The products ranges of perfumes and cosmetics are aimed at the medium to higher earning bracket of males and females. The executive management has been following world trends of local companies entering emerging markets, and the above average returns some of these companies have shown in a relatively short time has spur them to look at the possibility of going global with Madam Cosmetic's. After a lot of collaboration it was decided to evaluate the opportunity and risks of investing in China.
This instigating factors for this decision was the market-reforms that was implemented in China which resulted in the largest reduction of poverty and one of the fastest increases in income levels ever seen. China toady is the sixth-largest and fastest growing economy in the world. In 2004, its $1,65 trillion economy was about one-seventh that of the U.S. China's rapidly expanding economy and 1,3 billion population for business, and most global companies, are either already involved in the Chinese market or have plans to do so soon (Julian Chen. 2005).
China is currently one of the fastest growing economies in the world, driven by excessive government spending and a huge influx of money through the investment of Major International Companies. It is advocated as the country which presents a golden opportunity for businesses to expand and increase their profits. To proof this fact we need to look at the Macroeconomic indicators.
According to the Asian Development Bank, China has grown at an average rate of 7.6% over the last five years. This growth was mostly in the private sector and has forced market fundamentals to change to address gaps and inefficiencies of state-owned enterprises. China's low vulnerability to external shock has helped it to maintain macroeconomic stability despite structural distortions, both at the output and input levels and at the financial and enterprise levels.
Contributory factors include the large internal market, large foreign exchange reserves, and low dependence on high technology, use of expansionary fiscal and monetary policy, and high consumer and investor confidence as reflected in Table 1 below (ABD, 2006).
Table 1: Selected Macroeconomic Indicators 1
Macroeconomic indicators are influenced by a range of different factors and although the indicators could give a positive picture for investment, these factors needs to be carefully analyzed to give a true reflection of the macroeconomic environment. This includes political, financial, socio-cultural and technological factors. The best way to effectively analyse the Factors influencing the Macroeconomic environment is to use the PEST Analyzes method.
PEST Microenvironment Analyzes of China
The PEST Analyzes Tool is a business measurement tool that can be modified and used to analyze very complex environments, such as the macroeconomic environment of China. Each section of the tool is used to review external situations to help measure a market's potential and suitability of access to help an organization decide on a position, strategy or direction.
Subject of PEST analysis: Review of Macroeconomic Factors in