9,326,410 sq km water: 270,550 sq km

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Coastline :14500 Km

China is World’s fourth largest country after Russia,canada,US.

Which Provinces of China to Invest in /Trade with?

Area POSITIVE FACTORS NEGATIVE FACTORS

1. Coastal Area Economically Prosperous. Highly Competitive Market.

2. Inner China Potential for Future Investment and Trade

Lack development,Poor.

3. Border Provinces

Close proximity with ThailandInterested in Trade and Investment with Thailand.

Limited Market

4. North Eastern Provinces

New Markets with Potential.

Far Proximity from Thailand.

If we see in the table than china is divided into four areas. in that the coastal area is economically prosperous area but due to economic prosperity there is a highly competitive market is there. Inner china having potential for future investment and trade but the problem is lack of development. Broader provinces area having close proximity with Thailand and interested in investment and trade with Thailand but the problem is that it is limited to Thailand only.

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Political System:

China is communist country. Chinese communist parties (CCP) and eight registered small parties.

In china holds that all resources should be owned and shared by all the people not by profit seeking enterprises for the benefit of the society. In china government controls all the productive resources and industries and as a result the government determine jobs, production, price, Education etc They emphasis on human welfare. Because profit making is not the government’s main objective.

Political pressure group and leaders China democracy Party No substantial political opposition group exists

Cabinet : State Council appointed by the National People's Congress (NPC)

Elections: In China president and vice president elected by the Na-tional people.

People's Congress for five-year terms; elections last held 15-17 March 2008; premier nominated by the president, confirmed by the National People's Congress.

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Legal System

China’s legal system is based on civil law system; derived from So-viet and continental civil code legal principles; legislature retains power to interpret statutes. In this system, the main rules are embod-ied in legislative codes. Every circumstance is clearly spelled out to indicate what is legal and what is not. There is also a strict and literal interpretation of the law under this system.

Judicial Branch : Supreme People's Court (judges appointed by the National People's Congress); Local People's Courts (comprise higher, intermediate, and basic courts); Special People's Courts (primarily military, maritime, railway transportation, and forestry courts)

Intellectual Property Rights: The problem of getting patent granted is often difficult in many communist countries and less developed countries because patent law do not exist or are ignored.

China did not enact its first patent laws until 1984 Items like computer software, animal, plants, food, beverages, atomic

energy related innovations, chemicals, pharmaceuticals are not in-cluded in patent law

Process of filing for patent – First to File system is adopted. here patent is granted even if innovation was actually found by someone else. Patent publication is will be published eighteen month after fill-ing.

According to business software alliance 95% of computer software used in china is illegal copies. Software companies are making a loss of $400mn every year.

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Political risk

Confiscation Risk:It is a process of Government taking ownership without giving any kind of compensation like in case of coke. Chinese government take the American property after the Chinese communists take place in 1949.

Operational Risk: here Chinese government constrain the company’s business operation in all areas including operation, marketing and finance. For example direct marketing is not allowed in china.

Political instability: Company should identify & evaluate the indicator of political difficulty.

Social unrest: China is modernizing economy does not fully embrace open economy which is liable to encourage dissemina-tions among the various groups for the sake of its own survival. Co operative society may have to obstruct the dissemination of new idea and neutralize an external group that forces a threat.

Policies of host government: In china production of illegal compact disk has greater increased. The factories making coun-terfeit products are able to operate freely because of their politi-cal contacts.

Attitude of nations: The product of a multinational company is accepted or not is depend on the attitude of the nation towards the multinational companies.

Bribery and Corruption14

• Top 7 Rankings • 1. Nigeria• 2. Pakistan• 3. Kenya• 4. Bangladesh• 5. China• 6. Cameroon• 7. Venezuela

• Bottom 7 Rankings• 45. Australia• 46. Netherlands• 47. Switzerland• 48. Singapore• 49. Norway• 50. Canada• 51. Finland•

If we see above than the China ranks fifth in Bribery and corruption. so from that we can come to know that the political risk and business risk is very much high in china.

Minimize the political Risk

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It is impossible to eliminate the political risk but it cane minimized. Here are some ways to minimize the political risk. Stimulation of the local economy: Company can link its business activities with the host countries national economic maters. Company can involve the company’s purchases local products and raw materials for its production and operation. For e.g. Coke purchase raw material & labor from local market.

Sharing Ownership:Instead of keeping complete ownership for itself a company should try to share ownership with others especially with local companies. Like company convert from private to public or from foreign to local company. For e.g. Cathay Pecific sell a new public issue to allow Chinese investors for invest

Being civic minded: A good idea is to assist in building schools, hospi-tals, roads because such projects benefits the host country as well as the company. For e.g. In china H.G. Heinz spent 94000$ for infant Nutrition studies

Trade Barriers

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Distribution channel takes longer time to reach the product in the hand if customer:

Overseas distribution channel often has to be longer than desired because of government regulations, a foreign company may find it necessary also through a local agent in china foreign firms can not wholly on retail outlets and they can not engage in wholesaling activities. Banned on direct selling: In china direct selling is not allowed so due to

that a company can not go for that it has to choose any other media for advertising. for e.g. in case of Amway

• Reason:– Fear of Grey Marketing and fake goods– criminals have used direct marketing to spread heretical reli-

gion and start secret societies; – Anti social activity– Fraud and corruption

Foreign firm can not wholly own retail outlets and can not engage in wholesale activities. so due to that all multi national company has to tie up with the local firms.

Newspaper is controlled by govt. and is used for propaganda. In china news papers tend to carry news items that government wants to express and carry social values.

Examples:• Canon Inc., for example, has historically had to use its Hong Kong of-

fice as the primary sales arm in servicing China because of regulatory constraints on mainland sales and distribution.

• One option is to emulate the Chinese practice of building dedicated distribution networks that can be used to smooth the supply chain, get closer to customers and gain better control of marketing and commu-nications through to the point of sale.

• Kodak has been a pioneer. In 1998, it negotiated a deal with the Chi-nese government to take over three large state-owned enterprises in the photographic industry and integrate them with Kodak's existing operations into a holding company.

Trade benefit:

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China is having benefit of SEZ. so due to that the trade become easy.

SEZ for manufacturing, banking, exporting, importing, foreign invest-ment.

Provide more liberal environment: Due to SEZ a company can get the benefit of more liberal environment as it is totally orga-nized.

Company enjoy considerable administration autonomy and of-fer numerous activities

Co. get advantage of lower production cost, reduce both duties, freight charges

International organization & Participation ADB,APEC,APT,G24,ASEAN,IMF,WTO,WHO,UNESCO,SA

ARC, BIS. China is having participation with different organization. So if one company is doing business in china than ultimately it can get the benefit of these all above organization participation.

ECONOMIC FACTORS:

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Before few years company going to china faces lot of problem due to communist government, and there was a fear of confiscation that government may take over a control over your business and may ask you to leave the country and can have control your business and your investment. But after that the was a tremendous change in the political system of china and it open the market for the foreign companies to invest in their country and for that it gives may benefits to those foreign companies and due to that many foreign companies are attracted to invest in china and to take the benefit of cheaper source of production like labor, natural resources and lot of government support.

• Market oriented economy : Due L.P.G in china it gives it’s a tremen-dous benefit to those who are operating in china and or wants to oper-ates in china because of its cheaper source of production and due to that many labor intensive companies had made china as a production hub. And even due to large population in china many companies es-tablished in china and they are earning by satisfying the local demand.

• Chinese government faces numerous economic development chal-lenges like:

Sustaining adequate job growth for tens of millions of migrants: The main problem in china is that the rural market is not devel-oping with the same pace as the urban areas of china and due to that migration level is very high in china, so the main problem for the government is to give support to those migrant and to give them employment and this is the main reason that labor is available at cheaper rate and due to that manufacturing compa-nies are very much attracted to work in china and to make in-vestment in china.

New entrants to the work force: Now due to increase population literate people are also increasing and due to that workforce also increase but due to control of government on population there is a one child policy and due to that slowly the young working population is also increasing.

Workers laid off from state-owned enterprises: Now because of privatization in china and reduce in number of public corpora-tion due to that laid off is increases in china and the labor laws

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are not that powerful and by this labor exploitation in china in-creases this one of the reason that why the labor is cheap in china and it is helpful to labor intensive industries are increases that manufacturing companies are more attracted.

Reducing corruption and other economic crimes: The main problem the Chinese government is facing is the problem of high level of corruption is there and which is disturbing the economy and environment badly. And by these the high pol-luted companies are also given permission to set-up and which affect the environment badly which creates environmental dam-age and social strife related to the economy's rapid transforma-tion.

TAX SYSTEM:

VAT applies to enterprises engaged in importation, production, distribution or retailing activities.

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• The general VAT rate is 17% but necessities, such as agricultural and utility items, are taxed at 13%. And it is beneficial to the companies which are generally producing agriculture related products and the daily necessary products

• Custom duty of 25%.generally for all the product the custom duty is less as compare to India and so it even cheaper to import the products to china and due to that it also gives benefit to companies to earn good profit, and the companies who are export oriented units the govern-ment provides special tax exemption and also provide s.e.z area for the exporting from china which is more attracting the multi-national companies and due that the cost of production is very less in china.

• Tariffs for ASEAN countries is 5.8% from 9.9%: Even special tariffs are there for the ASEAN countries in china and due to that many In-dian companies have set up their plants and offices in china and it is also beneficial to other Asian countries.

• And even the government gives special concession to the companies if they invest 40% of their earnings in china only, by this china will get good amount of investment as well as the companies will get several tax reliefs.

GDP (purchasing power parity) (Billion $):

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Even the GDP of china is increasing and is high as compare to other developing countries like India whose GDP is around a trillion dollar only so we can say that the growth of china is higher as compare to other countries and even domestic demand is increasing due to increase in living standard and increase in income of the people.

GDP growth in (%).

Even the GDP in % also increasing though there is a recession in the world it has been very less affected in year 2008 and constant growth is there, though as compare to other last year it is less but it is higher that India which is around 6-7% and due to that more and more companies are attracted to invest in china and will be attracted after the recession period is over.

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GDP Composition by sector

GDP is compose of 3 factor that is agriculture is contributing 11% to GDP, while service sector contribute 40%, and industry contribute 49%, manufacturing is high because of cheaper source of production factors in china but service sector and agriculture sectors are providing less as compare to Brazil and India respectively so there I a chance for the service and agriculture oriented units china.

But the Chinese GDP if compare to developed countries like America it is ¼ of that country but it is growing very fast and slowly and steadily increasing and it is a good sign for china but fear for America because more and more

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companies are attracted to work in china because of its image of low cost of production and changes in demographic factor like increase in living standard and increase in disposable of people of china.

Industrial production growth rate (%)

Due to many manufacturing are setting up their plant in china and already established in china the industrial increasing except 2007-08, because of the manufacturing plants are being set up from the companies established in developed countries and most of them are badly affect by the global recession but these companies comes out of the effect of inflation they start again to invest in china.

Share of global manufacturing output:

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Due to cheaper cost of production more and more manufacturing units are setting up their plants in china due to this their over cost of production also reduces and now most of the multinational companies want to make china as their manufacturing hub and china slowly eating the share of manufacturing output of developed countries like Japan and America.

Inflation Rate:

Even since the last few years inflation in china is under control which is around 2.15% average so that we can say that there are very chance of demand and supply gap in china because of the large scale production it is use to satisfy the local demand as well as feeling the international demand of several countries many countries are directly or in directly depended on china.

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Balance of payment:

Even since many years the current account is in surplus it is there due to large scale production and exports to other countries and due to that its foreign exchange reserves are also increasing and due more and more companies are investing in china its FII’s and FDI is also increasing which directly affect the balance of payment of china and due to these reasons current account balance is in surplus.

Currency appreciation:

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The local currency is appreciating since few years which shows the sign of increase in exports to other countries and due to that many companies are setting up their plant in china so that they can easily sell to other countries at very cheaper rate as compare to their competitors in that particular countries, because people will try to buy the product which is cheaper and qualitative with quantative products. And due to that many Indian companies are setting their units in china and exporting in India.

Gold Reserve:

Even the gold reserve is also increasing with china which is a good sign for any country because it shows that china is now becoming self dependent and

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now require less help from the developed country and it happen due to several favorable policy of Chinese government.

FDI (MN USD):

Due its liberalized policy investment from the foreign countries is increasing in the form of FDI that is the companies are investing in setting up a Greenfield units or investing in domestic companies this had happen due to several tax relief policies as well as low cost of production more and more companies are investing in china and these are the reason why FDI in china is increasing.

FDI and MNC:

• China has absorbed huge amount of foreign investments.

• Billions of dollars and 350,000 foreign-invested enterprises

• Between them, McDonald's and Kentucky Fried Chicken have almost 700 branches.

• Kodak has half of the market for film and photographic paper, with Fuji holding most of the rest.

• Procter & Gamble is the biggest seller of shampoo, while foreign manufacturers, led by Motorola, Ericsson and Nokia, have 95% of the market for mobile phones, the world's biggest market in terms of handset sales.

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• Coca-Cola says that China is about to become its biggest Asian mar-ket. Some estimates put foreign involvement at about one-tenth of the whole economy.

• In China, annual exports are equivalent to at least 23% of GDP, mak-ing China the world's ninth-largest exporter.

Investment Opportunity:

• Negotiation with Govt. to get tax benefit: Even the MNC can bargain with the local government and can get more tax benefits by accepting certain norms of the Chinese government.

• High no. of SEZ and Protected zones are Established: Due to more no of SEZ and protected zones export oriented units are attracting be-cause in these zones they get good infrastructure facilities and several tax holidays which will reduce their cost of production and profitabil-ity will increases.

• Priority sectors include transportation, communications, energy, met-allurgy, construction materials, machinery, chemicals, pharmaceuti-cals, medical equipment, environmental protection and electronics.

• China encourages reinvestment of profits. A foreign investor may ob-tain a refund of 40 percent of taxes paid on its share of income, if the profit is reinvested in China for at least five years.

• Where profits are reinvested in high-technology or export-oriented en-terprises, the foreign investor may receive a full refund. Many foreign companies invested in China have adopted a strategic plan which re-quires reinvestment of profits for growth and expansion.

Labor Force (mn):29

Due more labor in china it is quit cheaper as compare to other countries like India and even due to increase in literate labor production of the company is cheaper and even quality is maintained due to literate labor and even capital intensive firms are also increasing in china which are technology based.

External Debt:

And due to lot of investment and increase in foreign exchange external debt on the country reduce tremendously and due to that current account become surplus and by this there is less burden on the local public and their consumption also increases due to this.

Attitude towards Foreign Banks:

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• Fully opened for foreign bank: Now the government gave permission to set up the foreign banks and due to this transaction of the multi-na-tional companies became easy and fund can transfer easily.

• Access its RMB retail business and lifts all geographic and client con-straints: Even the government gave permission to access to local cur-rency and local transaction.

• Also allows subsidiary and branches of foreign banks.

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Socio Culture Environment:Culture plays a significant role in influencing consumer’s perception, which in turn influences their preference and purchase. A marketing mix is effective as long as it is relevant to their culture. According to culture a company must modified their product.

Great wall, Grand Canal, Karez irrigation system is the symbol of rich culture which build 2000 years ago.

Culture is socially shared:

In china culture is socially shared. Girl children must have small feet: The preference of wanting their girl children to have small feet. Large feet viewed as lower class people. So that parents from upper class bound daughter’s feet tightly.

Lack of shared common culture common values: In china due to lack of shared common cultural values, standardized advertisement may have difficulty in communicating with customers. So due to that advertising and sales promotion require special attention.

Culture is enduring: In most Asian countries also in china culture is enduring. Culture is shared and passed along from generation to generation. Old habits are hard to break. People tend to maintain their own heritage. That’s why India and China are over crowding. In past china views large family are blessing and assume that children will take care of parents when grown. Old but modern Chinese government make compulsory of one child per family. It’s result in numerous death of first born daughter.

Chinese do not consume beef at all: Influence of culture on consumption pattern. Living style and priority of needs are dictated by culture. Chinese do not consume beef at all. They believed that it is improper to eat caftan that work on ferns. Asian consumer prefer their chicken boiled rather than fried.

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Classes of Population

The People's Republic of China is a unified, multi-national country, com-

prising 56 nationalities. The Han people make up 91.02 percent of the total

population, leaving 8.98 percent for the other 55 ethnic minorities. They are

Mongolian, Hui, Tibetan, Uygur, Miao, Yi, Zhuang, Bouyei, Korean, Manchu,

Dong, Yao, Bai, Tujia, Hani, Kazak, Dai, Li, Lisu, Va, She, Gaoshan, Lahu,

Shui, Dongxiang, Naxi, Jingpo, Kirgiz, Tu, Daur, Mulam, Qiang, Blang, Salar,

Maonan, Gelo, Xibe, Achang, Pumi, Tajik, Nu, Ozbek, Russian, Ewenki, Ben-

glong, Bonan, Yugur, Jing, Tatar, Drung, Oroqen, Hezhen, Moinba, Lhoba and

Gelo. All nationalities in China are equal according to the law. The State pro-

tects their lawful rights and interests and promotes equality, unity and mutual

help among them.

Age structure

The age structure of China:

0-14 years: 20.4% (male 143,527,634/female 126,607,344) 15-64 years: 71.7% (male 487,079,770/female 460,596,384) 65 years and over: 7.9% (male 49,683,856/female 54,356,900)(2007est)

Looking to above it is very clear that in China the Older population is very less

around 5 to 10 Per Cent, while the ratio of Generation X & Generation Y is

high. So from above we can conclude that in China most of age of people are

young and so it is very good market for the product targeting to the young age.

FAMILY NAMES : Chinese family names came into being some 5,000

years ago. There are more than 5,000 family names, of which 200 to 300 are

polular. The order of Chinese names is family name goes first, following by

given name. For instance, the family name of a person is Wang, given name is

Dong, his/her full name would be Wang Dong . The most popular Chinese

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family names are LI, ZHANG, WANG, LI, ZHAO, LIU, CHEN. According to

the most recent official statistics, the three most popular family names are: LI,

WANG and ZHANG, occupied 7.9% (97million), 7.4 and 7.1  of total popula-

tion in China respectively.

Food Habits:-

China is a vast country with a wide diversity of ethnic groups and eating habits—

and large differences in the life-styles of rich and poor. In general, however, the

Chinese recognize the relationship of diet to good health, and believe that the ideal

diet is one that stresses both diversity and balance. Ancient texts stress the impor-

tance of the five flavors (pungent, sour, sweet, bitter and salty); the five grains

(wheat, glutinous millet, millet, rice and beans); the five tree-fruits (peaches,

plums, apricots, chestnuts and dates); the five vegetables (mallows, coarse greens,

scallions, onions and leeks); and the five domestic animals (fowl, sheep beef,

horses and pigs.)1 Meat, although not to be eaten in excess, was valued for its

strengthening properties.

China fiber-rich diet based on grains and vegetables offers substantial protection

against cancer, heart disease and osteoporosis.a fundamental feature of Chinese

heating habits is the inclusion of a wide diversity of food items—everything from

pickled ant eggs to dog hams—most Chinese, especially most Chinese in rural

areas, consume a diet that is dull and limited in the extreme. A 1946 survey of

rural China indicated that 88% of the diet was composed of cereals and legumes,

with only 5% as vegetables, 3% as meat and fish and 4% as fats. Rice is China's

most important cereal. In the Southern regions it is consumed at all three meals.

Millet and wheat production dominate the more arid regions of northern China—

with millet consumed principally in the form of a fluffy porridge, and wheat made

into noodles and bread, although in the poorest regions, wheat is consumed as a

rough porridge. Barley, sorghum, corn, buckwheat, rye and oats constitute minor

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crops in China, but the total of them all adds substantially to the amount of

carbohydrate food consumed by the populace. Millet and wheat production

dominate the more arid regions of northern China—with millet consumed

principally in the form of a fluffy porridge, and wheat made into noodles and

bread, although in the poorest regions, wheat is consumed as a rough porridge.

Barley, sorghum, corn, buckwheat, rye and oats constitute minor crops in China,

but the total of them all adds substantially to the amount of carbohydrate food

consumed by the populace.

Traditionally, rice and wheat were eaten as whole grains or whole meal, probably

after a long, slow steaming in the case of rice, or a soaking procedure in the case

of wheat. Noodles were made by a process of stretching and sun drying that

amounted to a partial fermentation. Today these grains are consumed as white pol-

ished rice and white wheat flour, shorn of their valuable vitamins and minerals.

But millet and the other minor grains continue to be consumed in whole form, as

porridges, gruels or cakes. " Congee", a watery porridge made from rice or other

grains, is a common food, either eaten plain or with other ingredients such as meat,

fish, vegetables or flavoring.

Animal foods in the Chinese diet, while beyond the reach of many, are character-

ized by great diversity. Scavenger, omnivorous animals such as pig, chicken and

duck are preferred to beef and lamb, although beef and lamb—and more meat in

general—are consumed by the northern Chinese, who are admired for their size

and strength. Whatever the animal, it is entirely consumed—organs, feet, tail and

tongue. Packages of duck's tongues are available even in Chinese markets in

America. Goose, pigeon, turkey, dog, frog, monkey and snake are available in

Chinese markets, often sold live, for the Chinese put a great store on freshness.

Even rat figures in accounts of traditional cuisine and bear paw was considered a

great delicacy by the aristocracy. Insects such as flies, gnats, earthworms, bees, ci-

cadas, beetles, crickets, silkworm cocoons, waterbugs, locust and stinkbugs are

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valued both as food and as medicine. The Chinese also cultivate caterpillars that

have become infected with a fungus that roots in the caterpillar's neck and grows

upward to a height of six to eight inches. When both die, they become dry, hard

and brown and may be prepared in a broth. Insects are a valuable source of protein

and fat soluble vitamins in the Chinese diet, especially that of the poor, but their

use and importance are generally overlooked by researchers. 3

Traditionally lard was used in cooking, by those who could afford it, along with

small amounts of sesame oil that was produced by vendors who set up their stone

grinders in the street and sold the fresh oil as soon as it was extracted. Today most

cooking oil is extracted in factories from rapeseed, soybeans, peanuts and cotton-

seed.

Eggs are highly valued as a brain food throughout the Orient. In China, they are

consumed preserved or fresh, often scrambled with vegetables and other ingredi-

ents. In the northern areas, a breakfast dish is prepared by placing a raw egg in a

bowl and pouring hot soy milk over it. The mixture is eaten with a flat pancake.

Sometimes a raw egg is mixed with hot rice and soy sauce.

Soy foods are widely used in China as an adjunct to animal foods. The Chinese

have perfected numerous ways of fermenting soy in order to neutralize phytic acid

(which blocks minerals like zinc and calcium), enzyme inhibitors (which block di-

gestion) and goitrogens (which inhibit thyroid function.) Traditional preparation of

soymilk begins with soaking until the beans become soft. The softened beans are

ground into a mush on a stone grinder, using copious amounts of water. The mush

is then put into a cloth bag and placed under a weight or heavy rock so that all the

liquid is squeezed out. The resulting soy paste is then cooked in fresh water. Large

amounts of dirty scum that rise to the surface are carefully removed. To serve, raw

egg or dried shrimp are placed in a bowl along with scallions, soy sauce, flavor-

ings and vinegar, and the scalding soy milk is poured over. The vinegar causes the

soy milk to curdle slightly. In traditional times, homemade soymilk was consumed

36

by the elderly and by nursing mothers in the belief that it stimulated breastmilk,

but was not normally used in feeding infants.4

Industrial methods for the production of soymilk leave out the all-important

squeezing and skimming steps. The presoaking is shortened by using an alkaline

solution. This process helps deactivate some of the enzyme inhibitors, but not the

other antinutrients. The high pH value of the soaking solution results in a decrease

in cystine content when the beverage is heated, thus lowering total protein avail-

ability and soymilk's usefulness as a protein source.5 Various refined sweeteners,

preservatives and stabilizers may then be added.

The real value of the soybean is that it can be made into soy sauce, the salty elixir

that gives Oriental food its unique character. Traditional soy sauce is made by a

fermentation process that takes six to eight months to complete. This long and

careful procedure creates a mix of phenolic compounds, including a natural form

of glutamic acid, that contribute to the unique taste and aroma of traditionally

brewed soy sauce. The modern bioreactor method produces a product by rapid hy-

drolysis, rather than by complete fermentation, in the space of two days, and uses

the enzyme glutamase as a reactor, so that the final product contains large amounts

of the kind of unnatural glutamic acid that is found in MSG.6

Various types of vinegars, fermented sauces made from oysters or fish, ginger,

garlic, ginseng and a wide variety of peppers and spices are used with great imagi-

nation in traditional Chinese cuisine; these too, have been replaced in large mea-

sure with preparations in which MSG allows manufacturers to cut corners and use

only minimal amounts of basic ingredients.

Salt in general is not added to Chinese food during cooking—rice is prepared

without salt, for example—but because it is used in the production of condiments

and pickled vegetables, Chinese food has a salty taste, and overall salt consump-

tion is high. Most salt is produced by the evaporation of sea water in the coastal ar-

37

eas so that, unlike industrially processed salt in America, it provides a rich source

of natural iodine.7 There is a large black market in salt in China. 8

Since antiquity, the Chinese have used a number of sweeteners including honey,

rice or barley malt, palm sugar (jaggery), sorghum syrup and dehydrated sugar

cane juice, but only in moderation in accordance with the Oriental concept of bal-

ance. Chinese living overseas have adopted Western habits of high sugar con-

sumption. A recent study found that Chinese children in Malaya had as much as

30 percent of the total caloric intake as sugar in the form of candy, cookies, soft

drinks and other sweets.9 However, it is unlikely that mainland Chinese will adopt

such expensive habits in the foreseeable future.

Chinese cuisine includes a large variety of vegetables, although the diet of the

poor is limited to a very few, notably cabbage and various forms of radish. Sweet

potato consumption is high, especially among the poor.

Fish consumption ranged from about 120 grams per day on seacoast areas, to zero

in remote inland regions. Fish consumption was positively associated with con-

sumption of sugar, "other oils," beer, liquor, meat, and rice and negatively associ-

ated with consumption of salt, wheat and legumes. Fish eaters had more diabetes,

nasal cancer and liver cancer, but less TB, infectious disease and rheumatism. Fish

eaters had lower triglycerides. There was no significant correlation, either positive

or negative, of fish eating with coronary heart disease. There was a negative corre-

lation of fish eating with pipe smoking.

Milk consumption was zero in the vast majority of the provinces. However, in the

western border region, milk consumption averaged 856 grams (about 1 quart) per

person per day. (Whether this figure includes fermented milk products is not speci-

fied.) The rate of coronary heart disease in the western border region was about

half that of Jiangxain and Longxian, where no milk products are consumed and

where lipid intake is under 10% of total calories. Milk consumption showed no

38

strong correlation, either negative or positive, with any disease but there was a

high correlation of milk drinking with taking snuff.

Language:

Language is a important part of culture and communication is impossible without it.

Mandarin is national language: In china mandarin language is uniform; there are hundreds of local dialects. Mandarin is the national language.

Written language uniform and number if dialects: In china written language is uniform and number are dialects.

Chinese pay more attention to visual information processing as well as the writing of a name:

Marketer should understand the how customer process linguistic information. East Asian pays more attention to visual information processing as well as writing of name. As far as brand name is Concern Company must use visually distinct brand name meaning for communication or calligraphy and logo design.

Chinese read from right to left: Writing and reading rules are different in different countries. China read from right to left and in America they read and write from left to right. This difference usually requires a product to be adjusted to some contest. For example computer maker must take care and change their system according to countries. so that computer can produce a printout reading from right to left.

Chinese are strict punctuality for social occasions & business ap-pointment:

Latin American people are usually late, Asian people are tend to be punctual but the Chinese observe struck punctuality for social occasion and business appointment. For Chinese people time is money.

Language of Friendship China has the unique characteristics of being friendly. They believe that let’s make friend first and than see if we can conduct a business.

39

General motors have learned that in china. the Chinese meet together first before taking about business.

Language of Religion: Religion affects people in many ways including work habits. Islamic Indians are seems as a sign of persons lack of faith in religion in Budhism. The emphasis on the elimination of desire. Because desire cause worrying marketer must pay attention to religion activities. The entire month of Ramzan is a religious holiday for muslim who fast from down to desk each day during the month. Therefore worker must use part of normal sleeping time for them so that work production can affected. Also muslim pray five time a day and they stop all work to do so attitude and religion shape the text and visual image that appear in print advertisement. (Christian, Muslim, Buddhist, Buddhism, Taoism, Catholicism and Protestantism)

Language of Color In china red is lucky color. it is compulsory for all company to put money in red envelope as gift for employee and children on special occasion. special on Chinese new year day. marketing manager should be careful in using certain color with the product because using wrong color can make or break the deal for example parkers white pen did not fare well in china where white is color of sorrow and sadness. Language of Gift

Business people must understand the customer gift giving. It is wise to avoid giving anything or any item with four in the name to the Chinese because it means death. likewise clocks are a choice of gift in china because the word for a clock sound like in word for terminate as for a cultural visit to the dying.

Language of Negotiation

40

State Negotiation Power (traits)

Northwestern, eastern mandarin, Gan, Minnan

Business Mindset

Hakka Not so good at business

Yu, Wu, Xiang Stubborn, argumentative, hot tempered, competitive, adventurous

Chinese negotiation is generally rough minded well prepared and no time constraints. they are prepare to use various tactics to secure the best deal. in china foreign countries should expect repetitive and time-consuming negotiations. Chinese executives more likely than Canadian executive to avoid conflicts when Chinese managers had to deal with conflicts when. They were using more likely use negative strategies.

Subculture: Subculture provide an effective basis for market segmentation.

41

2 & 4 number are known as “Easy” & Death” respectivelyFor example one marketer offered one discount coupen of $24 with each purchases to Chinese people. But unfortunately 2 & 4 number in Chinese communities known towards. Easy and Death naturally many consumer do not want each day.

Green baseball caps were offered as premium In china baseball caps were offered to the Chinese people as it is a sign of premium things to be offered.

Road drive side:  • Mainland China: on the right • Hong Kong: on the left • Taiwan: on the right

So due to this different kind of driving system the automobile producer has to take into consideration.

Surname comes first (for e.g. Huang Zhirong addressed as Mr. Huang

Chinese Opera Performance

The working days are from Monday to Friday. Most people do not work on weekend. Official hours are from 8:00 am to 17:00pm with one hour for lunch.

Culture Adaptation examples:

42

• Kentucky Fried Chicken's (KFC), which provides fast and cheap foods in the US, built its first store in Beijing twelve years ago. In China, the customers go to KFC for a special occasion or a family gathering, and therefore, expect better surroundings, a higher hygienic standard and higher quality food and service. So KFC in China played classical piano music and made it a place for young couples’ special event.

• Wal-Mart, the world's largest department-supermarket chain store, opened eight stores in less than four years in China. It found that in-stead of locating in suburbs which offer large spaces and lower rents as in the United States, it had to find city-center sites or those in heav-ily populated areas, as most Chinese do not drive. The stores also needed to carry different food items in different cities due to varied eating habits between south and north.

Behavior of Chinese People

43

Chinese consumer give more emphasis on convenience of location, sales person’s manner and less emphasis on stores return policy. It is also possible to identify the personality traits that vary from one re-gion to another within the same country.

Each region have different language, heroes, local capital, and differ-ent behavioral traits and tastes. so due to that marketer may want to match the traits of the product with the audience’s positive traits.

STATE THEMES USED FOR SALE THE PRODUCT

Gavi Nations, Northern, southern, Northwestern, southwestern mandarin nation

Simple, old-fashioned, frugal themes

Wu & Eastern Mandarin nations

Luxury themes

Hakka Independence

Northern Mandarin Gentle humble image

Minan Adventure

Yu, Wu, Minnan, Hakka Hardworking, innovative, aggressive

Population

44

China is having world’s largest population Population (2007 est.): 1,321,851,888

(growth rate: 0.6%); birth rate: 13.5/1000; infant mortality rate: 22.1.1/1000; life

expectancy: 72.9; density per sq mi: 367. This shows that there are enough people

to accept our product.

Population below poverty line: 8%

note: 21.5 million rural population live below

the official "absolute poverty" line (approxi-

mately $90 per year); and an additional 35.5

million rural population above that but below

the official "low income" line (approximately

$125 per year) (2006 est.)

Household income or con-

sumption by percentage share:

lowest 10%: 1.6%

highest 10%: 34.9% (2004)

Related Indicators for the Seven Chinese Banks (Unit: US$ hundred million)

Rank in

Bank Pri-mary

Total Assets

Pre-tax Profits

Real Profit Growth

45

world top

1000 banks 

Capital Rate %

6 Industrial and Commercial bank of China

222.13 3912.13 4.17 14.1

18 Bank of China 147.12 2990.07 4.25 -74.265 Construction

Bank of China59.88 2031.16 12.15 20.1

99 Agricultural Bank 48.02 1900.95 0.95 -83.7

129 Bank of Commu-nications

28.16 584.54 3.22 -48.5

300 Merchants Bank 9.74 166.79 2.42 -29.7938 Xiamen Interna-

tional Bank1.63 12.08 0.22 -14.6

Source: Beijing Review Vol.43 No. 16 Ap

CHINA-COMMUNICATION

Telephones - main lines in use:

368 million (2006)

Telephones - main lines in use density:

279 Telephones - main lines in use per 1000 people

Telephones - mobile cellular: 461.1 million (2006)

Telephones - mobile cellular - density:

349 mobile cellular telephones in use per 1000 capita

Telephone system: general assessment: domestic and interna-tional services are increasingly available for private use; unevenly distributed domestic system serves principal cities, industrial cen-ters, and many towns; China continues to de-velop its telecommunications infrastructure,

46

and is partnering with foreign providers to expand its global reach; 3 of China's 6 major telecommunications operators are part of an international consortium which, in Decem-ber 2006, signed an agreement with Verizon Business to build the first next-generation fiber optic submarine cable system directly linking the US mainland and China domestic: interprovincial fiber-optic trunk lines and cellular telephone systems have been installed; mobile-cellular subscriber-ship is increasing rapidly; the number of in-ternet users reached 162 million in 2007; a domestic satellite system with 55 earth sta-tions is in place international: country code - 86; a number of submarine cables provide connectivity to Asia, the Middle East, Europe, and the US; satellite earth stations - 5 Intelsat (4 Pacific Ocean and 1 Indian Ocean), 1 Intersputnik (Indian Ocean region) and 1 Inmarsat (Pa-cific and Indian Ocean regions) (2007)

Radio broadcast stations: AM 369, FM 259, shortwave 45 (1998)

Radio broadcast stations AM density:

3,582,255 people per AM Radio broadcast station

Radio broadcast stations FM density:

5,103,676 people per FM Radio broadcast station

Radio broadcast stations shortwave density:

29,374,487 people per shortwave Radio broadcast station

Television broadcast sta-tions:

3,240 (of which 209 are operated by China Central Television, 31 are provincial TV sta-tions, and nearly 3,000 are local city sta-tions) (1997)

Television broadcast stations density:

407,979 people per Television broadcast sta-tion

Internet country code: .cn

47

Internet hosts: 10.637 million (2007)

Internet users: 162 million (2007)

Internet users - density: 123 internet users per 1000 capita

CHINA-RAILWAYS

Railways: total: 75,438 km standard gauge: 75,438 km 1.435-m gauge (20,151 km electrified) (2005)

Roadways: total: 1,870,661 km paved: 1,515,797 km (with at least 34,288 km of expressways) unpaved: 354,864 km (2004)

Waterways: 124,000 km navigable (2006)

Pipelines: gas 26,344 km; oil 17,240 km; refined prod-ucts 6,106 km (2007)

Ports and terminals: Dalian, Guangzhou, Ningbo, Qingdao, Qin-huangdao, Shanghai, Shenzhen, Tianjin

Merchant marine: total: 1,775 ships (1000 GRT or over) 22,219,786 GRT/33,819,636 DWT by type: barge carrier 3, bulk carrier 415, cargo 689, carrier 3, chemical tanker 62, combination ore/oil 2, container 157, lique-fied gas 35, passenger 8, passenger/cargo 84, petroleum tanker 250, refrigerated cargo 33, roll on/roll off 9, specialized tanker 8, vehi-cle carrier 17 foreign-owned: 12 (Ecuador 1, Greece 1, Hong Kong 6, Japan 2, South Korea 1, Nor-way 1) registered in other countries: 1,366 (Ba-hamas 9, Bangladesh 1, Belize 107, Bermuda 10, Bolivia 1, Cambodia 166, Cyprus 10, France 5, Georgia 4, Germany 2, Honduras 3, Hong Kong 309, India 1, In-

48

donesia 2, Liberia 32, Malaysia 1, Malta 13, Marshall Islands 3, Mongolia 3, Norway 47, Panama 473, Philippines 2, Sierra Leone 8, Singapore 19, St Vincent and The Grenadines 106, Thailand 1, Turkey 1, Tu-valu 25, unknown 33) (2007)

Airports: 467 (2007)

Airports density: 2,830,518 people per Airport

Airports - with paved run-ways:

total: 403 over 3,047 m: 58 2,438 to 3,047 m: 128 1,524 to 2,437 m: 130 914 to 1,523 m: 20 under 914 m: 67 (2007)

Airports - with unpaved runways:

total: 64 over 3,047 m: 4 2,438 to 3,047 m: 4 1,524 to 2,437 m: 13 914 to 1,523 m: 17 under 914 m: 26 (2007)

Heliports: 35 (2007)

REASON FOR THE SELECTION OF THE COUNTRY

49

The Economic Growth rate of China is very good and showing continu-

ous growth rate and there is lots of Opportunity available for the inter-

national company.

Having world largest population resulting in very lucrative and attrac-

tive market.

The size of the middleclass is increasing as well as its spending.

The appreciation of the market for foreign goods.

Cheap Labour force is available at the same time infrastructural facili-

ties are provided by Government (0.22 $ per hour)

PRODUCT TO BE EXPORTED IN CHINA

50

We would be exporting Soya Beans to China

Why Soya beans should be exported to China?

China’s thirst for natural resources has for several years been an issue in the

global markets for petroleum and hard commodities like iron ore and cop-

per. Since the summer of 2007 at the latest China’s thirst for commodities

has even been felt by consumers in Germany – after all, the rising prices of

dairy products in German stores have been blamed on increased demand in

China. And shortly before Christmas it was reported that the prices of

Christmas trees would also rise on account of unexpectedly strong demand

from China.

The fact is that swift industrialization and rapid growth in sectors ranging

from steel to IT have made China the leading importer of a whole range of

commodities. With a share of nearly 70% of global chromium imports

China ranks a long way ahead of Russia with just 13%. China is also the

world’s biggest importer of iron ore and manganese with shares of over

40% of each segment. Only on copper imports does China land in second

place with almost 19% – just behind Japan.

Another consequence is China’s increased energy requirements. Fossil fuels

provide more than 80% of all electricity generated in China, with hard coal

the main source. China’s proven coal reserves are the third largest in the

world, behind those of the US and Russia. However, it tops the production

rankings by generating nearly 40% of global output. As long ago as 1993

China had already lost its status as a net exporter of crude oil, and imports

have risen inexorably since. Between 1996 and 2006 its oil consumption

doubled, whereas its output rose by just 16%.

51

Only one-fifth of China’s natural resource imports are agricultural com-

modities (also known as soft commodities). All the same, demand for meat

and dairy products in particular has risen constantly in recent years. This

can be attributed to the rise in incomes and the associated changes in di-

etary habits, and it is most clearly reflected in the growth of imported ani-

mal feed: around 40% of global soya bean exports are destined for China.

There are, however, other categories like vegetable oils that are also posting

strong growth. Besides demand-side factors urbanisation along with soil

erosion and water shortages are reducing the land area used for agriculture.

This limits the capacity for boosting output. China thus imports mostly

commodities that require intensive land use – like grain, soya beans and

cotton – and exports labour-intensive agricultural products like fruit and

vegetables.

Soybean production in the India grew by more than 23.68% last year The

soybean production rose to 9.4 million tones during October 2006-

September 2007 from 7.6 million tones Soybean meal, an intermediate

product, is the second most important export with 9%of sales. Soybean is

the single largest oilseed produced in the world.

The Chinese recognize the relationship of diet to good health, and believe

that the ideal diet is one that stresses both diversity and balance and Soya

bean is such one product .

Chinese soya bean imports are set to reach 16.5 million tonnes in 2003/04,

from 16.25mt in 2002/03, due to an increased demand for oils and livestock

feed,

Let us see the uses of Soya Bean :-

I) Soy foods are widely used in China as an adjunct to animal foods.

II) Preparation of soymilk begins with soaking until the beans become

soft. The softened beans are ground into a mush on a stone grinder,

using copious amounts of water. The mush is then put into a cloth

52

bag and placed under a weight or heavy rock so that all the liquid is

squeezed out. The resulting soy paste is then cooked in fresh water.

Large amounts of dirty scum that rise to the surface are carefully

removed. To serve, raw egg or dried shrimp are placed in a bowl

along with scallions, soy sauce, flavorings and vinegar, and the

scalding soy milk is poured over. The vinegar causes the soy milk to

curdle slightly.

III) Homemade soymilk was consumed by the elderly and by nursing

mothers in the belief that it stimulated breast milk, but was not

normally used in feeding infants.

IV) The real value of the soybean is that it can be made into soy sauce,

the salty elixir that gives Oriental food its unique character.

Because of such high utility of Soya-Beans in Chinese cuisines

And having so much nutritious value the demand is increasing for

the Soya beans in the Chinese market is prompting us to export

this product .

53

S-T-P

Segmentation:

Demographic Segmentation

Target:

The middle class is increasing at a rapid rate and their purchasing power is

also increasing very high and they welcome foreign made products.

Target Market for Soyaji

Population Size 1,321,851,888

Target Market (65%) 859203727.2

Positioning: We will promote our Soyaji as a soybean ready to made soya-

milk, soya-sauce with special ingredients including corn, sesame seed which

are special ingredients in coffee which is only suitable for such countries and

give the nutritious value to the body and easily digestible and fat free and

high protein providing dietary product which make your body balanced and

healthy.

II. PRODUCT STRATEGY

54

Thus our product is very specific with is focusing on “MAN” Factor i.e.M = Money means those who have purchasing power,A = Authority means those who have authority to purchase the product,N = Needs means those who are health conscious and wants to make their body in balance i.e. high protein rich diet food product.

Product To Be Exported: Soya bean ready mixture

In relation of demand for the product i.e. Soya bean the market has lot of potential .

Brand Name: “Soyaji”

Ingredients: The ingredients on the label include 85%soyabean, 10% corn and 5% sesame seed.

Packaging: The Size of the Packaging includes:100 Gms250 Gms500 Gms

Colour: White plus light Shed of Yellow ;almost transparent. .

55

PRICING STRATEGIES

As the China is socialist economy it will always encourage some product

which helps it citizen to become healthy. Though its combination of free

market and socialist economy the incorporation would not be having so

much legal formalities.

As the product is new in the market and looking the mentality of Chinese

People and to take the introductory advantage we would follows the

following pricing Strategy in the Chinese Market:

Skimming Pricing Strategy:

Since the product is of new kind due to as the Middle Class Family have

enough income to buy our product and looking to the food habit the Chinese

people use Soya Bean oil in their cooking which is very good for health. So

we have added two more ingredients corn & sesame seed which is fat free

ingredients. And as the product is new in the market and health conscious,

so we would go for “Skimming Pricing Strategy”.

Base of Export Price Quotation:

In China mostly CIF Price are used as a bases of export price quotation. As

we know that under CIF (Cost Insurance & Freight) pricing includes FOB+

Ocean Freight+ Insurance. Under this pricing delivery take place when the

Bill of lading is handed over and the goods and transit risks are transferred

when the goods go over the ship’s rail.

56

Implication: The implications of such insistences are two-fold:

1) The Exporter will have to arrange for shipping space

and

2) He will have to bear all transit costs and risks till the goods are

handed over at the port of destination.

Demo of Export Price Quotation eligible in China

Price Quotations

The pro-forma invoice is the most commonly used document to give price quotations to potential customers. The quotation in a pro-forma invoice is usually considered binding, although prices may change prior to final sale. To prepare the invoice, you should give a detailed description of the product, an itemized list of charges and sale terms. Prices should be quoted in United States dollars to reduce foreign exchange risks. The invoice should also in-dicate the period during which the price quotation is valid.

PRO-FORMA INVOICE*

SHIPPER: Agility logistics Reference No:. RB20693

Date: April 30, 2008

Customer P.O. No.5555

Shivranjani Road

Gujarat

(079) 22554466

57

Thus any change in the transportation cost subsequently will have to

borne by the exporter.

Terms of Payment:

Estimated Date of Shipment

SOLD TO: SHIP TO:

Suoi Moli Ltd Chin Chong Industriale

633 Estate Road 454 Estate Road

Shanghai,China Shanghai.China

ITEM QUANTITY DESCRIPTION UNIT PRICE TOTAL PRICE 100 Soya Bean Ready US $75.00 US $7,500.00 Mixture FOB factory 7,500.00 Inland Freight Forwarder fees 500.00 Ocean freight 1,500.00Five (5) sealed cartons Insurance 25.00 Gross weight: 10 lbs. C.I.F. China C 9250.00

Authorized signature/Title

The above offering is based on current prices and is valid 60 days from in-voice date.

*NOTE: This pro-forma invoice is only a sample. It is advisable to contact a freight forwarder in advance of shipping.

58

DISTRIBUTION STRATEGY

1. Logistic Management

In preparing your goods for international transport, you must first de-

termine what mode of transport you will use. Maritime shipping is almost

always slower and less expensive than air. However, an exporter must

factor in the additional costs of sea freight, such as surface transporta-

tion to the dock.

Another factor is the time value of money: payment may not be made

until the ship reaches its destination -- ocean freight can be signific-

antly longer than air freight.

With reference to international freight forwarder can assist in weighing the

pros and cons of different modes of transportation. Let us evaluate from the

view point of exporting product to China :

The Advantage of Sea Transport is:

Less Costly Compared to other mode of transport

The Disadvantage of Sea Transport is:

As the payment may not release until the goods are reached at the cus-

tomer ends. So slow process in mode of transport.

With reference to international freight forwarder can assist in weighing the

pros and cons of different modes of transportation. Let us evaluate from the

view point of exporting product to Mexico:

59

The Advantage of Sea Transport is:

Less Costly Compared to other mode of transport

The Disadvantage of Sea Transport is:

As the payment may not release until the goods are reached at the cus-

tomer ends. So slow process in mode of transport.

DOCUMENTATION:

Export Documentation Checklist -- Documents Prepared Before the Ship-

ment

Commercial Invoice/Consular Invoice

After the pro-forma invoice is accepted, the exporter must prepare a com-

mercial invoice. The commercial invoice is necessary for both the exporter

and importer.

The exporter needs the commercial invoice to prove ownership and secure

payment. The description of the goods on the commercial invoice must cor-

respond exactly to the description in the letter of credit or other method of

payment. There can be no exceptions.

The importer needs the commercial invoice since it is often used by Customs

authorities to assess duties. For this reason, it is common practice to prepare

a commercial invoice in English and in the language of the destination coun-

try. The freight forwarder can advise you when a translated copy is neces-

sary.

60

Similar to a commercial invoice, a consular invoice is required by certain

countries. The consular invoice must be prepared in the language of the des-

tination country and can be obtained from the country's consulate, and often

must be "consularized."

In some countries, the commercial invoice must be prepared on a special

form known as a "customs invoice." Your importer may request this of you.

Export License

Export controls are based on the type of goods being shipped and their ulti-

mate destination. Most exports do not require a license, per se. Technically,

most exports are shipped under a "general" license which does not require an

application.

Should your particular export be subject to export controls, then a "valid-

ated" license must be obtained. In general, your export would require a "val-

idated" license if export of the goods would: threaten China national secur-

ity; affect certain foreign policies of the China; or create short supply in do-

mestic markets. Check with the U.S. Department of Commerce's (DOC's)

Bureau of Export Administration (BEA) to determine if your product may be

subject to export controls (see Part II, The Exporter's Directory).

Shipper's Export Declaration (SED)

The most common document used by exporters is the Shipper's Export De-

claration (Form 7525-V), for mail shipments valued at more than $500, and

required for other shipments valued at more than $2,500. In addition, a SED

must be prepared for all shipments covered by an Individually Validated Ex-

port License (IVL), regardless of value. The SED enables the Bureau of the

61

Census to monitor for statistical purposes the kinds of products being expor-

ted from the China . The SED must be presented to the carrier before the

shipment departs.

A sample SED follows:

A Shipper's Export Declaration Form 7525-V cannot be reproduced here.

The form is available through the Superintendent of Documents, Govern-

ment Printing Office, Washington, DC 20402 and local Customs district of-

fices.

Three items appearing on the SED may cause confusion:

Item 14, "Schedule B Description of Commodities"

You will need to determine the official description of the commodity you are

shipping by obtaining a copy of the Mexico government publication entitled,

Harmonized System/Schedule B Statistical Classification of Domestic and

Foreign Commodities Exported from the China and then transfer the appro-

priate description onto the SED. This is available from the Government

Printing Office and from most freight forwarders.

Item 21, "Validated License No./General License Symbol"

If your product for export is controlled, the "validated" license number is in-

serted in this space. If you are exporting under a "general license," one of

eight possible "General License Symbols" must be noted. The three most

commonly used symbols are:

G-Dest (General Destination): authorizes the export of any items not

requiring a validated license

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GLV (General License Limited Value): authorizes the export of a single

shipment of limited-value items

GTE (General License for Temporary Export): authorizes the export of

items for trade shows, training or temporary use abroad

Item 22, ECCN (Export Control Commodity Number)

Only necessary when a "validated" license is required, the ECCN is the

number assigned to your commodity from the Bureau of Export Administra-

tion's Commodity Control List. This special number must be supplied on the

SED.

Shipper's Export Declaration

SED forms can be obtained through international freight forwarders, the

Government Printing Office or local Customs district offices. The "Exact

Way to Fill Out the Shipper's Export Declaration" is available from the Bur-

eau of the Census, Washington, DC 20233.

Certificate of Origin (where applicable)

Although the commercial invoice may contain a statement of origin, some

countries (particularly those subject to certain free trade treaties, such as

Canada or the Caribbean Basin) require Certificates of Origin. Certificates of

Origin allow for preferential duty rates if the exporter's country has an agree-

ment with the importer's country to allow entry of certain products at lower

tariffs.

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Export Packing List

Considerably more detailed and informative than a standard domestic pack-

ing list, an export packing list itemizes the material in each individual pack-

age and indicates the type of package: box, crate, drum, carton, etc. It shows

the individual net, legal, tare and gross weights and measurements for each

package (in both U.S. and metric systems). Package markings should be

shown along with the shipper's and buyer's references. A copy of the pack-

ing list should be attached to the outside of a package in a waterproof envel-

ope marked "packing list enclosed." The list is used by the shipper or for-

warding agent to determine the total shipment weight and volume and

whether the correct cargo is being shipped. In addition, customs officials

(both U.S. and foreign) may use the list to check the cargo. The original

packing list should be forwarded along with your other original documents

in line with the conditions of sale.

Insurance Certificate

If the exporter is providing insurance, a certificate will be needed confirming

the type and amount of coverage for the goods being shipped. Normal accep-

ted practice for coverage is 110 percent of the CIF value. This certificate

should be made in negotiable form and must be endorsed before submitting

to the bank.

Inspection Certificate

Many foreign purchasers request that the seller certify that the goods being

shipped meet certain specifications. This certification is usually performed

by an independent inspection firm.

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Documents Used During the Inland Movement of the Goods

Shipper's Instructions

As an exporter, you are responsible for providing your freight forwarder

with the necessary information regarding your shipment. The more details

you provide, the greater the chances of your goods moving problem free.

Your freight forwarder can provide you with a commonly used form for not-

ing instructions.

Inland Bill of Lading

Inland bills of lading document the transportation of goods between inland

points and the port from where the export will emanate. Rail shipments use

"waybills on rail." "Pro-forma" bills of lading are used in trucking.

Delivery Instructions

This document is prepared by the freight forwarder giving instructions to the

trucking or Railroad Company where the goods for export are to be de-

livered.

Dock Receipts

This document transfers shipping obligations from the domestic to the inter-

national carrier as the shipment reaches the terminal.

Bill of Lading/Air Waybill

Bills of lading and air waybills provide evidence to title of the goods and set

forth the international carrier's responsibility to transport the goods to their

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named destination. There are two types of ocean bills of lading used to trans-

fer ownership:

Straight (non-negotiable): provides for delivery of goods to the person

named in the bill of lading. The bill must be marked "non-negotiable."

Shipper's Order (negotiable): provides for delivery of goods to the

person named in the bill of lading or anyone designated.

The shipper's order is used with draft or letter-of-credit shipments and en-

ables the bank involved in the export transaction to take title to the goods if

the buyer defaults. The bank does not release title to the goods to the buyer

until payment is received. The bank does not release funds to the exporter

until conditions of sale have been satisfied.

When using air freight, "air waybills" take the place of bills of lading. Air

waybills are only issued in non-negotiable form, therefore the exporter and

the bank lose title to the goods once the shipment commences. Most air way-

bills also contain a customs declaration form.

PACKAGING

Goods shipped for export require substantially greater handling than do-

mestic shipments. The exporter must pack the goods to ensure that the

weight and measurements are kept to a minimum, breakage is avoided, the

container is theft proof, and that the goods do not suffer the stresses of ocean

shipment, such as excess moisture.

In addition to proper packing, the exporter should be aware that certain

markings are necessary on goods transported internationally. Some countries

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require that the country of origin be marked on the outside of the container,

and even have regulations as to how the mark of origin should appear.

The second type of marking with which the exporter should be familiar is la-

belling. Food and drugs must often carry special labeling as determined by

the laws of the country of destination.

Third, certain "shipping marks" must appear on the outside of the package.

The weight and dimensions should be visible and any special instructions

should be shown, and you may want to repeat these instructions in the lan-

guage of the importer's country.

If your business is not equipped to package your goods for export, there are

export packaging companies which can perform this service for you. Ask

your international freight forwarder for a list of export packaging companies

in your area.

Many businesses, after achieving success in exporting, or as an alternative to

exporting, contemplate joint ventures or licensing agreements with foreign

companies to produce goods overseas. Some companies even set up their

own off-shore operations.

Channel of Distribution:

As our product is for Middle Class group means those who have average income of

$20000-30000 and so due to this our primary focus had been on hypermarkets in China to

give our product more popularity and to reach effectively and efficiently on the target

consumer. So we will go for Selective distribution channel.

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PROMOTIONAL MANAGEMENT AND ADVERTISING

1. ADVERTISING

BRAND NAME: “SOYAJI”

THEME OF THE PRODUCT: “Get Healthier Everyday”

SELECTION OF MEDIUM includes:

TELEVISION CHANNEL:

Our target market is likely to have TV sets and in relation of this we would

be selecting the national channel and all those channel which are dealing in

the local dialect or language.

SALES PROMOTION:

As we are going to Target “Middle Class” income group, so our sales

promotion scheme should be very standard and value-added.

With every above 250 Gm 1 utility air tight container would be given to

store our product and a recipe booklet also for making new dishes.

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CONCLUSION

Thus lastly I conclude that “China” is really very potential market for

“Soyaji” from the view point of:

The Economic Growth rate of China is very good market and showing

continuous growth rate and there is lots of Opportunity available for

the international company.

The population of China is world’s highest. This population shows

that there is enough people to accept our product in the market. So

from population point of view it is attractive market.

Soyaji is source of high protein with added value of corn and sesame

seeds making it more nutritious.

It is very handy hence can be taken to any place.

The percentage of Generation Y and X is more in Chinese population

which mean more working class so this product coul be proved more

beneficial.

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