Mattel in China

1 e Conduct internet research on China. Are there any possible barriers that toy manufacturers from Europe and North America will need to consider? Describe and comment on the market entry approach Mattel initiated in China. Current status? What should Mattel do now in China?

Internet Research on China

Population
1,349,585,838 (July 2013 est.)
Age structure
0-14 years: 17.2% (male 124,773,577/female 107,286,198)
15-24 years: 15.4% (male 109,922,192/female 98,325,568)
25-54 years: 46.7% (male 322,161,347/female 308,101,780)
55-64 years: 11.3% (male 77,374,476/female 75,289,733)
65 years and over: 9.4% (male 60,597,243/female 65,753,724) (2013 est.)

Median age total: 36.3 years male: 35.5 years female: 37.2 years (2013 est.)
Population growth rate
0.46% (2013 est.)
Birth rate
12.25 births/1,000 population (2013 est.)
Death rate
7.31 deaths/1,000 population (2013 est.)
Net migration rate
-0.33 migrant(s)/1,000 population (2013 est.)
Urbanization
urban population: 50.6% of total population (2011) rate of urbanization: 2.85% annual rate of change (2010-15 est.)
Major cities - population
Shanghai 16.575 million; BEIJING (capital) 15.594 million; Chongqing 9.401 million; Shenzhen 9.005 million; Guangzhou 8.884 million (2011)
Sex ratio at birth: 1.12 male(s)/female
0-14 years: 1.17 male(s)/female
15-24 years: 1.11 male(s)/female
25-54 years: 1.05 male(s)/female
55-64 years: 1.03 male(s)/female
65 years and over: 0.92 male(s)/female total population: 1.06 male(s)/female (2013 est.)

Infant mortality rate
Total: 15.2 deaths/1,000 live births male: 15.16 deaths/1,000 live births female: 15.25 deaths/1,000 live births (2013 est.)

Life expectancy at birth
Total population: 74.99 years male: 72.96 years female: 77.27 years (2013 est.)

Ethnic groups
Han Chinese 91.5%, Zhuang, Manchu, Hui, Miao, Uighur, Tujia, Yi, Mongol, Tibetan, Buyi, Dong, Yao, Korean, and other nationalities 8.5% (2000 census)

Religions
Daoist (Taoist), Buddhist, Christian 3%-4%, Muslim 1%-2% note: officially atheist (2002 est.)

Languages
Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue (Cantonese), Wu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, Hakka dialects, minority languages (see Ethnic groups entry) note: Mongolian is official in Nei Mongol, Uighur is official in Xinjiang Uygur, and Tibetan is official in Xizang (Tibet)
Literacy
Definition: age 15 and over can read and write total population: 95.1% male: 97.5% female: 92.7% (2010 est.)
School life expectancy (primary to tertiary education) total: 12 years male: 12 years female: 12 years (2011)
Education expenditures
NA
Maternal mortality rate
37 deaths/100,000 live births (2010)

Children under the age of 5 years underweight
3.4% (2010)

Health expenditures
5.2% of GDP (2011)

Physicians density
1.456 physicians/1,000 population (2010)

Hospital bed density
3.8 beds/1,000 population (2011)

Obesity - adult prevalence rate
5.7% (2008)
(China Demographics Profile 2013, 2013)

In China, speedily fluctuating demographics, growing incomes, amplified consumer spending and an increasingly open business environment have all helped to make the Chinese market increasingly striking to Western businesses across a variety of industries. Similarly, deteriorating sales in their home markets has forced many US and European companies to relocate China firmly to the Centre of their long-term global growth strategies. (Hedley, 2013)

China has tremendous potential in the manufacturing sector. European and North American investors although, need to realize that China is not a homogenous market. The volatility levels may become an issue while performing business operations.

Appearance in China

Men prefer conservative suits having subtle designs.

High heels and short sleeved blouses are considered as a taboo. The Chinese frown on women who tend to show off.

Neutrality and subtleness is preferred in clothing for both sexes.

Casual clothing is mandatorily traditional as well.

Jeans are considered unacceptable for business meetings.

Women revealing clothing is taken as an offense by Chinese businessmen.

Behavior & Manners in China

Hand movements are considered to be distractions to the host.

A man must avoid personal contact with a woman in public.

Gifting an individual is something that the Chinese are very delicate about.

The most favorable gifts are high quality pens.

Clocks, handkerchiefs, straw sandals and anything white, blue or black are associated with death and should not be given as gifts.

Punctuality is crucial, especially for a guest.

Business matters must not be discussed at meals.

The host must always initiate the meal.

Tasting each and every dish offered is considered as cultural courtesy.

Chopsticks should never be dropped while eating, as it is considered as a bad omen.

Females do not drink at meals in China.

Emptying the plate while having food will give the Chinese an impression that the person is still hungry for more food.

Communications in China

The Chinese normally greet by bowing or nodding.

Waiting for the Chinese to offer a handshake is the best procedure.

The Chinese must be allowed to leave the meeting place first.

Presenting and receiving of cards must be done with both hands.

Rank and status are factors highly valued by the Chinese.

People in China are generally of a reflective personality and thus have relatively slow decision making capabilities. (China Business Etiquette, Culture, & Manners)

Possible barriers that toy manufacturers from Europe and North America will need to consider

There will be a lot of time and capital investment required in order to initiate the business in various provinces.

Regulatory bodies in China operate in such a manner, that it becomes difficult to predict the changes that take place before they happen. The regulatory environment in China is comparatively transparent.

Persuading the Chinese consumers to shift from their hometown branded toy products, and purchase the industry products instead.

The market share controlled by existing toy manufacturers in China will play a detrimental role in the market entry.

Licensing agreements will have to be formed, depending upon the location of launching the product.

Competition from local and international toy-manufacturing companies will become increasingly fierce.

Cultural, religious and traditional factors related to the particular toy product will be of extreme significance while designing the product to be launched.

Variations in different provinces regarding the population, economic growth rates, average income levels, GDP per capita and consumer buying trends play an important role in determining the proper location to introduce the business.

Government regulations and policies related must be thoroughly understood, before launching the product in the country. For example, the foreign investment catalogue must be viewed beforehand.

Issues related to set-up costs, incubation period and intellectual property rights may come into picture.

The Chinese often take an enormous amount of time to negotiate a particular deal.

It takes 18 procedures and 65 days to establish a foreign-owned limited liability company (LLC) in Shanghai, China. This is slower than the IAB global average but in line with the IAB regional average for East Asia and the Pacific. Five procedures are required exclusively of foreign companies. (The World Bank)

The incorporation documents of the parent company must be notarized by a local notary and authenticated by a Chinese consulate in the country of origin.

Foreign investors must submit their applications, along with feasibility studies and charters of association, to the Foreign Investment Commission (under the district government for foreign investment approval) after obtaining a company name pre-registration. This step usually takes 14 days between the date of receiving and date of acceptance of the documents.

Foreign companies that wish to engage in international trade must also get customs registration certificates and foreign trade licenses, which can take on average 13 days.

In addition, foreign companies must obtain a financial certificate for enterprises with foreign investment as well as a foreign exchange registration certificate, which usually takes a day to obtain (but can vary significantly from several hours to several weeks).

Company registration documents are available online, although submissions may not yet be made online. Foreign companies wishing to maintain bank accounts in foreign currency need the approval of the State Administration of Foreign Exchange, which takes on average 4 days.

The minimum paid-in capital requirement for an LLC is CNY 30,000 (~$4,390). Chinese law allows for deposit of the capital contribution in installments, provided that the first payment is no less than 15% of the registered capital. The balance of the registered capital must be paid within 2 years of the issuance of the business license.

Manufacturing background, topographical size, technical issues and scope of the market could be hindrances in the market entry process.
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In China, land is either owned by the state and local governments, or collectively by farmers. Private terrestrial proprietorship is not allowed.
The acquisition of the land-use right of manufacturing land, however, is subject to an obligatory open bidding procedure. Land rights may be covenanted, forfeited, rented, or shifted. (The World Bank)

Market entry approach Mattel initiated in China

Mattel had initially set up its first Barbie store in China in March 2009 at Shanghai, one of the most lavish shopping lanes in the country. This venture did not work out as planned.

Despite the lack of knowledge of Chinese culture, Mattel aimed to target both young and elderly females, thereby increasing the probabilities of jeopardy.

The large variety of services and products rendered it unmanageable for the company to analyze in advance localization and customer strategy. (Anil Gupta, 2011)

The public relations approach that Mattel used had been viewed by the Chinese officials as a design problem. As a result, the company was not able to expand its business.

Current Status

Mattel Inc. is currently making an effort to sell the American designed Barbie doll, on the basis of trying to be appealing to Tiger Moms who would prefer to have their children read books and not waste time on leisurely activities. The latest low priced offerings include Violin Soloist Barbie, with a bow and sheet music. Rosin is not included. (Laurie, 2013)

Mattel is targeting education-minded parents like Luo Chongzong, who watched her 9-year-old daughter, Yang Siqi, gaze at a 369 yuan, or about $60, "Fashion Design" Barbie play set during a recent visit to a Beijing Wal-Mart.
"She loves those dolls. But I had to stop buying them because they distract her from her studies," said Ms. Luo, 33. "She'll spend hours braiding her hair, dressing and undressing her," she said. (Laurie, 2013)

The El Segundo, Calif., company is one of many toy sellers adjusting tactics for China. Sales in China's toy market, excluding videogames, rose 18% to nearly 48 billion yuan ($7.88 billion) last year, according to market-research firm Euromonitor International.
Still, many Chinese people consider toys a waste of time in a country that prizes educational success, said Torsten Stocker, a Hong Kong consultant.
The company has had to clear several obstacles. Advocacy group China Labor Watch said last month that factory workers are underpaid and overworked at six Chinese factories that make Mattel toys. Mattel said it is reviewing labor conditions at its factories here. (Laurie, 2013)

Mattel has recently kicked off a multi-tiered partnership with Fifth Harmony. Mattel is also currently working in collaboration with Wal-Mart, the world’s largest retailer.

Competitive issues

There are three main competitors

I. Hasbro Inc.

After Mattel, this company is the world’s second largest toy manufacturer. The famous board game ‘Monopoly’ is a product of this particular company. Children enjoy Mr. Potato Head, another product of Hasbro.

II. JAKKS Pacific, Inc.

This is another popular toy maker in The United States. Pokémon related toys are found in many households, as children are very much inclined towards the world-famous anime Pokémon.

III. LEGO

LEGO is renowned for its innovation. This company uses the stratagem of introducing toy-kits for children which will help them enhance their technical skills. Such products can become quite popular in China.

Recommended strategies for Mattel in China

Investing in Joint ventures

Forming collaborations

Effective distribution channels

Appointing local distributors

Making its presence on videogame consoles, smartphones and personal computers more effectively.

Introduction of online casino games, which would target the adult age-group.

Mattel should look to expand its business into the clothing industry. By this method, children and their parents will notice these more frequently and the chances of profits will increase.

Making its presence in the entertainment sector would be a viable option. Contracts can be signed with movie producers to create movies related to its products.

Performing the task of carrying out due diligence becomes an essential part of setting up business opportunities in China. The primary purpose of due diligence is for the verification of trustworthy partners and employees.

Consultants performing risk and legal assessments should be contacted.

Contravention in the international property rights is an important factor to be considered. Technology must be compromised upon at certain situations.

Consultation with lawyers and IPR experts to develop effective IPR strategies for the Chinese market is crucial.

Many market research companies offering tailored services have been set up in China recently, and the tools implemented by these organizations are based on the particular Chinese target-market. Mattel should make efforts to obtain services of these market research companies.

Publications based on English language available online makes it simpler for Mattel to carry out steps of desk-research on the Chinese market.

Data analysis specialists can be approached for providing valuable insights on future growth rate predictions and decision-making.

Hiring staff from the right enterprises will form a critical part of the business stratagem. Salary packages and insurance costs must be reviewed thoroughly.

Obtaining expatriate knowledge of the Chinese business practices in order to perform better operational control is of prime significance.

Many of Chinese employees have contacts with suppliers and local authorities who could provide vital information along with useful services.

Before making a market entry initiative, trademark registration is essential.

Hearsay and third-hand market information should not be relied upon.

Bibliography

(n.d.). Retrieved from The World Bank: http://iab.worldbank.org
China Demographics Profile 2013. (2013, February 13). Retrieved from indexmundi: http://www.indexmundi.com/china/demographics_profile.html
Anil Gupta, H. W. (2011, April). Why Barbie Flopped in Shanghai. Retrieved from BloombergBusinessweek: Global Economics: http://www.businessweek.com/globalbiz/content/apr2011/gb20110421_445230.htm
China Business Etiquette, Culture, & Manners. (n.d.). Retrieved from cyborlink: http://www.cyborlink.com/besite/china.htm
Hedley, M. (2013). Entering Chinese Business-to-Business Markets: The Challenges & Opportunities. Retrieved from B2B International: http://www.b2binternational.com/publications/china-market-entry/
Taylor, K. (2013, October 26). Tips for investing in emerging markets. Retrieved from Entrepreneur Web site: http://www.entrepreneur.com/article/229280

Mattel, inc.; Barbie and fifth harmony kick-off a multi-tiered partnership in 2014. (2014). Marketing Weekly News , 126. Retrieved from http://search.proquest.com/docview/1494752432?accountid=39340

Burkitt, L. (2013, Nov 08). Corporate news: In china, mattel tries 'violin soloist' barbie --- Mattel gives toys in china a makeover toward the brainy after parents snub the frivolous. Wall Street Journal. Retrieved from http://search.proquest.com/docview/1449258292?accountid=39340