costa develop in china Essay example

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Question: COSTA is an internationally famous coffee shop brand. What factors does COSTA need to take into consideration before opening branches in China?

COSTA founded in 1971 has become one of the world’s most valuable brands. It is specialized in coffee retail. It is stated by COSTA Company Profile that Costa have 1069 stores in the United Kingdom in 2010, COSTA become the largest chain store of United Kingdom. COSTA not only develops in UK, but also tries to plan global expansion. China is the first step of development of Asian for COSTA. Thus, COSTA develops in Japan and Korea. This essay studies the expansion of COSTA, to discover the factors it need to consider before opening branches in China.

The macro-level political and social environment is realized as one of the important components. In China's recent history, the country is still a communist country. It was ruled by Chairman Mao in an very centralized national method. However, the market-oriented reform was introduced by Deng Xiaoping who led China’s economy developed. Followed by Deng’s leadership, Jiang Zemin further opened China’s market to the rest of the world and led China grew to the second largest economy in the world only followed United States in 2006 (Harrison, 2008).Harrison further stated that compared with the same period in the previous year, the foreign investment increased 22.6% to US$39.59 billion in 2006. It is reported by President Jiang in the 16th Chinese Communist Party Conference, held in 2002, that the Chinese market will be manipulated only by distributing resources in order to create a better business environment for all the enterprises especially MNEs(Multinational Enterprise) (Jiang 2006). The intervention MNEs would be reduced by the new policy in order to attract the foreign investment into China. Although China is dominated by the monopolistic political power, it can be solved by dealing with the government and according to the laws in China. So policies are good for COSTA development in China.

Openness of the economy is another issue should be considered which relates to the welcome of FDI (Foreign Direct Investment) by China and its openness to the foreign ideas. According the growth and size of Chinese market, it is considered as one of the most significant market in the world. Chinese government have made numerous polices and have taken actions to attract FDI. It is reported by (TMCHN, 2008) the Chinese State Council approved the Experimental Measure for Commercial Enterprises with Foreign Investment in June 2004. The policy is carried out to deepen the opening-up policy, promote the revolution and development of commercial enterprises, propel the building of domestic market and ensure the healthy and orderly implementation of foreign investment. The joint venture operational range was extended to all capital cities, autonomous regions and cities with independent planning. (Harrison, 2005) stated that the FDI in China went up 14.7% from January to September in 2009. Furthermore, China has obtained a rapid economic development after the entrance into WTO (World Trade Organization) in 2001. To some extent that the same rules are applies in Chinese market and the function of Chinese government is restricted by the guidelines of WTO. The tariffs for foreign investors are lowered by WTO in China. After joined the WTO, Chinese government promised that the region of retail and distribution would be open to foreign investors within three years (TMCHN 2008).Since then, the wholly foreign-owned commercial enterprises are allowed in China which enables MNEs more independence. With the clearance of policy, MNEs from all over the world speed up their expansion in China. In addition, the living standards is continue to improve in China and western-style coffee has been accepted by an increasing number of people. It is further stated by (Qin, 2004) that the teenagers’ purchasing power is much stronger than before
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