Business Kea Fashion Ltd Term Paper

Pages: 10 (3128 words)  ·  Bibliography Sources: ≈ 6  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

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[. . .] Given the importance that the Chinese place on group philosophy, this may even be seen as an insult, both by the group and by the worker himself. He sees his work as only a little bit of the collective force and praising him alone would mean neglecting the importance of the group.

Another thing we need to consider when setting up a production facility in China refers to social responsibility issues. In economic theory, this includes environmental issues, but given the fact that the clothing and garment industry is a less polluting type of industry, it doesn't seem suitable to approach them here. In terms of social responsibility, safety in the work place seems the most important. However, we should consider whether the production facilities will import the technology and means of production used in New Zealand. It seems obvious to do so, because through the higher technology used, one can also save on the total cost of production. If this is the case here, then it is most probable that the company has been using high safety devices in New Zealand and one does not have to worry about safety in the workplace. As for the quality of life, another social issue, I have already mentioned offering a higher than average salary to the workers. Additionally, it is most probable that the conditions at work will surpass many of those already existing in China. In my opinion, in terms of social responsibility issues, the company doesn't have to worry, because of one simple reason: the level of these issues in China is much lower than those in New Zealand, which means that exporting these to China will create the right premises for a good social environment.

However, there is one more thing to consider here: the political situation in China. We are all familiar with the fact that China is still a Communist country and this can have serious consequences in the production facility. The workers will be probably forming an union and, even more important, this union will have the support of the local authorities. This can prove a serious challenge and needs to be treated as such. I am not quite sure how to deal with this challenge, but probably the best solution would be to have trusted locals in high positions within the syndicate.

Finally, in what the production facility is concerned, one last thing needs to be addressed: administrative issues. China in this sense is certainly far more different than New Zealand. For once, it takes longer to open such a facility in China because of the numerous approvals and papers one needs to get in order. I have to refer here again to the local Communist government, which placed its man in almost any position available and they need to approve every step of the way. Second of all, in every province and every small town there is a Communist Party responsible and they should be treated with every single respect there position imposes. Third of all, the Chinese culture has a certain way of looking at gifts and gift offerings, in the sense that almost nothing can be done without them. In the Chinese culture, this is not actually seen as bribery and it is not treated as such. It is however a custom to offer a gift when you want to get something done. We should keep in mind that, if we want everything to run on smoothly, gifts are appropriate in different situations.

I have discussed almost every issues in terms of a production facility, making sure I have discussed both the opportunities (large labor force market, low wages, high qualification) and the challenges in this case (social responsibility issues, administrative issues, the presence of the Communist Party at all levels, etc.). It is now time to address the sales opportunity.

The first opportunity I see in selling to China is the size of the Chinese market. As I have mentioned several times before, we need to take into consideration the 1.2 billion people market and regard the possibilities associated with this size. However, as we mention this opportunity, a serious challenge comes to mind: we have seen the level of Chinese wages and we can ask ourselves where the size of the market should be associated with the actual possibilities of that market (noting also that the clothing and garments produced by Kea Fashions are not the cheapest).

In my opinion, the company can commercialize the garments made in China (at significantly lower costs) on the local market. In this way, the profit margins will remain high, but, at the same time, the company will have a significant segment of local customers.

One of the most important issues to be discussed here refers to the potential and existing competitors on the local market. Kea Fashion needs to discover the appropriate marketing means to ensure that some of these will give up their long time garment suppliers and start buying from Kea. This is hard to do, given the fact that the Chinese are quite conservative and such changes in their preferences are hard to come by. However, one important niche that can be used is the young population, adolescent and teens, that is the group age from 18 to 35, for example. In the last years, following the country's increasing openness to the outside world, this category of consumers have become rather cosmopolite and they would represent a category of customers that are more likely to be open to a foreign product and brand. So, in my opinion, the sales strategy for Kea in China should aim at two things. First of all, entering a niche on the market, niche that will be mainly formed from young people, in the 18 to 35 age segment. Second of all, promoting and selling garments at a price level accessible to the local Chinese population.

Several of the things I have discussed when referring to the production facility apply here as well. One of the most important is the administrative issue. As I have said, the Chinese culture is radically different from the Western culture and this needs to be properly considered. Kea should expect, for example, that the formalities for opening a shop should take more than accustomed to in New Zealand. Additionally, local connections are more than useful, because they will be able to know where one needs to apply and how much one needs to "contribute," either to the particular administrative official or to the general system of administration.

Considering all of the above, I would suggest that part of the managerial team should be formed of local Chinese people, preferably those who have studied in the West and who are familiar with the Western standards and methods. The advantages here are two fold. First of all, it is much easier to work with someone who is familiar with the Western ways. Second of all, it is more than useful to have local personnel in some positions, because, as we have seen, they are better prepared to face the local challenges. Overall, a top manager should be from New Zealand, but lower management should have a Chinese predominance, people who will be best suited to link top management with the workers.

Conclusions and Recommendations

My analysis has revolved around two issues. First of all, I have discussed and analyzed the possible reasons that Kea has decided to expand internationally. As we have seen, the first reason regards the local production costs. From the charts and data provided in the appendices, we have seen that the workers are no longer producing at an efficient costs and that the labor wages have caused a negative correlation between the average labor cost and the company's turnover. This made us believe that production needed to be relocated elsewhere, preferably in a country where the wage level is much lower than that in New Zealand. A developing country came to mind and China seemed the best choice because of the very large population and low wages.

Second of all, we have investigated the opportunities and challenges that selling on the Chinese market involves. As we have seen, the potential target market is very large and provides certain premises for selling there. However, the company needs to find the suitable niches for its products and needs to adjust its prices so that they will be available to the Chinese population.

As such, I am able now to resume some of the recommendations I have made throughout my analysis. First of all, it is advisable that some of the management will be of Chinese origin. I have recommended here young and enthusiastic Chinese who have studied abroad and who will have, on one side, the advantages of a Western education (including here a high level of English) and, on the… [end of preview; READ MORE]

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Business Kea Fashion Ltd.  (2004, June 7).  Retrieved January 23, 2020, from https://www.essaytown.com/subjects/paper/business-kea-fashion-ltd/8416023

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