E&Y - Global consumer products companies’ strategies in China

E&Y - Global consumer products companies’ strategies in China

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Unformatted text preview: Global consumer products companies’ strategies in China Global consumer products companies’ strategies in China Global consumer products companies’ strategies in China Contents • Overview • China’s economy: bouncing back quicker than others • Current retail and consumer market landscape – challenges and opportunities • Common strategies in a rapidly changing environment • Conclusion • Bibliography • Contacts 1 2 6 10 18 20 22 Global consumer products companies’ strategies in China Global consumer products companies’ strategies in China Overview 1 The global financial crisis has affected China’s economy, albeit to a lesser extent than many other developed and developing nations. The retail and consumer products sector is one of the more significantly affected industries as it depends heavily upon discretionary consumer spending. With falling sales and rising operational costs in developed markets, some global consumer products (CP) companies 1 are suffering from losses in their home markets. For many multinationals (MNCs), China is one of the targets for a strategic shift amid the global recession. With its vast market size, rapid economic growth and rising household income, China is viewed by many MNCs not only as a buffer against the global financial crisis, but also a platform to recover from the crisis. In fact, China has attracted massive interest from foreign investors in the last decade or two. Most leading global CP companies have already tapped the lucrative China market; and many international brands have made successful inroads into the lives of many Chinese people. Most of these companies understand that selling consumer goods in such a huge and diverse market requires a very different approach than the mass market practice common in other developed nations. We have identified eight major strategies commonly adopted by global CP companies in China: • Localization • Strengthening marketing and branding efforts • Strengthening cost control • Enhancing supply chain efficiency • Expanding into lower-tier cities and tapping the rural market • Actively pursuing M&A • Expanding e-commerce business • Transforming into wholly foreign-owned enterprises 1 For the purpose of this paper, global CP companies include both manufacturers and retailers of consumer products. Global consumer products companies’ strategies in China China’s economy: bouncing back quicker than others Global consumer products companies’ strategies in China Despite being the world’s fastest growing economy and having a somewhat insulated financial market, China too has been impacted by the global financial crisis. With its economy long driven by exports and investments, China posted economic growth of 6.1% in 1Q2009; the growth rate was 4.5 percentage points lower than 1Q2008 and 0.7 percentage point lower than 4Q2008. This quarterly growth rate was also the lowest in 10 years 2 ....
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E&Y - Global consumer products companies’ strategies in China

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