Case Study – the Demise of Foreign Competitors in the Chinese Beer Industry

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Background In the case, background in 1990’s China Government open beer market to foreign investor. China is a huge, future potential market, a lot of foreign brewers enter to the Chinese market and making multi million dollar investment on production facilities as well as labor market. However a few years later most of the foreign brewers were still running at loss. On other hands the local brewers with untrained management, problematic human resource and poor quality product and weak marketing capabilities was winning in this beer wars. We would use PEST framework to evaluate the China beer market whether is affricative for foreign investments, what the strength of local brewers are and why foreign brewers are lost. Political In…show more content…
In 2000 China was the 7th leading exporter and 8th largest importer of merchandise trade - exports: 249.2 us billion dollars (3.9% share), imports: 225.1 us billion dollars (3.4% share). For commercial services China was the 12th largest exporter and the 10th in importer - exports: 29.7 us billion dollars (2.1% share), imports: 34.8 us billion dollars (2.5% share). 1 The average annual growth in world beer market was just 2.6% during 1995 – 2000, the Asia Pacific is 7.7.% in same period, but Europe and North America just 1.2%. In 2000 – 2004 the estimates growth for Asia Pacific is 8.1%, China was the largest market within Asia Pacific, accounting for two third of consumption. Also growing per capita GDP in Asia fuelled consumption growth, beer consumption and beer expenditure in emerging markets were income elastic, whereas the income elasticity of the beer expenditure in developed counties, with higher GDP as only 0.4, for emerging markets it as 1.35, indicating that a 1% increase in GDP per capita would lead to 1.35% increase in beer expenditure. In China future economic conditions appeared rosy. GDP growth was projected to continue at an average of 8% from 2001 – 2005. Means the projection of beer consumption rate is 10.8% per capita during same period. Social and Cultural China has a favorable demographic profile – the higher population of younger people which
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