According to Porter (2004), factor conditions are factors of production such as labour, land, natural resource, capital and infrastructure. Moreover, a disadvantage might be an advantage. Local disadvantages in factors of production force to innovate to over come their problems. This innovation often results in a national comparative advantage. The big number of population in China provides retailers with a huge and cheap labour power.
Furthermore, according to Day (1996), many foreign investors had experienced difficulties in sourcing products in China such as basic raw materials and components due to the poor and unsteady quality, late deliveries and shortage of quantity with local suppliers in the past. However, following with foreign investment and government’s capital, suppliers are getting more competitive. China becomes the most popular outsourcing provider. 2. 2Demand conditions A sophisticated domestic market is an important element to generate competitiveness.
When the local firms face a sophisticated market, they need to keep improving their product because the saturated market demands high quality products. In the last 20 years, China’s consumer were lacking in the knowledge of products because the low education and the sequel of the Cultural Revolution. Nevertheless, China’s economics is growing and consumers are also getting more sophisticated and demanding (Kwan, Yeung and Au, 2003). As a result, the high demanding market pushes retailers to innovate.
Furthermore, because of the cheap labour, more and more outsourcing firms come to China to cut down their cost. Come along with the high demand, China rises their technique level and provides more skillful labour to attractive foreign firms. 2. 3Related and supporting industries Porter (2004) argues that a set of strong related and supporting industries is important to the competitiveness of firms. When local supporting industries are competitive, firms will gain more cost effective and innovative inputs.
Compared with other countries, the fabric industry is very competitive in price because China is the largest cotton producing cotton. In terms of the apparel retailers, they could gain advantage form their competitive suppliers and become more competitive. 2. 4Firm strategy, Structure, and Rivalry More local rivals is an advantage since competitive rivals spurs firms to innovate and improve. Local competitors forces firms to surpass basic advantage which the home country may enjoy (Quick MBA, 2005). In the case of retailers in China, the competition is very intense.
In the past, price is the main point. However, since more and more firms join the war, price becomes less important. Retails are forced to innovate and improve such as new products or better customer service to enhance their capacity. 2. 5Government’s Role As Quick MBA indicates (2005), the role of government in Porter’s model is to encourage firms to raise their performance, stir early demand for advanced products and stimulate local competition by limiting direct cooperation and enforcing antitrust regulations.
In short, government should play a supervisal and managing role. China government adopts a serious policy to enlarge the advantage of retailing environment. According to Euromonitor (2004), China government will issue series of policies to enhance the scale of using foreign capital in business field and allow foreign retailing corporations to enlarge their scope of purchasing activities in China. 3Conclusion The internationalisation process of a firm is very complicated and needs to be considered carefully.
As mentioned above, all aspect of marketing environments will have an impact on the firm’s marketing institutions, operating conditions, entry strategies and marketing mix-4P. Zara, a fast-fashion apparel retailer, has been successful for last few years. However, as other retailers, they are facing a serious problem which the markets of developed countries are getting saturated. Thus, they do have to find out potential markets to maintain their business. China, one of the biggest countries in the world, is getting rid of the sequel of the Great Cultural Revolution.
Come along with the open door policy in 1978, the economics are growing year by year. Along with the growth of economics, the macro and micro environment have also changed. After joining the WTO, China is regarded as the biggest emerging market on the earth. This paper is a presumption of Zara entry into China market. It is recommended that joint venture is the most suitable entry mode for Zara into China. If Zara can conduct the correct marketing strategy and adopt competitive advantages in China, it could not only make impressive sales but also build a truly global Zara kingdom.