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Kikkerland China

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Christophe de Vizcaya

on 15 March 2013

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Transcript of Kikkerland China

Kikkerland in China Different options The unknown Identifying the market Choosing a location Government policies and regulations Human resources Challenges Why China? The most populous country in the world Tremendous growth rates: About 10% for the last 10 years Favorable to Foreign investment A market of 1.3 billion people A growing middle class:
-About 350 Million people in 2012 (more than US population)
>With an income between 10,000 and 60,000 USD/year
-It will account for 45% of the population in 2020 Annual FDI Flows to China: 1985-2011and estimate for 2012 in $ billion Challenges >Forecasts for the years to come are around 6-8% >China's GDP will account for 20% of the world output in 2020
GDP of 8.23 trillion US dollars (the US GDP is of 15.6 trillion US dollars A growth of about 20 % in the 5 most developed regions of China. (Shanghai, Beijing, Hong-kong, Canton, Shenzen) Extremely low labor costs (compared to US, EU) Benefits from SEZ (special economic zones: Pudong, Shenzhen)
>Corporate tax of 15%.
>A benefit of "2 + 3 years" which means an exemption from tax for the first two years and tax at the rate of 12.5% for the next three years. China is in the WTO since 2001 WOFE: Wholly owned foreign enterprise CJV: Contractual joint venture EJV: Equity joint venture A developed transportation system The 2nd most powerful country in the world A Promising Market 160 cities in China with a population over one million. The most populated city in China with 23 million inhabitants An international city with an influence in commerce, culture, finance, media, fashion, technology, and transport A major Financial hub and the busiest container port in the world A GDP of US $297 billion with GDP per capita of 82,560 yuan (US $12,784), the highest in China The three largest industries are financial services, retail and real estate An international city: About 210,000 foreign citizens 44,000 Taiwanese 29,000 Japanese 22,000 Korean 8 million foreign tourists in 2011 Many western established companies: Fashion, Finance, retail, food The largest consumer market in China
>the trend-setters for the rest of the chinese consumers Shanghai: Tier 1 city (231 million domestic tourists) 23,600 Americans A huge market that is not homogenous Differences in GDP, growth rates and habits
between East and West >Identify the geographical location of the target and market(s) and the best specific location to target first. Developed Tier 1 cities OR Developing Tier 2 cities Shanghai, Beijing, Guangzhou Shenzen, Nanjing, Suzhou Hiring quality staff The "guanxi" The language barrier Entry mode WOFE FICE: Foreign-invested commercial company a Limited liability company wholly owned and operated by the foreign investor(s) offers sole control of the company advantages Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;

Able to issue invoices to customers in RMB and receive revenues in RMB;

Capability of converting RMB profits to US dollars for remittance to its parent company outside of China;

Protection of intellectual know-how and technology;

Full control of human resources

Greater efficiency in operations, management and future development. needs a clear business scope to be validated by the MOFCOM Disadvantage initial set up costs are high Long incubation period no acces to JV partner resources High costs related to land, facility construction,
human resources foreign investors receive all profits and bear all risks FICE (Foreign-Invested Commercial Enterprise) A Specialized structure for Trading, Wholesale, Retail or Franchise in China Similar to WFOE but with an import/export license Can distribute imported and locally manufactured products Joint venture EJV: Equity joint venture CJV: contractual joint venture At least two investors, one chinese, one foreign Profits, losses, risks are shared among investors according to the capital invested The foreign investment must represent at least 25% of the registered capital Is considered independent legal person registered in china with limited liability under the PRC law A business entity jointly created by a Chinese enterprise and a foreign enterprise Profits, losses and risks are shared among investors according to the CJV contract terms Advantages Disadvantages Opportunity to use existing sales network and customer base Access to partner's existing resources Production facilities Lower cost base (local management) China Population: 1.3 billion GDP: $8.23 trillion (2nd after US) Middle class of 350 million people >With an income between 10,000 and 60,000 USD/year USA Hong Kong Population: 7.1 million GDP: $ 363.7 billion GDP per capita: $31,757 GDP per capita: $31,220 Distributor: Duhub international (since 2010)
Sales in 2012: $97,90
($53,700 in 2011) Population: 314 million GDP: $15 trillion Distributor: Kikkerland
Revenues: TBA Japan GDP: $ 5.87 trillion Population: 128 million Distributor: Collect co. (since 1998) Sales in 2012: $498,335
($385,201 in 2011) Distributor: Art it is (since 1999) Sales in 2012: $43,377
($55,831 in 2011) INC. BV HK WOFE South Korea Population: 49 million GDP: $1.12 trillion Distributor: Baobab Design (Since 2010) Sales in 2012: $68,020 ($118,254 in 2011) Wholly owned foreign enterprise Joint venture Less managerial controls Hard to find a trustworthy person Challenging to agree terms of the partnership Potential risk to IPR Success may depend of the staff on-the-ground to control activities Objectives: Opening a store
Developing the activity Lack of transparency Corruption: tea money, bribes Vagueness in the laws Favoritism to local business Trademark protection Tier 2 cities Investment flow from the government >Construction of roads and airports, as well as improvements to railroads and city utilities Consumption driving demand - not investment lower labor cost and land cost "The Chinese love shopping, they love brands, and they love international products, even though the average income is low. New shoppers are born every day. We won't run out of them." McKinsey consultant firm: Never opened a store Poor knowledge of the Chinese market Maybe, but not for now. Franchising? A consumption driven economy for the years to come Finding a partner? Examples of themes Chinese dragon Ying yang items Chopsticks Pandas Chinese lanterns Great wall Chinese opera masks Environment related items: Solar... Gold fish (sign of wealth in China) 12 chinese zodiac animals >will account of 43% of GDP in 2020 Cigarettes related items Duhub, a potential partner? Two exemples: Shenzen and Nanjing Nanjing Shenzhen Population: 8 million GDP: $115 billion GDP per capita: $14,300 Average income: $7000 (yearly) Ranked fourth in the “Top 100 best commercial cities in Mainland China” by Forbes, 2008 Population: 11 million GDP: $178 billion GDP per capita: $17,100 Part of the SEZ: "2 + 3 years" which means an exemption from tax for the first two years and tax at the rate of 12.5% for the next three years. Average income: $7510 (yearly) Referred as the “Shopping mall of hong kong” Neighbor city of Shanghai Neighbor city of Hong Kong Shanghai Nanjing Shenzhen Highly educated population, one of the most recognized city for its schools The actual chinese consumers Self-expression is becoming more important, needs products that brings something more, that makes them special (Guanxi; face) They trust big brands but will also try niche brands that market to them directly Chinese consumers are more knowledgeable and renowned for being pragmatic >The benefits that a product can bring to them Rapid urbanization The one child policy (Confucian values) Average yearly income: $9500 3 golden rules when marketing in China -Products need to project the status and generate Face
>guanxi, a social currency -Products have to yield dividends: must be promoted as a means to an end. -Products need to Reassure: quality control, customer service Maximize public consumption ex: Pepsi: "Get on the can" VIP cards Kikkerland: makes you look cool and makes your life easier The concept of Guanxi Successful market transactions are relying more heavily on business relationships Interconnection web of relationships Businesses are hard to express without a guanxi they need a bond, a relationship The Chinese believe that success depends more on your guanxi and less on personal effort. Existence in society is defined by relationships with others >Trust, commitment and reliability A completely different culture Competition >A market that changes very fast Branding Social media E-commerce HUGE BUCKS A Western company: young, innovative and fun company
Family owned
Experience, more than 20 years
Environmental friendly
Close to its customers Home made products, in-house designers
>Adapt some products to the Chinese culture
>Better quality products Famous designers: Milton friedman Emphasize on green products, like Duhub Fun and innovative products that make your life easier China is the most social media connected country in the world Weibo ("Chinese" twitter), 368 million users Renren ("Chinese" facebook),160 million users QQ.com (chat with online shopping, gaming...), 300 million users one of the most visited website in china Qzone (social media networking), 388 million users, used mainly in tier 2 and tier 3 cities. >Digital jungle, social media marketing co. >O-MKT Shanghai Online retail generated in 2011, $121 billion in sales, up 66% from 2010.

The size of China's ecommerce market is expected to more than triple over the next three years, with sales reaching $420 billion by 2015.

That's 20% more than what the U.S.'s e-commerce market is forecast to bring in that year.

China has an estimated 193 million online shoppers, more than any other country. By 2015, those consumers will be spending $1,000 per year online B to B > Ali baba
B to C > Tao bao mall The concept of Face “The respect, pride, and dignity of an individual as a consequence of his/her social achievement and the practice of it”

“An individual’s external public appearance” Face can be used for entering into a particular channel (it goes along with the guanxi) they can seek help from a third party and use its connections >Used to develop business networks
>Used to build long-term relationships Face relies heavily on a person's social rank and status Very important not to make someone lose face in public Status of leader Confronting a Problem Expressing Anger Relationships Perception of self A Kikkerland Chinese website? "not about who you are but who you know" Benefits are not internalized they should be externalized What is the message we want to convey?
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