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Entering Chinese yachting industry

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Case Overview

Martin Mann is the owner of a yacht and pleasure boat sales firm, based in Miami, FL. He has been in business for nearly 20 years as a broker and dealer, and owns a marina, with a showroom, parts and service facility, warehousing and storage, and financing services. His revenues have been volatile, fluctuating between $3 million ( a low) in 2009, experiencing losses that year, to a recent high- in 2014, of $ 7 million, with profit margins on sales at just over 10%. His son, Peter, has been spending the last year in China, as part of his undergraduate Business degree, studying and learning about business opportunities in China. When Martin visited his son in Shanghai over the Christmas holidays at the end of 2014, Peter was enthusiastic in recommending that his father open a boat dealership business in Shanghai, distributing boats for both US and other foreign boat manufacturers, selling to the growing upper middle class and wealthy segment of Chinese consumers. Martin has had a few international customers over the years, primarily Latin American and Russian customers with apartments and investments in Florida. Martin expects his son to take over his business someday, and is intrigued with Peter's suggestion to expand into China. As a first step, he wants to get a sense of the potential market in China, how he might enter the Chinese market, and key issues he needs to keep in mind as he examines and perhaps enters the market for pleasure boats in China.

Your task is to develop an international marketing analysis and recommendations for Mr. Martin Mann. You should draw on the frameworks and concepts discussed in the course as you carry out your analysis and develop your recommendations. The documents listed below could be useful in conducting your analysis.

You may conduct additional research if you wish, please cite all sources used. You should present a complete report, around 7 to 10 pages, double-spaced, 10 point font, with Exhibits, as appropriate, with your market analysis, caveats, and recommendation,

Use the following documents for your guide and references:
• Yachting: The tide begins to turn for China's sailing industry. China Daily, Saturday, August 2, 2014
• China's yacht industry sails ahead. By Wang Wen and Li Fangfang, China Daily, June 12, 2013
• Lobster and Boat Industries hope to cash in on Chinese affluence, Canadian Sailings, April 8, 2013
• Sara Cheng, Global boat manufacturers - ready for China boom? Aug. 20, 2012
• Speedboat to China, Tim Harcourt, Australian Trade Commission. BRW, May 3, 2007.
• Doing Business in China. 2014 Country Commercial Guide for US Companies. US Commercial Service, US Dept. of Commerce.
• Pleasure boat international resource guide, US Commercial Service, US Dept. of Commerce, 2014 edition.
• S. China Pleasure Boats Industry & Market. US Commercial Service, US Dept. of Commerce, June 2013.
• Ports and Marine Technology Trade, Mission to India; November 10-14, 2014. International Trade Administration, US Dept. of Commerce, Nov. 2014.

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Solution Preview

China is one of the most attractive emerging economies for U.S. based companies. In an attempt to boost foreign direct investment the Chinese government has initiated many reforms called for as part of the Third Plenum. Some of these include:
- Revision of basic laws which govern foreign investment
- Reduction in number of approvals required when starting business in China
- Relaxation of minimum registered capital requirements for foreign-invested enterprises and replacement of annual government inspection procedure with online filing system
- Stronger safeguard of intellectual property rights
- Liberalization of financial controls
- The government is extending its support to marine tourism, catching on the huge market potential in the industry.

Number of yachts in China in 2012: 3000
Number of yachts expected by 2020: 100,000
Chinese yacht market in 2012: 1.75 billion
Value of Chinese yachting sector by 2020: 50 billion Yuan
Growth rate of Chinese yacht market from 2006 to 2011: 732%

China represents large and untapped market for pleasure yachting industry. Yachting is expected to become a popular recreational activity which will highlight marine tourism. A positive step for the yachting industry has been declaration by the Chinese government that Hainan Island in South China would be developed as an International Tourism Destination (). The recent policy developments to encourage foreign investment would have a direct impact on the yachting industry. The government is further implementing inspection regulations and initiating infrastructure projects to help grow the culture of boating.

- Growing upper class and wealthy segment of Chinese consumers
While yachting may not be glamorous for middle class Chinese population, for wealthy Chinese business magnates, marine culture is a business culture. In their society ownership of yacht is seen as symbol of wealth; it distinguishes ...

Solution Summary

Marketing analysis of entering Chinese yachting industry are examined.