Market Entry and Risk Management
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Introduction
The country of China has recorded the emergent global trading for the organization. The Dorchester Corporation will benefit in the entry of the market. The planned method that allows the delivery of services and goods will allow the formation of the Chinese economy. The exporting and importing services refer to the management and establishment of contracts for the foreign country. The companies are seen to operate in the niche markets for the expansion into the new markets, (Christopher, 2012). The Dorchester Corporation will benefit from the increased awareness of their brand in the market. This will increase the value of the organization brand in the market. The entry into the Chinese economy will ensure increased sales for the organization. The organization will benefit from the overall market stability in the event of different market risks in USA. The assessment of the economy for the state will offer a vivid illustration of the economic rise of the state, their rule of law and their market regulatory activities. This will help in the acknowledgement of the possible items that need to be considered in decision making.
Scope
This research will assess the economic state of China. The economic rise of the state, their rule of law and their market regulatory activities will be assessed with regard to the Dorchester Corporation’s practices. The discussion section will analyze the possible financing plans that can be used by the Dorchester Corporation. The analysis will offer the identification and preventive strategies for the risks.
Purpose
The research is aimed at providing the relevant information on the application and management of the Dorchester Corporation. The research will offer insights on the different ways that the management can diversify their risks in market entry.
Thesis
The Market entry to China requires numerous changes to the firm.
Literature review
- Economic assessment for China
The Chinese economy holds a population of 1.4 billion individuals. The GDP for the country was recorded at 12.4 trillion. The state has recorded the growth of the GDP to be 7.8%. The 9.3% rate for GDP was obtained through the compounding of the annual growth rate. The GDP was recorded to be 9162 dollars per capita. The rate of unemployment for the country is 4.1%. The inflation rate for the state was 2.7%. The foreign direct investment for China has been recorded to be 121.1 Billion, (Christopher, 2012). The following economic assessment will focus on the rise, rule of law and regulatory activities for the economy of China.
Economic Rise
In the late 1990, most of the state enterprises had sold their private ownership. The state offices operated as businesses. The government budget had changed from a slush fund to the modern tax system. The increased shift in the market led to increased urbanization. The education sector brought about the premium payments all jobs. The public education for the state of China became universal till the ninth grade. The infrastructure of the Dorchester Corporation ensured the crisscrossing of the highways and provision of the telecommunication to all the provinces in the state.
The China’s market has integrated into the international community with respect to Japan and South Korea. China has been able to embrace the world trade organizations and the foreign direct investments through the unprecedented contributions of the growth success. China has been able to engage the unfair commercial practices with the effort of influencing the exchange rate levels, subsidies, intellectual property protection and the accumulation of the foreign exchange reserves. The economic management for China has been recorded to be meeting the economic standards for the organization. The economy of China has experienced destabilizing fast to slow fluctuations for the growth surges that have originated from the market waves, (Christopher, 2012). The embrace of world trade organization and the support from Foreign Direct Investment have offered the opportunity to impact the growth success for the organization. The economic market has expanded exponentially with the provision of reforms. The reputable aspect of the economic market was the growth surge from the 2003 SARS received stimulus. The government investment promotion was seen o be unnecessary.
The consumer’s behavior has been expressed to change. The different consumers have been expressed to be seeking value in the different products that they purchase. The individuals are seen to spend a lot of time researching the products and observing the prices. The consumers are expressed to be the sophisticated earners, (Cogan, 2011). The consumer’s budget for their consumption. The increased western influence has allowed the realization of the appeal to purchase a lot of products. The consumers are loyal to their Brands. The entry into the market will require the management of the desired tasks with respect to the loyal brand enjoyment.
Rule of Law
The country of China is a communist party that maintains the tight control of the assembly, religion and speech. This has led to the unprecedented changes in the economic market. The political arenas have presented different reforms and bills to change the economy. The communist party for the state is led by the president. The different anti-corruption whistle blowers are exposed to the enjoyment of the little protection from the police or the internal disciplinary investigations, (Christopher, 2012). The forms of corruptions are seen to influence the finance, banking, construction and the government procurement severely. The Chinese state has a weak judicial system that is vulnerable to the corruption and political systems. All of the lands for the nation are state owned. This undermines fast response to market reforms. The environmental degradation and the aging society have been able to fuel the popular discontent individuals. China had liberalized the parts of the economy that had started in the late 1970 to 1990. The state has been able to achieve a good GDP for the integration into the world trading and financial systems, (Cogan, 2011). The size of the manufacturing sector and industrial sector allowed the rivalry between USA and China markets.
Regulatory activities
The top income tax rate is 45% while the corporate tax rate is 25 percent. The Dorchester Corporation will be required to search for strategies to evade the occurrence of Value added tax ad real estate taxes. The overall tax burden for the economy is 19% of the GDP. The Chinese government expenditure was accounting for 24 percent of the GDP. The gross domestic output was 23 percent of the whole amount. The new government has been able to respond to the slow economy with the temporal small business tax cuts and stimulus spending, (Cogan, 2011). The business freedom for the Dorchester Corporation will be curtailed. The regulatory department will require the management to take 13 procedures to launch their business. The completion of the licensing requirements will remain to offer the level of the annual income. The relatively rigid labor regulations are seen to hinder the employment growth. The State is bound to provide the electric and massive fuel subsidies. These subsidies are seen to be 160 billion dollars.
The Chinese economy has an average tariff rate of 4.1%. The prevalence of the state owned enterprises and government subsidies allow the distortion of the economy. The state is seen to continue to offer the tight controls for the financial system as the primary means that allow the management of the rest of the Chinese economy, (Terrence, 2011). The government is seen to own all of the large financial institutions. The institutions are required to lend according to the priorities and directives that favor the large state enterprises.
Risk mitigation plans
The understanding of China’s local market requires the identification of the key issues that the organization will be required to learn with regard to the risk management for the markets. The executives are seen to be consistent with their view of the critical nature of the organization in developing the deep understanding of the local markets to work closely with the local experts and partners. The economic risk can be managed through the following options, (Cogan, 2011). The Licensing, Greenfield projects, Franchising, Alliances, Wholly owned subsidiaries, Exporting and Turnkey project or Joint ventures are the different strategies for the mitigation of risk. The following are the most pressing issues affecting the entry into the Chinese Market.
- Corruption or Fraud Risk
The concept of corruption has been the emergent characteristics for the different markets that occur in the management. The emerging market participation wills items like the facilitation fees or inappropriate gratuities. The management will assure the retaining of the best business advantages for the different common practices. The management of the Dorchester Corporation will be required to assess the Foreign Corrupt Practices Act that is regulated through the US businesses. The Foreign Corrupt Practices Act will prohibit the quid pro quo payment to the foreign government officials through the US citizens for the global companies that operate in USA, (Christopher, 2012). The Foreign Corrupt Practices Act will offer the management the maintenance provision of accurate accounting controls, records and accurate books.
The Foreign Corrupt Practices Act and standards are required to establish the appropriate standards for the conducts through the global procedures and policies. The management’s policies require the implementation of the through education and training. The communication for the subsidiaries and the other departments within the organization are the other issues that should be applied in the classification of the organization. The management will mitigate this risk through the conducting of the fraud risk assessment for the different operations within the organization, (Cogan, 2011). The instituting of the anti-corruption will require the placement of the specific internal controls through the unannounced internal audits, segregation of duties, management rotation and use of data analytic procedures. The management will be required to reduce the risk through the establishment of protocols, (Yuan, 2012). These protocols will deal with remediation, disciplinary, investigations and escalations. These activities will ensure the control of the bribery and fraud risks.
- Business partners and Supplier risk
The different recalls that are placed on products are dependent on the on the facing of the competitive threats and making the areas least restrictive. The multitudes of the tired business arrangements and players can affect the effective quality providence by the Business partners and Suppliers. The supply chains and distribution networks are dependent on the Business partners and Suppliers, (Christopher, 2012). The emergent nature of the market assures the provision of the competitive threats. This leads to the formation of the Business partners and Supplier risk.
The Business partners and Supplier risk offers the contract non-compliance. The Business partners and Suppliers ca reject the terms that they could have pledged in dealing with the different tasks. The Business partners and Suppliers will force the assessment of the definite achievements in service delivery. The intellectual property theft is another risk. The provision of the product that looks alike to the products of Business partners or Suppliers will require the enforcement of the definite methods that will be applicable in the assessment of processes for the organization, (Richard and Ran, 2011). The Business partners and Suppliers could present the risk of counterfeiting and using gray marketing for the provision of high margins for the products. The risk can be managed through licensing and strict policy formations. The addressing of the risk will ensure that the organization’s revenue is not diluted or lost. The market share is diminished and the reputation is considered impaired. The management of the risk will assure the addressing of the shareholder’s value, brand, product and company’s reputations.
- Information Technology Risk
The Information Technology offers the provision of the assessment of the definite activities that manage the planning stages of the new initiatives and conclusion of the market entry. The careful considerations will allow the planning stages for the entry of the emerging markets to enhance the potential for the successful outcomes. A company can be at risk if they assume that the IT in the home markets will support the operations in the emerging markets, (Cogan, 2011). The Information Technology is manageable and available to the locals for the meeting of their needs. The corporate information systems include the accounting assessment for the for corporate information systems.
The management will be required to mitigate the Information Technology risk through the following approaches. The management will be required to determine the standards for locally managed IT and information access centers. The management will require the management to work with the local partners for the determination of how best they comply with the local standards, (Cogan, 2011). The management will focus on the analysis and fills with the gaps in the home-market IT function. The supporting of the operations for the emergence of the markets will require the making of investments in the local technology services and solutions. The management will be required limit the local access to the non-essential home market information and application of the stringent privacy or security practices to information that are made available for the organization. The incorporation of the internationally accepted third party reporting standards will offer the right to audit the clauses into the service agreements with the local providers and with the customaries for local markets.
- Tax risk
The tax issue is the most important and burdensome in the entry to Chinese Economy. The vital aspect occurs in the aspect of the key tax risk. The tax allows the vital provision for the key tax risks for the emergent market locations that are efficiently managed, assessed and understood. The management will be required to assess the fluctuations or stability of the Tax rate. The lack of assessment will lead to the loss of finances in the management, (Christopher, 2012). The management will be required to be fully informed decisions in investment. The corporate oversight and risk teams allow the determination of the tax minimization strategies. These are aligned to the organization’s overall strategy and desired risk profiling, (Terrence, 2011). The skilled resources in the location allow the staying abreast by the local tax developments that are offered for the major operational issues. The emergence of the markets allows the provision of the local tax positions that can be a big operational issue.
Discussion
Financing plan
The financing plan for the acquisition is as follows. The management can finance the operation in equity capital and debt financing.
Equity capital
The capital is raised by the offering of the stakeholders with the stocks from the organization. The sources of the equity capital are business angels, venture capitalists, act of crowd funding, stock market and the enterprise investment schemes, (Richard and Ran, 2011). The stocks provide the investors the ability to assess the management of the different tasks. The initial capital is required for the financing the introduction of the new facility. The business is provided with the finances through the public borrowing. The equity capital offers the opportunity to analyze the relevant assessment of the control of the organization.
Advantages
- No repayment requirements
The repayment for the management allows the assessment of the position for the assessment of the operations for the organization. The Dorchester Corporation will be able to offer the fast analysis and growth of the shareholder’s wealth through the overall finances that are provided by the management in the provision of the required finances. The repayment requirement will be subjected to the sharing of the dividends, (Yang, 2012). The finances will help in the provision of the advancement of the ideas that are provided in the analysis of the operations. The right business angels and venture capitalists offer the finances without the need to pull out of the investment.
- Delivery of value
The stakeholders offer the assessment for the execution of ideas, increasing profitability and the organizational growth. The purchase of the stocks will require the providence of the best assessment in the providence of the required finances for the organization. The stakeholders are offered the chance to offer their decisions in investment, (Kim, 2006). This helps in the creation of shared apparition and standards for the institute and the different individuals in the management. The equity capital ensures the public keep watch on the effective use of resources for the handling of the amount of power for making the management decisions.
- Follow-up Funding
The stakeholders are able to offer the management the follow-up funding for all the projects. The bank institutions are affected due to the lack of the possible assessment of operations for the organization, (Yang, 2012). The dividends that will be required from the equity will be deductible from the expenses. The economic double tax ability will require the dividend to be subject to the economic double taxation for the hand of the company to be distributing the dividends in the hands of the shareholders, (Christopher, 2012). The shareholders will feel obligated to provide the Dorchester Corporation with finances with the incident that they receive the stocks from the Dorchester Corporation. This exponentially will allow the provision of the required methods. The stakeholders offer the liberty for the organization to be refraining from servicing the bank loans. The loans from banks require interests that can be provided with the assurance of the follow-up funding.
Disadvantages
- Voting right
The equity capital allows the shareholders to obtain the voting rights. This leads to the dilution of control or power from the management. The management will be forced to operate at the mercies of the investors. The fear of losing the investors or shareholders will necessitate the provision of equitable methods, (Kim, 2006). The close monitoring of operations by the shareholders will affect the organizations operations and financial applications. The loss of the voting rights will lead to the shareholders tailored decisions for the purpose of assessment.
- Diverts organizational focus
The shareholders politics and decision deviates the organization’s movement in the presentation of certain ideas. The management will focus on the secure assessment of the shareholding with the use of the union funding, (Richard and Ran, 2011). The business will be forced to maximize the shareholder’s funding while the management’s intention could be the expansion of the operations for the organization. The cost to increase the shareholder’s value could outweigh the accrued benefits for the organization. This leads to the increased diversion of the overall operations of the organization.
- Increased publicity
The increased publicity for the management will affect the performance of duties for the organization. The management of the Dorchester Corporation will search for the possible ways for managing the business from the percentage of the absolute monetary terms. The increased focus on the social welfare of operations will lead to the realization of the definite approaches in reducing of the shares, (Yuan, 2012). The manager will be required to offer numerous information and meetings in order to supply investors with credible information for their funding.
Debt financing
The debt financing assures that the interest for the Dorchester Corporation is deductible. This interest is not subject to the double taxation. This makes it attractive to the management in the formation of the relevant operations, (Christopher, 2012). The repayment of the loan will refuse the attraction of the management from any taxes. The convertibility option allows the management to transfer the debt into the required stock. The debt capital requires less statutory procedures that are allowed for the increase of the debt.
Advantages
- Control of destiny
The debt financing assures the management the opportunity to offer an assessment and control of the desired tasks that will increase the management’s operations for quality service delivery. The control of destiny is offered for the management in regard to the facility, (Yang, 2012). The management can easily change their approach to the funds without questions from the shareholders. The management will be answerable to the bank and minimally to the shareholders. This provides great liberty for the control of operations for the organization.
- Profit Advantage
The statutory procedures that are presented for dividends allow the sharing of profits with the stock holders, (Yuan, 2012). The debt capital will assure that the management is able to benefit from the investments of decisions. The management will be able to enjoy the returns that they obtain from the organization, (Kim, 2006). The provided amount of profits will be able to be channeled to the expansion of the business without interference on the profitability and increase of the profits for the organization.
- Favorable loan terms
The management is able to negotiate terms of the operations with regard to relevance of the approaches in the organization. The management can easily negotiate the severity and the blow of the loan to the institute and the overall improvement of activities for the organization in the formulation of the desired resources, (Yuan, 2012). The management of the Dorchester Corporation can search for the ways that will allow the bank can buy the institution stocks while they obtain the required finances
- Investors Attractiveness
The different investors in the market will be pulled to invest in institutions that have confidence in their market and finances. The organizations that are going concerns assure the providence of the possible logic in the management of the different disasters, (Richard and Ran, 2011). This means that the scheduled reversal of the transaction will affect the ability of the private equity financing for the organization. This is with regard to the management of the resources of the Dorchester Corporation.
Disadvantages
- Large loan repayments
The loan repayments for the organization are considered to be of the highest amount as compared to the desired. The principal value that is provided by the bank is exaggerated or increased at the time of paying for the repayment, (Kim, 2006). The over commitment of the Dorchester Corporation to pay the loan may undermine their profit viability. The Dorchester Corporation will require the periodic interests for the paying back of the principal amount in the operations of the Dorchester Corporation.
- Credit ratings
The management of the bank will be required to assess the credit ratings for the Dorchester Corporation. This means that the management will be required to analyze the overall worthiness of the Dorchester Corporation to borrow the desired amount, (Terrence, 2011). The management will require a credit rating to increase in order for them to be offered the large amounts funding. The lack of good credit rating will affect the management’s ability to offer the required amount of finances to the construction of the facility.
Conclusion
The Market entry to China requires numerous changes to the firm. The best approach to financing the operations in the market will be the equity capital. The management will benefit from accountability, follow-up Funding, delivery of value and lack of abrupt repayment requirements. The debt financing would not be the best approach to financing the operations of a firm due to large loan repayments and credit rating requirements. The economic state of China indicated the following. The state has recorded the growth of the GDP to be 7.8%. The 9.3% rate for GDP was obtained through the compounding of the annual growth rate. The GDP was recorded to be 9162 dollars per capita. The rate of unemployment for the country is 4.1%. The inflation rate for the state was 2.7%. The foreign direct investment for China has been recorded to be 121.1 Billion. The economic rise of the China has been attributed to the embracing of the world trade organization and the support from Foreign Direct Investment. The rule of law maintains the tight control of the assembly, religion and speech. The regulatory activities of the state provided the overall tax burden of 19% of the GDP, (Kim, 2006). The Chinese government expenditure was accounting for 24 percent of the GDP. The gross domestic output was 23 percent of the whole amount of GDP. The management will be required to check on the aspects of corruption or Fraud Risk, Business partners and Supplier risk, Information Technology Risk and Tax risk. The mitigation of these risks will ensure the success of the operations in the organization.
Recommendation
The establishment of a risk culture and alignment of the organizational structure to risk will offer numerous benefits to the Dorchester Corporation. The Dorchester Corporation will be required to conduct numerous formal assessments of the different possible risks for the organization. The upgrading of the standards and techniques of communication will benefit the Dorchester Corporation in the providence of the numerous methods that can be used in the assessment of the operations for the Dorchester Corporation. The organization will be required to be documented for risk management strategy that allows the coverage of the ongoing management for risks in the emergent markets. The management will be required to understand the complexity of the risks and assure the stakeholders of their control of the market.
Reference
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Richard, C. and Ran, T. (2011). An ABC conduct to unfashionable Lending Patterns in China: Journal on Chinese Economy, 44, 5, 34-54
Terrence K. (2011): Business Achieves Strategic Market Entry in China. International journal on China Chemical Reporter, 22, 14, 256 – 287
Yang, L. (2012). China and the humankind Trading System: Journal on the World Economy, 35, 12, 1733-1771
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