Doing Cafe Business in China

8/12/2019 Doing Cafe Business in China

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competitors as McDonalds, Starbucks, KFC, and Korean food restaurants around, the caf will draw

everybodys attention because it will not only have a colorful sign and attractive interior design, but also

because it will conduct advertising campaigns in the Universities, and will offer discounts and bonuses.

Prices for the drinks and dishes will be based on cost of production and on prices of similar products of

competitors.

Since the cuisine is mostly western, there will be no need in local personnel. The only requirement will

be that staff contacting with guests could speak Chinese and English. The proximity to the university will

be again beneficial because the students will become a source of potential employees.

Coffee house XXX will have many attractive features, and hopefully it will become one of the most

visited places in this district of Beijing and will expand its activities in other districts and towns.

III. Identification and Analysis of Country Variables

Physical and demographic profiles

Geography

The countrys full name the Peoples Republic of China is used for constitutional and political

purposes. China is third largest country in the world with the land area of about 9.6 million sq. km.

Though the territory is rather broad, China has only one time zone: GMT+8 hours. This is very

convenient for doing business in China.

The territory of China contains a big variety of landscapes: from sea shores and grasslands in the East

and South to valleys and mountain ranges in the West and North. China borders with 14 countries such

as Afghanistan, Bhutan, India, Kazakhstan, Kyrgyzstan, Laos, Mongolia, Myanmar, Nepal, North Korea,

Pakistan, Russia, Tajikistan, and Vietnam. Since many young people from these countries come to China

to study, they can become potential customers of XXX cafe.

There are about 160 cities in China with the population exceeding one million citizens. However,

according to the China-profile web site the biggest cities are Shanghai, Beijing, Chongqing, Shenzhen,

and Guangzhou. It will be very important to keep this in mind if XXX has intention to expand to othercities.

The climate in China is diverse because the territory of the country is rather huge and because of

complex topography. According to China Travel Most parts of China are located in temperate zones.

Areas in the south lie in tropical and sub-tropical zones, while those in the north are close to cold

temperate zones. For the XXX climate can be very crucial since the temperature directly affects

peoples decision whether to visit a caf or not. If the weather is hot it is unlikely that somebody comes


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to caf to eat or drink coffee; however, they may come to drink soda or just to spend time in the cool

room.

Resources

The land of China is used for many different purposes: from manufacturing to agricultural. There are

not so many plains and croplands; however, many crops are raised in China including wheat, corn, and

soy. Chinese also grow rice, peanuts, tea, sugarcane, and citrus plants which is very important for the

caf because these products can be used on the menu and there will be no need to buy imported more

expensive items.

Almost 19% of the territory of China is covered with forests. Moreover, China has huge reserves of

timber - about 12.5 million cubic meters. China is also one of the countries with the richest amount of

mineral resources such as tin, zinc, iron, silver, gold, etc. It also has relatively big amount of different

energy resources including coal, gas, and oil. However, gas and oil resources are rather scarce andpoorly explored yet. On the territory of China there are several rivers and other water reservoirs,

existence of which creates beneficial conditions of hydro energy usage and development.

When opening a caf in China it is important to consider energy resources, because caf consumes

much electricity. The cost of electricity per kilowatt an hour is very high, though Chinese hydro

generation is considered to be the best in the world680 million kilowatt.

Population

China is the most populated country in the world. According to the GeoHive web site the population of

China is 1,345,750,973 people, including 698,405,850 of male population and 647,345,123 of female.

The population is not growing as fast as it grew before, because of Chinese strict family planning policy

prohibiting having more than one child in a family. This, however, decreases young population and

increases the number of old and very old people in the country. According to China Tells Chinas young

population (20-29 year old) will reach its peak by 2015. Since 2015 the size of such population will

continue to go down year by year.

For the Coffee house XXX the young population matters much, since it represents its target audience.

It is alarming that the growth rate of young people will become negative in near future. Luckily, China is

a land of many international students who can make up a deficiency of local young people.

Language

In every province of China different Chinese language dialects are spoken. Standard Mandarin

(Standard Spoken Chinese), however, is a business language and official modern Chinese spoken


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language used in mainland China. One interesting fact pointed out by Abrahamsen and Chan is that

Although English is largely considered the most practical language for business and commerce, Chinese

remains the most widely used language in the world - spoken by one-fifth of the world's population

(para. 4). Since China is developing fast, there arise predictions that in the future Chinese may become

the international language of business. Thats why many young people around the globe are studying

Chinese and go to China to improve their language skills.

For the XXX language plays an important role since the communications in the caf will be mostly in

Chinese. The cafe staff will be of different origin, but everybody will speak Chinese and, if possible,

English.

Education

Education is China is the preliminary sphere of concern of many Chinese parents. They invest big

portions of their household incomes in educations of their children. The government also pays muchattention to this area of Chinese development. According to the Jetcost web site In March 2007, China

announced the decision of making education a national "strategic priority" and *of allocating+ extra

funding from the central government in the next 5 years to improve the compulsory education in rural

areas. Another source The China Perspective provided the following information. In 2004, students

represented 17.5% of the total population. Out of every 10,000 people 103 students attended college or

university, 776secondary school, 870primary school. Though the students population decreased

compared to previous years, the amount of people obtaining education increased and keeps increasing.

Since the cafe XXX is surrounded by several universities, the fact that more and more people are

attending universities is favorable and beneficial. The more students will be in the universities, the morevisitors will XXX have.

Workforce characteristics

As estimated by the Nation Master the total workforce of China is 776,047,400 people. Out of which,

according to the National Bureau of Statistics of China, The migrant workers *comprise+ 225.42 million

persons. The unemployment rate in China is 4%, which means that about 31,041,896 Chinese people

are unemployed.

The labor force statistics by occupation is the following: agriculture - 43%, industry - 25%, and services

- 32%. Many industries are of high importance for China today. Such industries are cotton textile,

footwear, toys, consumer electronics, mining and ore processing, iron, coal, machinery, petroleum,

chemicals, fertilizers, automobiles and transportation equipment, telecommunications equipment, and

satellites; however, the agriculture anyway occupies most of Chinese labor force.


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The XXX will not represent much interest for Chinese people concerning vacancies, since it will need

only 5 employees. For the caf it will also be not a problem to find staff, because it will provide sufficient

wages and working conditions.

Cultural / social, political, legal, ethical, and economic profiles

Cultural / social profile

China is a very old country which has a great long history, and, therefore, many cultural peculiarities.

As the World Visit Guide web site stated Today, the PRC government has accepted much of traditional

Chinese culture as an integral part of Chinese society, lauding it as an important achievement of the

Chinese civilization and emphasizing it as vital to a Chinese national identity. The traces of Chinese

culture are extremely visible in Chinese art, literature, music, movies, fashion, and architecture. Many

tourists come all over the world to admire great centuries-old history and unique culture of China, thus

providing constant flow of customers to the XXX.

Another important cultural issue is Chinese religion. Most Chinese are nonreligious people; however,

for others Confucianism and Taoism play significant role. Buddhism is also practiced, but by minor

portion of the population. Concerning the social stratification, China values and cares about old people

very much. For young people, the elder generation is very respected and honored. Family is an

important cluster in the society. Chinese people have big families and understand the concept of family

as horizontally extended. In addition, big emphasis is placed on ascribed group memberships, which

makes the Chinese society closed. The social variable doesnt influence the XXX significantly.

Political profile

Today, China has rater stable political situation. China is a communist state where the collectivism

doctrine prevails over the individualism. The government in China is described as authoritarian and

socialist and it controls such areas as the Internet and press. According to the World Visit Guide web site

The country is ruled under the Constitution of the People's Republic of China. Its incumbent Paramount

Leader is President Hu Jintao and premier is Wen Jiabao. Though there are several political parties, the

country is mainly ruled by the Communist Party of China.

For the XXX the political stability matters much. In case of wars, strikes, terrorism or other political

issues, the caf business can suffer much, because of decreased inflow of foreigners into the country.

Legal profile


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It important to say that Chinese legal system rests on the rule of man, which means that one

authorized person can make decisions without concern for laws and policies. That is why Danels,

Radebaugh, and Sullivan (13th ed.) stated thats Still, China faces challenges, including legislative gaps,

hazy interpretation, lax enforcement, and philosophical disagreements (p.90). The same authors also

provided information about the following things. When starting a business in China a company or

entrepreneur must complete 14 procedures including registering, choosing appropriate tax system,

getting license, securing insurance and other. All these legal procedures will take about 40 days to

complete. Further, China has the most flexibility in hiring and firing plus the greatest discretion in setting

employment conditions (work hours, minimum wages, and benefits). What is also important to consider

is the taxation system. There are 14 kinds of taxes currently applicable to foreign businesses (Value

Added Tax, Consumption Tax, Business Tax, Income Tax, etc.). Closing business in China takes long and is

rater expensive. Despite the last fact, China is ranked third in the top ten countries concerning the ease

of doing business.

It is very convenient that all legal procedures of setting up a business in China are not complicated and

take little time. Of course, the caf will need appropriate license and permissions to operate legally, butthat will not be difficult and will not take long time. The taxes, however, are rather diverse and this may

require patience to learn and understand them all.

Ethic Profile

When considering ethics in China, the most crucial issue is the issue of corruption. China has a high

tendency toward briberies; so many authorities are very corrupt. In the article of Schulman, Stephan

Rothlin, general secretary of the Center for International Business Ethics in Beijing, points out that The

Chinese are very open to considering ethical issues. They want to be global players, and they realize thatin order to become a real global power, they have to eliminate corrupt practices. However, the life

shows that corruption is still there and adjustments still needed.

Though briberies are illegal and must be avoided, it is hard for businesses to operate in corrupt foreign

countries without paying bribes. So, XXX will try to behave ethically and not to pay bribes. However, it

there will be no other chance, the briberies will be inevitable.

Economic profile

There is no need to prove that China is the most developing country of today and it has the largest

economy after the United States in terms of GNI. In his interview to Forbes, President of China Hu has

said that China has ample labor resources, large demand in its domestic market, a high savings rate,

and social and political stability. All these have been favorable conditions for the relatively high

economic growth in China. China adopted free market reforms and generated great economic success.

It has been one of the fastest-growing economies over the past 30 years. It records growth in


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Economic Cooperation (APEC) and others. According to the article Chinas Foreign Affairs and

International Relations China has maintained mutually beneficial relations in various fields and at

different levels with major countries in the world. China has friendly relationships with the U.S., good

trading partnership with the EU, and close international affairs with Russia.

All in all, Chinas good relationships with Russia will positively affect the XXX and its Russian owner.

IV. Conclusion

To sum up, it would be fair to say, that the Peoples Republic of China is a good place for a Russian

citizen to start a business, because it has favourable economic conditions and political stability. The caf

XXX will benefit from doing business in China, if its owner takes into account the issues described in the

paper. So, before starting a business there it would be wise to get acquainted with the local rules and

regulations, learn Chinese language, and try to understand Chinas culture and business world

peculiarities.

Bibliography

Abrahamsen, E. and Chan, J. (2004, September 3). The legacy and future of the Chinese language. China

daily. Retrieved from http://www.chinadaily.com.cn/english/doc/2004-09/03/content_371457.htm

China balance of trade. (2010, September 13) Trading Economics. Retrieved from

http://www.tradingeconomics.com/Economics/Balance-Of-Trade.aspx?Symbol=CNY

Chinas foreign affairs and international relations. (2008, August 25). Embassy of the peoples Republic

of China in the Republic of Albania. Retrieved from http://al.china-embassy.org/eng/zggk/t514667.htm

China's Hu says political stability helps maintain high economic growth. (2005, October 10). Retrieved

from http://www.forbes.com/feeds/afx/2005/10/15/afx2278991.html

China inflation rate. (2010, September 13) Trading Economics. Retrieved from

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=CNY

China perspective. Retrieved from

http://www.thechinaperspective.com/resources/demographics/chinaeducationstatistics.html

China profile. Retrieved from http://www.china-profile.com/data/fig_urban_3.htm

China travel. Retrieved from http://www.chinatravel.com/facts/general-china/china-climate.htm

China tells. Retrieved from http://blog.chinatells.com/2010/01/3977


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Danels, J.D, Radebaugh, L.H. & Sullivan, D.P. International business: environments and operations (13th

ed.). Pearson Education, Inc.

GeoHive. Retrieved from http://www.xist.org/

Jetcost. Retrieved from http://www.jetcost.co.uk/travel/trip-to-China.html

Multilateral Investment Guarantee Agency World Bank group. Retrieved from

http://www.fdi.net/documents/WorldBank/databases/pri-center_mockup/special_fdinet.html

The Nation Master. Retrieved from http://www.nationmaster.com/country/ch-china/lab-labor

Schulman, M. (March, 2006) Business ethics in China. Santa Clara University. Retrieved from

http://www.scu.edu/ethics/publications/ethicalperspectives/business-china.html

Statistical Communiqu on Labor and Social Security Development in 2008. (2009, April 22). National

Bureau of Statistics of China. Retrieved from

http://www.stats.gov.cn/was40/gjtjj_en_detail.jsp?searchword=employment&channelid=9528&record

=17

World Visit Guide. Retrieved from http://worldvisitguide.com/zone/Z0007772.html

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Doing Cafe Business in China