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Best Practices for Creating New Sales in a Foreign Market
Best Practices for Creating New Sales in a Foreign Market
This research paper is designed to look at the expansion that Hangzhou Yongheng hopes to make into markets in the Ukraine and how that expansion will work. The goal of the manufacturer is to produce a product that is easily modifiable when it is shipped so that the company does not have to concern itself with the added costs associated with reworking the design to fit the new location. This essay examines the company in question and the products that it already ship. The markets where the product is currently available (such as Western European countries) will also be looked at to determine how well Hangzhou has done expanding its base from the Chinese market in the past. The situation in the Ukraine will be examined to discover what difficulties Hangzhou might face when entering this market, and finally all of this will be put together to see if Hangzhou's reliance on the diversity of their product will actually be a reality, or if they will need to give dealers the means to modify the bikes to fit the Ukraine.
Hangzhou Yongheng Electric Bikes
The company in question is actually labeled as the Hangzhou Yongheng Car Industry Company, Ltd. due to the language barrier that exists between the company and English speaking people. The primary focus of the company is to produce top-quality two-wheeled electric conveyances for the local market and for customers around the world. The firm produces "electric bicycle, electric scooter, electric motorcycle, electric tricycle, electric mobility scooter" (Hangzhou Yongheng, 2012). The different products have been manufactured for the Chinese market since 2002, and the company has been making inroads into the European market since that time and more than "40% of [their] product export to overseas market" (Hangzhou Yongheng, 2012). The company is involved in a great deal of businesses in China, and has been one of the strongest companies in the Xiaoshan District for almost two decades now (Tonghengio, 2012).
The company remains relatively small for an international manufacturer of electric bicycles and like products, but they need to expand outside the country of China because the competition is so great. The expansion into Western Europe and other places has gone well from the standpoint that sales are doing well, but too many people own cars. With environmental consciousness the sales of these types of products are expanding, but there is a need to seek other markets that may be more friendly to their product.
The reason that Hangzhou Tongheng has decided to venture into the Eastern European market is actually because many of the people in these countries do not have the money to buy a new car. Thus, many of them ride bicycles for their everyday transportation. This means that Hangzhou has a readymade market for their products. Special emphasis will be placed on electric bicycles because they are less expensive, and provide the same benefits of a bicycle. The people in the Ukraine also have access to electricity in their homes at a reasonable rate which would mean that they can easily afford the small increased cost necessary to refuel their bicycles.
There are two distinct marketplaces in Europe that have existed since the Soviet Union fell in the early 1990s. The most wealthy is the Western market that was not affected by the Soviet block of nations, and the second is Eastern Europe. The people in the West are relatively wealthy, when compared to the East because they have enjoyed free market economies, for the most part, for more than a hundred years. The countries in the East have only enjoyed any economic freedom for the past two decades, and it has been difficult for many of the people to get used to the new system. The system of government has also meant that there has been a great deal of corruption in the countries formally associated with Soviet Russia, and this has also caused a large black market to erupt. The Western countries have allowed many of the countries in Eastern Europe to join the European Union, but they some have not been allowed because of the weakness of their governments and the instability of their economies.
The Ukraine was the second largest economy in the former USSR, so it had the most problems when the Union was dissolved in 1991. The problems for the country have mainly been that it had not reliable exports that it could send to other countries to pay for the goods the citizens of the Ukraine needed on a daily basis (U.S. Department of State, 2011). The issue then for the government was how they could form an economy that would sustain the state, and allow it to grow.
One of the major issues that the government had initially was the corruption that was rampant within its halls and among the new entrepreneurs who were not sprouting up throughout the former countries of the Soviet Union. This corruption caused a great deal of distrust among the people, and caused them to resist the economic reforms that the new government was trying to push through. The reason that people resisted is that they knew what had happened when the Soviet Union fell, and they wanted the freedoms that had been denied them for almost a century under the Bolsheviks and the Czars for hundreds of years before that. The problems that the government had to combat were not just the attitudes of the people, but the reality of controlling an economy and country that were so large. Transportation and the road systems were not stable, and the people did not trust them; food and other consumer goods were not readily available to people the way they were for other European countries; and there was a great deal of urgency to launch a new currency that was not backed by the old Russian ruble. The people of the country wanted to be their own nation, free from the influences of their neighbor.
The government started making changes when in 1993 it devised a new currency and also began upgrading many of the road systems that plagued the people (U.S. Department of State, 2011). The economic system did not immediately follow these initiatives, and the country set a record for having the highest one-year inflation of any country in recorded world history (U.S. Department of State, 2011). However, the country has made a remarkable recovery since then.
According to the U.S. Department of State Ukraine has;
"rich farmlands, a well-developed industrial base, highly trained labor force of 20 million, and good education system, Ukraine has the potential to become a major European economy. After a robust 8-year expansion beginning in 2000 that saw real GDP expand 75%, Ukraine's economy experienced a sharp slowdown in late 2008, which continued through 2009. After contracting 15.1% in 2009, GDP bounced back only 4.3% in 2010 and was forecast to grow between 4.5% and 4.7% in 2011."
This economy has expanded because the people of the country, historically independent, have taken it upon themselves to become so again. The economy is booming, and the agricultural lands are some of the richest in the world.
The only issue that has presented itself again is that the country has poor transportation routes that have not been repaired to any great extent in almost 20 years. The problem is that the area can experience harsh winters which break up the roads if they are not quickly repaired. The government has already made a declaration that they will work on fixing the roadways as quickly as possible, but it could take several years to actually accomplish this. Also, many of the people seem to prefer how inexpensive and easy to maintain bicycles are, so they purchase them instead of new cars. However, the rough roads and cold winters make it difficult for bicycle riders at times.
One issue that may affect Hangzhou's ability to make inroads into the country is that the government has still not completely fixed the problems it has had updating its economy. Although the country has made some major strides, there is still much work to do. The U.S. Department of State (2011) says that;
"Ukraine ostensibly encourages foreign trade and investment. Foreigners have the right to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event property were to be nationalized by a future government. However, the country's complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and particularly corruption have discouraged broad foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment from abroad."