Wilborn 1
Date: March 22, 2015
To: CEO
From: CFO
Subject: Beijing, China Expansion
At last week’s executive committee meeting, you informed us that our organization will be expanding our cosmetic portfolio into Beijing, China. Per your request, I’ve researched and analyzed the economic, political, business and current conditions which suggest the proposed expansion would be a very challenging, yet lucrative move for our organization.
The Economic Conditions
Beijing overall economic status indicates that every industry achieved a steady development or added value profit margin. The industry however does suffer from the lack of a diverse economic structure as well the absence of various size enterprises. Beijing recognizes a mega industrial system that prides itself as a multipurpose associated sub-system diverse in 406 of the 539 industrial trades legitimately open in its country. (ChinaVista1997)
Wilborn 2
The Political Business Insight in China
The signing of the “Banking Service Protocol of China-Pakistan Free Trade Area Service Trade Agreement” will share a vigorous role in inspiring and the joining of other planned cooperative partnership. All parties concurred that the relaxation of previous government service trade standards would strengthen banking industry as well as grant additional financing ease to enterprises in both countries. (MOFCOM2015)
Beijing Business Expansion Prospective
Research demonstrates that Beijing possess a strong financial economy that would enhance our cosmetic portfolio. The future of expanding our manufacturing division would greatly decrease production cost and increasing our profit margin. In many cases a cosmetic products are currently being research and developed at a per unit production rate between 6.5 to 10 yuan, which is equivalent to $1 to $1.60 in US currency. The more captivating factor is its resale value of 560 yuan, the equivalence to $89 US dollars, therefore producing an $87.40 to $88.00 profit margin per unit before expenses. (WantChinaTimes2015) Wilborn 3
All Eyes on China China is currently being perceived as the workshop capital of the world, an unstoppable industrial powerhouse. At the present time China is well known for captivating various jobs from the United States as well as a primary factor of its wage depression. China appears to be a victim of success from decades of nonstop growth causing it to become the world’s second largest economy. (Schuman and Jiang 2013) Shifting our efforts from our business aspect of our cosmetic portfolio to our employee relocation, it appears that at the present time China is experiencing a slump in its real estate market. For that reason, the cost of new homes in China has fallen by 4.3 percent. The city of Beijing decreased interest rates and the government has relaxed the purchasing regulatory standards, therefore
