Name: Duo Ding/Ella
In the recent past, Foreign Direct Investment in Asian countries from Europe has been on an incline. With the rise of global competitiveness, it has become essential for companies to extend their market reach for higher profitability and long-term survival. This report seeks to examine the market conditions for the establishment of a wine distribution unit in India and China by an Australian company. In the analysis of these two markets, a market research has been conducted and the business environment evaluated. In this, market research entails a study on the size and potential growth of the Indian and Chinese wine markets as well as the existing and potential competitors in the two markets. The business environment and risks entailed looks at the political factors and government policies which shape the wine markets in the two countries. Location, infrastructure and logistics have also been examined. More to this, technology and labour as well as financial and economic growth in the markets have been evaluated. A study on the possible FDIs a wine firm can form in the Indian and Chinese markets has been conducted. Based on the overall study, conclusion has been drawn and recommendations of the most suitable market for the establishment of wine FDI made.
Table of Contents
Executive Summary 2
1.0 Introduction 4
2.0 Market Research 4
2.1 Size and Potential Growth 4
2.2 Current and Potential Competitors 6
3.0 Business Environment and Risks 7
3.1 Political Factors and Government Policies 7
3.2 Location, Infrastructure and Logistics 8
3.3 Technology and Labour 9
3.4 Financial and Economic Growth 10
3.5 Favourable FDI 12
4.0 Conclusion 13
5.0 Advice and Recommendations 14
1.0 Introduction As observed by Quazi and Tandon (2011), various benefits like filling investment gaps and closing the tax revenue gaps have been associated with Foreign Direct Investment (FDI) in different countries. China and India are two major countries which have been a target for FDI. The ability to attract the FDIs is equated to the feasibility in the two different markets, where foreign companies examine the markets before deciding whether to establish their operations in these two countries. The growth of the middle class in both countries which has a taste for refined products, especially Western goods presents a growth opportunity for the wine industry. With this in mind, it is essential to conduct an in-depth study on the Chinese and Indian markets before deciding to set up wine distribution operations in either of the two countries.
2.0 Market Research
2.1 Size and Potential Growth
China is arguably one of the largest wine markets across the globe. As observed by Quazi and Tandon (2011), the Chinese wine industry made $ 18.4bn in revenue for the year 2011 where as observed New Zealand (2013), the Chinese wine market has been valued as one of the best markets with a value of over $10bn in 2012 and a 2bn litres market size volume. The Chinese wine market also has a high potential for growth, with Wine Industry Profile: China (2012) observing that between 2007 and 2011, it has been experiencing a growth of about 28.1%. With the high demand for wine being associated with the incline in the number urban population which is primarily composed of the middle class, the Chinese wine market has a high potential for growth. Concerning the rise of the high-spending middle class, New Zealand (2013) observes that by 2011 China had an urban population of 691m and 178m urban-dwelling potential wine consumers. Table 1: Chinese wine market size by volume and respective growth rates
Source: Wine Industry Profile: China (2013).
Indian Market The Indian wine industry as noted by Government of Western Australia (2012) has a market size of about 1.2m consumers. This as observed by Wine Industry Profile: