Transcript File - Carolus Wood Daniel III

MARKET
ANALYSIS OF
CHINA FOR
PHILLIP MORRIS
INTERNATIONAL
CAROLUS DANIEL
ECONOMICS 3145.01
NOVEMBER 29TH 2012
CHINA’S HISTORY
5000 BC: First Clear Written Records
1700-1901: Dynasty Era (Feudal State)
 (1842) Britain Occupied China After the Opium War.
1911: Republic of China is Established (Nationalist)
 (1931-1945) Japan Occupied China
1949: Communist Victory, People’s Republic of China Begins
1979: Diplomatic Relations with U.S. Reinstated
1986: Opens Country to Foreign Investment
1992: IMF ranks China’s Economy as 3rd Largest
2001: Joins World Trade Organization
2011: Overtakes Japan as 2nd Largest Economy
2012: Xi Jinping Takes Over as Party Chief
(BBC News Asia-Pacific, 2012)
CHINA’S DEMOGRAPHICS
• Population (2012) 1,344,130,000
• Age Structure:
• (0-14) 126,634,384 Male/108,463,142 Female 17.6%
• (15-64) 505,326,577 Male/477,953,883 Female 73.6%
• (65 +) 56,823,028 Male/61,517,001 Female 8.9%
• Median Age: 35.5 Years
• Population Growth rate: .481%
• Life Expectancy: 74.84 Years
• Religions: Atheist, Daoism, Buddhist, Christian, Muslim
• Language: Mandarin and Cantonese (Various Dialects)
http://indexmundi.com/china/demographiccs_profile.html
NATURAL RESOURCES
• Coal
• Iron ore
• Petroleum
• Natural Gas
• Mercury, Tin, Tungsten, Antimony,
Manganese, Molybdenum, Vanadium,
Magnetite, Aluminum, Lead, Zinc
• Rare earth elements (Uranium)
• Hydropower potential (World's largest)
http://www.economywatch.com/world_economy/china/structure-of-economy.html
PROVINCES OF CHINA
22 Classified Provinces
CULTURAL DIVERSITY
CHINA POPULATION DENSITY
GEOPOLITICS IN CHINA
Surrounded by Mountains, Jungles and other
Geographic Boundaries.
More Enclosed than any Other Major Country
Export Oriented Economy
Regionalism and the Weakening of the Central
Government
Economic Threats to the China
Coastal Regions have a Stronger Economy
More Influence from Western Nations
Problems in Manchuria and Pacific Regions (Taiwan
& Hong Kong)
Chen, M. (2001), Chinese Business: A Guide for Managers & InvestorInsight.com (2012)
CHINA’S ECONOMY
Market Oriented
Economy
Private Enterprise
State Owned
Companies
Hybrids
Growth (2010) = 10%
GDP > 11.3 Trillion (2011)
 2nd Largest Economy
 25.6% of Global Output
by 2020
http://economywatch.com
CHINA AND U.S. GDP
CHINA’S ROLE IN GLOBAL BUSINESS
• Imports: $1.664 Trillion (2011)
• Exports: $1.897 Trillion (2011)
• Foreign Direct Investment: > 100 Billion (2012)
CIA World Fact book/ www.theodora.com
www.tradingeconomics.com/china/
GUAN XI
China’s Culture is Based its Philosophies and Religions.
Chinese Business Culture is Built around Relationships.
Chinese are Reluctant to Engage in Business with People
they do not know.
Guan Xi is a Network of Relationships Among Parties That
Cooperate and Support One Another.
The Inevitable Risks and Barriers Encountered in China
Will Be Minimized When You Have the Right “Guanxi”.
Strong Relationships Will Allow a Company to Be Trusted
and Even Favored.
Chen, M. (2001)
POLITICAL AND RISK FACTORS
Political
I.
One Party Government
 Chinese Communist Party
II. Limited Democracy
 8 Non- Communist Parties
III. State Owned Companies
IV. Regulations that Benefit
Domestic Companies
 Protectism
V. Manipulation of Yuan
VI. Size of Population
(U.S. Commercial Service,2012)
Risk
I. Counterfeit Products
II. Intellectual Property
Rights
III. Industrial Property Rights
IV. Copyrights
V. Product Liability
VI. Vague Business Laws
VII.Flexible Law Enforcement
CHINA’S TOBACCO CONSUMPTION
OPPORTUNITIES FOR PHILLIP MORRIS
I.
40% of Cigarettes are Sold in Chin (350 Million Smokers)
II. Cigarette Consumption is Actually Increasing
III. Cigarettes Projected Sales (2.75 Trillion by 2015)
IV. Three Main Competitors
A. China National Tobacco Company (CNTC)
1. State Owned
B. British American Tobacco (BAT)
C. Japan Tobacco (JT)
V. Market is opening to Foreign Tobacco Companies
A. Safer Cigarettes (Chinese Brands Contain 3 Times the Amount of Heavy Metals)
B. Production Through Joint Venture with CNTC gives access to
Political System and Additional Business Partners
html:file://D:\china info\Transnational Tobacco Companies(TTCs) in China- Joergens
OPPORTUNITIES FOR PHILLIP MORRIS
 General Foods and Kraft Allows PMI to offer a Additional Products
Other than Cigarettes to China.
 Offers China Access to the 180 Countries PMI Exports to.
 PMI Acquired a License to Manufacture and Distribute a Tobacco Based
Pandemic and Seasonal Influenza Vaccine In China. (2012)
 PMI provides over $30 million annually to support charitable causes
around the world. (2011)
 In 2011 PMI supported 274 charitable projects across 58 countries.
 In total more than 3.5 million people were impacted globally by PMI’s
charitable giving.
 meals and medical assistance to nearly 1.1 million people.
 educational programs for approx. 200,000 students and teachers.
 support to more than 200,000 people with disabilities
 22 million trees planted and support provided to over 700,000
people through forestry and rural living programs;
 clean water and sanitation provided to more than 300,000 people.
 new homes, shelters, and community centers provided for more
than 850,000 people
www.pmi.com
CONCLUSION
China is a Desirable Market for PMI
 Market is developing Rapidly
 Questions Arise about Stability, Property Rights, Intellectual
Rights.
Joint Ventures
 Helps Navigate China’s Complicated Business and Legal
Systems.
 Also Helps PMI Brands Identify with Chinese Consumer.
 Additional Companies (Medicago (Flu Vaccine), General Foods,
and Kraft)
 Offers Incentives for China to Work Effectively with PMI
 Establish Good Will and Guanxi.
PMI’s History of Charitable Giving Could Help to Improve
the Conditions in the Low Income Regions of China.