With Reference To Your Own Research And The Item Above, To What Extent Do You Think That Targeting Emerging Markets Such As China Is The Best Way For Businesses To Achieve Profit Growth?

1422 words - 6 pages

– With reference to your own research and the item above, to what extent do you think that targeting emerging markets such as China is the best way for businesses to achieve profit growth?

An emerging market is a market which is experiencing rapid growth and becoming highly profitable which becomes open to many businesses to enter. Achieving profit in China can be achieved through many ways by increasing revenue through changing the way the business operates or to operate as a joint venture. By doing this businesses that operate in China are able to benefit from their profit growth by becoming more well-known. There are exceptions however where business have become successful in achieving ...view middle of the document...

Growth in more sales will mean that customers will recommend or revisit the business meaning that the emerging market will allow for more sales and therefore more profit growth. Another example of a food and drink business that used the same approach of KFC is Starbucks. By adding spices and Chinese flavour to a drink of a wide tea drinking nation, they were able to readapt locally and meet the customer needs. As a result the revenues of the business rose by 12% from 2012-2013 which in total was a hefty $3 billion. Growth in sales, just like KFC, allowed Starbucks to take advantage of the economics of scales therefore lower unit cost. This is an advantage in China because unit costs are low and so food businesses can produce more for less. What is it important to remember however is that more sales will mean that the business will incur more costs and so setting prices which will overcome the costs will allow businesses to achieve profit growth.
Targeting emerging markets in China has also shown to be a good opportunity for achieving profit growth for businesses such as Jaguar. With its help from a joint venture Chery Automobile, a Chinese automobile company, the firm was able to “mark an investment of £1.1 billion” in China. This investment has shown that emerging markets in China offer a potential for businesses such as the automobile industry because as well as opening a new manufacturing plant in Shanghai, Jaguar plan to sell up to 100,000 cars in “China this year”. The evidence here shows that by teaming up with a Chinese firm that is established, the firm was able to “relevant, advanced models for Chinese customers”. This is important in the profit growth because China grew by 71% to nearly 72,000 vehicles in 2012 which has shown that there is a vast and huge customer spending. This provides potential in an emerging market for profit because as China is developing into becoming a highly affluent country more Chinese people who are employed are able to spend in a ‘booming economy’. This suggests that maybe in the future more customers spending will lead to an even stronger economy than China is today. This could offer even more advantages for a profit growth in an emerging market because car manufactures such as Jaguar could benefit from a better importing price which will minimize costs as a result and gain more profit as a result of having better export costs. Therefore this shows that setting up manufacturing in China can be a good method of achieving profit growth but there are also environmental factors to take on board because operating in a high polluted environment, especially Shanghai (which was reported to have such a high polluted environment that if you was to breathe its air for 24 hours it would be the equivalent to 20 cigarettes) can cause profit loss because the Chinese government, by law, will take a percent of your earnings based on your C02 consumption. Being a car firm such as Jaguar will require a lot of production...

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