Can Agros Enter the Chinese Market - Essay Example

Research Proposal Table of Contents Table of Contents 2 Introduction 4 Literature review 5 Major Growth Factors for Consumer Market in China 6 Consumer Behaviour in Chinese Market 6 Model/Theories of Buying Behaviour 6 Research design 10 Research objectives 10 Research questions 11 Research method 11 Sample plan 12 Data Collection and Analysis 13 Primary Data Collection 13 Secondary Data Collection 14 Limitations and expected contributions 15 Time Scale 15 Reference 17 Bibliography 20 Appendices 21 Introduction Among the Asian countries, China is one of the most favourite destinations for foreign investments. This is primarily because China has a voluminous and lucrative market. Not only is the Chinese economy growing at a stupendous rate but it has also proved itself immune to the fluctuations of the Western world. The booming retail industry of China has become a preferred choice of many foreign retailers like Wal-Mart, Metro, M&S and Carrefour. The success of Wal-Mart in the China attests the presence of a strong retail market in China. Such phenomenal accomplishment can be attributed to the increase in the purchasing power of the Chinese people due to the corresponding increase in their disposable income. The research paper will attempt to investigate the attitude of the Chinese customers towards Argos business model. Argos, owned by Home Retail Group, is a major retailer group in UK offering consumer durable and fast moving consumer goods. It has a unique recognition in UK as a multi-channel retailer and serves its customers with 700 retail stores in UK and Ireland. 26% of its total retail sales come from online and home delivery services. It has developed a unique style whereby it receives orders online and through telephone and delivers them at the customers’ home. Around 18 million of UK households are using products under Argos’ catalogue (Argos, 2010). The research will aim to find out whether Argos business model is compatible in the Chinese retail industry. A research will be conducted for this purpose. A brief literature review will be discussed in the very beginning to analyse the present situation of the Chinese retail market. This will be followed by a comprehensive analysis of the objective and requirements of this research paper. The section allotted to research design will discuss on the research methodology and will select the most suited one. The collected data will then be analysed to generate the findings of this research. The concluding section will not only deal with the inferences arrived at but also the limitations that have restricted the findings. Literature review The literature review is a very important section as it helps to develop a theoretical framework for the research topic. This part also prepares the base of the research topic by identifying supporting studies related to Chinese retail market and consumer behaviour. Political and social development of China was accompanied with economic growth. It is primarily seen as the fruit of industrialization that reduced poverty and increased the income level of population. At present, China is the fourth largest growing economy in the world (CIA-World Fact Book, 2010). The strong economic condition of China indicates a promising future for its retail market as the foreign investors are anxious to invest in this developing economy. Among major industries, retail is one of the fastest growing sectors. According to a report of ‘Chinese Business Review’, Chinese retail industry offers many promising opportunities to the foreign investors (Lu, 2010). Indian and Chinese markets have the topped the list in the potential global retail market. China has overshadowed India to emerge more powerful. Apart from the growing economy, there are many other factors that have led to the development of the Chinese retail industry. Recent market conditions, consumer trends to name a few. Identification of such salient factors requires a thorough study and understanding of the market. Major Growth Factors for Consumer Market in China The primary reason behind the developing consumer market is its booming retail sector, the latter often seen as the bye product of the growing economy. This coupled with the increase in disposable income of Chinese people have augmented manifold the retail sales of Chinese consumer goods. Industrial development in China has led to the rise of middle class households who have now become the major buyer group. These middle class people have stable income and are therefore more brand-conscious. The lifestyles of the Chinese people have changed significantly in the recent years due to the increase in urbanisation and development of infrastructure. Their changing lifestyles have influenced their buying behaviour. Consumer Behaviour in Chinese Market Several changes have been noticed in the consumer behaviour in recent years. Apart from basic goods like foods, clothing etc, Chinese people have increased their expenditure on discretionary items by advancing the consumer structures. Their focus has now shifted to luxurious items like cars, electronic devices, jewellery etc. Moreover, they have become more quality sensitive. Expensive-quality products are in vogue since an excess of disposable income have accumulated in the customer’s pocket. Chinese consumers have become more health conscious and are now focusing on branded products as they believe branded companies offer genuine products. Model/Theories of Buying Behaviour Literature review part is incomplete without the buying process theories and models related to the buying behaviour. Many scholars have developed models that help to predict the consumers’ psychology towards a product with the aid of a set of processes. “Buying behaviour is the decision processes and acts of people involved in buying and using products” (University of Delaware, n.d.). The process of buying behaviour can be explained by various models that include certain factors like loyalty, sociology and psychology (Patel & Schlijper, n.d.). Smith and Taylor show a simple model of buying behaviour. Figure 1 displays the model. Figure 1: Model for Buying Behaviour (Source: Smith and Taylor, 2004, p.97) Along with them, Yau and You have analysed the loyalty and consumer satisfaction of Chinese buyers. They have used a matrix model for analysing the consumer behaviour in China. Figure 2 shows the above mentioned model which is an important tool for analysing consumer behaviour in research. Figure 2: Loyalty in different situations satisfaction and attitude (Source: Yau & You, 1994, p.14) Evans, Jamal and Foxall have introduced many other alternative theories to understand the different attitudes of the consumers. However, the main focus is restricted on two related theories i.e. “The Theory of Reasoned Action” and “The Theory of Planned Behaviour” (Evans, Jamal and Foxall, 2007 p72-73). The most important and popular model for analysing consumer buying behaviour is called ‘the black-box model’. It includes all the relevant factors and stimuli affecting the consumer behaviour. Figure 3 portrays the model that figures out the details of consumer behaviour. Figure 3: Black-Box Model (Source: Sandhusen, 2000, p.218) Elaboration Likelihood Model (ELM) is an important model that helps to figure out the ways of convincing consumers. This model was developed by Petty and Cacioppo (1986) and it aims to understand the psychology of people. This model can be used by Argos to recognise the particular buying behaviours of Chinese consumers. The theory of this model suggests that there are two ways of convicting people and these are central route and peripheral route (Bartels & Nelissen, 2002, p.172). These two routes help to change the attitudes of consumer relating to the image of particular product or brand name. Argos will aim to enter the Chinese retail market and in this respect, it will be relevant to mention the market entry theory for the Chinese retail market. According to market entry theory, the transaction cost is one of the major factors that determine market entry. To ensure successful entry in the Chinese retail marker, Argos has to invest a significant amount of capital. The transaction cost for foreign investment is always higher (Klug, 2006, p.24). Another important factor is the market structure of the Chinese retail industry. The Chinese retail market is a perfectly competitive market where many large and small scale retailers are present along with a huge number of consumers. Other factors influencing market entry are the stake of Argos and Chinese Government, the risk level of the investments, availability of the required resources, the restrictions of the Chinese Government, the level of competition faced while making investments in the Chinese retail market etc. These are some of the vital factors that will help to understand market entry barrier for Argos in China (Taylor, Zou & Osland, 1999). The competitor analysis of the Chinese retail market will help Argos to understand the level of competition. The Chinese retail sector is already populated with many domestic and international retail companies. The competitor analyse will disclose the latest trend followed by the competitors. Their product line, pricing and service strategy will help Argos to understand the market conditions and opportunities. The primary objective of competitor analysis is to identify the major and potential competitors (Bergen & Peteraf, 2002). Argos may face distribution issues in its business operations in China. The availability of local supplier and franchises are the two important factors that lead to distribution issues. The distribution channel of Argos in UK is the ‘USP’ (unique selling point) and in China it will aim to develop such distribution channels. An analysis of the distribution issues of Argos in China will figure out the level of effective operation. Research design Research objectives The primary objective of this paper is to analyse the Chinese consumers’ attitude towards Argos business model. The research will also focus on several factors affecting the consumer behaviour and the retail market structure of China. Research questions The questions of this research paper are meant to analyse the behaviour of the Chinese consumers. The main objective of the research paper will be to deal with the business model of Argos. Therefore, the research question is “will Chinese retail consumers’ attitudes help Argos to enter the Chinese retail market?” The topic of the research paper will be to investigate the attitude of Chinese consumers towards the business model of Argo. To analyse the same, qualitative research will be executed. Qualitative research approach will help to identify the buying behaviours, taste and preferences of the Chinese consumer. The business model of Argos is quite unique as it provides home delivery to its customers who place their orders online or through telephone after selecting the required products from the catalogue. The qualitative research will help to recognise the consumers’ attitude towards this kind of services. Besides, secondary research will also be needed for analysing the quantitative data required for understanding the Chinese retail market structure. Research method The research method, for collecting the qualitative data, will require a survey through ‘focus group interviews’. In order to collect the qualitative primary data, a relevant questionnaire has been prepared which has been included in the appendices. The questionnaire will include qualitative questions related to the behavioural aspects of Chinese consumers in respect to Argo business model. The questionnaire will help to gather miscellaneous data from the Chinese consumers. In focus group interview, the consumers will be asked about their opinion, beliefs, perception and attitude towards the Argos service delivery styles, with the help of qualitative questionnaire. For secondary research, various statistical information of the government will be obtained through various authentic websites. The result of the past research will reveal the quantitative data which will help to disclose useful information on the research. Sample plan The sample plan will deal with the characteristics and the number of respondents. The respondents selected belong to the group of Chinese retail consumers as they alone can provide the relevant answers to the research topic. A proper sampling plan specifically meant for this research will be helpful to minimize and to choose the valid respondents. The respondents will include the middle class population who are the largest buyers group in China. Currently, the middle class people in China are enjoying high disposable income and they are contributing significantly to the total retail sales. This group of respondents will thus serve as the best source for collecting relevant data. The sample size should be enough for proper analysis so that the data collected hold a generalised perspective. The sample size must include at least 30 respondents to figure out the most valid results. The survey will be conducted in the major retail markets of China where many customers are available. They will be interviewed with the help of a questionnaire. The place of survey will include retail store, super market and unorganised retail location. Data Collection and Analysis Primary Data Collection The qualitative research, as has been mentioned in the research design section, will focus on collecting the relevant data which will facilitate Argos to enter the Chinese retail market by identifying consumers’ attitude towards its business model. The required data will be collected through the questions that will aim to understand the nature of Chinese retail consumers. The questions will be prepared after taking into account the business model of Argos and Consumers’ buying behaviour. The most important data that will be required for the research is the demographic information on Chinese retail consumers. According to the literature review, disposable incomes, age and their occupations are major factors that influence their consumer behaviour. The data gathered from the questionnaire will disclose such information. It will also help Argos to segment its target market. Other necessary data will include consumers’ tastes and preference for retail services and the extent to which they are satisfied with it. The questions will focus on services such as home delivery, online shopping etc, as the primary business model of Argos includes multi channel sales strategy through online shopping and telephones. The data will include the frequency of shopping shown by the Chinese consumers either by directly visiting stores or through online or by placing orders through telephone. The data on brand consciousness of Chinese consumers’ will be obtained as it is very important for Argo to know the manner in which Chinese consumers will react against a foreign established brand. Some of the questions will be aim to understand the brand loyalty level of the consumers which will help Argo to estimate its expected market share for sustaining itself in the Chinese market. Secondary Data Collection Apart from the primary research, secondary data will also be collected. The secondary research will reveal quantitative data that will help to analyse the market by figuring out the structure of the Chinese retail market. The qualitative data will focus on age structure of Chinese buyers and their frequency of buying. It will also focus on their manner of expenditure on different products. “According to a survey by Credit Suisse, credit card ownership is most popular among the younger generation who generally is less conservative about money” (Li & Fung, 2007). There has been a rise in the internet usage in Chinese society which has led to the increase in online shopping. Chinese people feel more comfortable with online shopping and they try to avoid visiting stores. eBay and Taobao are the famous online shopping sites in China. Chinese retail market is now experiencing the impact of the emerging consumer group comprising of the young generation. The age group of Chinese retail consumers is another important factor influencing the retail market structure and trend. The young generation is the potential consumers in the Chinese retail industry. With the increase in disposable income, the Chinese parents are now buying more products for their babies and the demand for products like toys; baby care items and clothing etc are continuously increasing. The Chinese teenage groups are the emerging consumers and they are more attracted to luxurious, fashionable and sophisticated products. Therefore, it will be important for Argos to understand the buying behaviour of this emerging consumer group. Limitations and expected contributions The necessary findings will be obtained after analysing the data collected through the questionnaire. However, this research process by virtue of its nature, posses certain limitations and constrains that reduces the validity of its findings. The limitations of this kind of research works generally include data constrains and controversial views of selected respondents. These limitations question the authenticity of the collected data. Time is another major limitation of this research. The finding of the research is dependent on the time in which it has been conducted as because consumers’ opinions change according to the uncertainties in market. Hence, in this case, the finding of this research may restrict its aims and objectives. However, this research will help to understand not only the behaviour of consumers in the Chinese retail market but also the major factors that affect it. Time Scale The time scale of this research will include the time schedule of different activities like writing literature reviews, drafting questionnaire, collecting data through interviews, analysing the data, discussing the findings and completing the research. The research design of this research paper will include all these activities that have to be completed within a specific time period. Therefore, proper scheduling of these activities is necessary in order to meet the deadline. The following table presents the time scale for this research paper. Tasks Starting Time Finishing Time Total Days Writing Research Proposal August 10, 2010 August 20, 2010 10 Literature Review August 25, 2010 September 10, 2010 15 Drafting Questionnaire September 15, 2010 September 25, 2010 10 Field Interviewing October 01, 2010 October 31, 2010 30 Analysing Data November 05, 2010 November 20, 2010 15 Discussing Findings November 21, 2010 November 30, 2010 10 Writing Report December 05, 2010 December 15, 2010 10 Finishing the Report December 16, 2010 December 20, 2010 10 The above table portrays the tentative time-table for all the tasks that have to be done in this research project. The final research will start from late August 2010 and will be finished by December 2010. This schedule must be followed strictly so that the deadline can be met within the limited time frame. Reference Argos. 2010. About us. [Online]. Available at: http://www.argos.co.uk/static/StaticDisplay/includeName/AboutArgos.htm#about. [Accessed on August 09, 2010]. Bartels, G. & Nelissen, W. 2002. Marketing for sustainability: towards transactional policy-making. IOS Press. Bergen, M. and Peteraf, M.A. 2002. Competitor Identification and Competitor Analysis: A Broad-Based Managerial Approach. [Pdf]. Available at: http://www.csom.umn.edu/Assets/71542.pdf. [Accessed on September 06, 2010]. CIA-World Fact Book. 2010. China. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. [Accessed on August 09, 2010]. Evans, Jamal and Foxall. 2007. Consumer behaviour. Wiley-India. Li & Fung. November 2007. China Distribution & Trading. [Pdf]. Available at: http://www.idsgroup.com/profile/pdf/distributing/issue48.pdf. [Accessed on August 09, 2010]. Lu, S. 2010. Understanding Chinas Retail Market. [Online]. Available at: http://www.chinabusinessreview.com/public/1005/lu.html. [Accessed on August 09, 2010]. Klug, M. 2006. Market Entry Strategies in Eastern Europe in the Context of the European Union: An Empirical Research into German Firms Entering the Polish Market. Springer. Patel, S. and Schlijper, A. No date. Models of Consumer Behaviour. [Pdf]. Available at: http://www.maths-in-industry.org/miis/38/1/Consumers.pdf. [Accessed on August 16, 2010]. Sandhusen, R.L. 2000. Marketing. 3rd Edition. Barrons Educational Series. Smith, P.R. and Taylor, J. 2004. Marketing communications: an integrated approach. 4th Edition. Kogan Page Publishers. Taylor, C.R., Zou, S. and. Osland, G.E. 1999. Foreign market entry strategies of Japanese MNCs. [Pdf]. Available at: http://www95.homepage.villanova.edu/raymond.taylor/taylorzou.pdf. [Accessed on September 06, 2010]. University of Delaware. No date. Chapter 6 Class Notes. [Online]. Available at: http://www.udel.edu/alex/chapt6.html. [Accessed on August 16, 2010]. Yau, O.H. and You, H. 1994. Consumer behaviour in China: customer satisfaction and cultural values. Taylor & Francis. Bibliography Georges, W. and McGee, R. W. 1987. Analytical contribution accounting: the interface of cost accounting and pricing policy. Greenwood Publishing Group. Kurtz, D. L., MacKenzie, H. F. and Snow, K. 2009. Contemporary Marketing. 2nd Edition. Cengage Learning. Wilke, W. 1999. Knowledge Management for Intelligent Sales Support in Electronic Commerce. IOS Press. Appendices Questionnaire for the research 1. Age 13yrs to 19yrs 20 yrs to 30yrs 31yrs to 40yrs 41yrs to 50yrs 51yrs to 60yrs 61yrs + 2. Gender Male Female 3. Employment Status Employee Businessman Pensioner Student 4. Income Group (Annually) More than $4500 $4500 to $3000 Less than $3000 5. How many times do you visit retail store for buying daily necessary products? Daily Once in a week Twice in a week Twice in a month 6. Does your retailer provide home delivery services? Yes No 7. Will you shift to a new retailer if it provides you home delivery services? Yes No 8. Do you use credit cards for shopping? Yes No 9. Do you buy products online? Yes No 10. Which products do you buy online? Fast moving consumer goods Consumer durable Luxury items All products 11. What are the factors that you consider while buying the consumer goods? Brand Price Quality Convenience 12. Will you exceed your shopping budget if discounts are available? Yes No 13. Do you always buy products from a particular branded retailer? Yes No 14. Do you shop from different retailers on the basis of favourable pricing? Yes No Read More