Risks Involved in Trading with or Operating in China Definition of Risk Suppliers Negative Attention from Pressure Groups and Political Figures Exchange Rate Fluctuations Political Instability Language and Cultural differences Intellectual Property Theft Bribery or Corruption

1. Risks Involved in
Trading with or
Operating in China
The P Team

2. Definition of Risk
The possibility of an event or condition occurring
that will have a negative or harmful impact on
something perceived to be of value.
Businesses are primarily concerned about financial
risk.

3. 1. Suppliers
 New suppliers may be relatively unknown, this
may result in businesses choosing one who is
not able to provide the product to the
standard required
 It can also mean that they are unable to meet
deadlines and unreliable in general

4. 2. Exchange Rate Fluctuations
 This could result in materials imported from
china becoming more expensive
 This can reduce profit margins if the increase
in costs cannot be passed onto the customers

5. 3. Negative Attention from Pressure
Groups and Political Figures
 Attracted because of China’s human rights
policies
 Businesses who choose to trade or operate
within China may receive unwanted negative
media attention
 This can cause consumers to switch to direct
competitors

6. 4. Political Instability
 Governments in China may apply policies
aimed just at foreign businesses in order to
gain popularity with its citizens
 However in 2012 China announced that it
would reduce its taxes on overseas businesses
by up to 50% to encourage foreign direct
investment

7. 5. Language and Cultural differences
 This could lead to the business marketing its
products in the wrong way or aiming their
product at the wrong target market
 This makes it difficult to appeal to the right
audience
 An example is Tesco who have put their
difficulties down to the inability to adapt their
business model to suit their target audiences
culture

8. 6. Intellectual Property Theft
 Intellectual property violations are common
 Without effective protection, a business may
lose its USP and competitive advantage
 Businesses may struggle to recoup R&D costs
and legal costs incurred from fighting
intellectual property infringements

9. 6. Intellectual Property Theft (Dyson)
 Dyson’s plan to enter the Chinese market in
2012 was undermined by the availability of
cheaper, similar products, which were an
infringement of their patent rights
 Chinese firms would not have spent millions on
R&D nor gone through the process of
registering a patent
 Firms like Dyson were damaged due to lower
sales, lower market share and cheaper copies
which harmed the brands reputation and
image

10. 7. Bribery or Corruption
 Common throughout China despite the fact it
is illegal
 Especially in areas such as dealing with local
officials in charge of permits
 The giving of gifts reflects a key feature of
business culture, but exposes businesses to the
accusations of bribery

11. 7. Bribery (GlaxoSmithKline)
 UK’s largest drug-maker
 Allegedly used travel companies to channel
¥3 billion (£300m) to bribe doctors and
officials
 Sales in China during July-September
quarter, 2013, sank 61% after the scandal

12.  Tescos - http://www.foodmanufacture.co.uk/World-News/Tesco-
failed-to-understand-the-Chinese-consumer
 Dyson -
http://www.telegraph.co.uk/finance/yourbusiness/8936685/Sir-
James-Dyson-attacks-China-over-designs-theft.html
 GlaxoSmithKline - http://www.bbc.co.uk/news/business-24637195
 https://www.youtube.com/watch?v=Iw7Q1LiNXig
Links