Internet Exercises


1			Nu Skin Enterprises is the new kid on the block in China, following rivals Avon products, Amway, and Mary Kay all of which are hoping to capture a share of 1.3 billion consumer market. Nu Skin, already playing catch up to its rivals, hopes the Chinese market will represent a substantial share of its total revenues within five years. Nu Skin is experienced in foreign markets. The company already sells its product in Hong Kong, Singapore, and Taiwan, but with those markets already in the mature stage, the company sees new market development as being essential to future growth. Go to Nu Skin’s web site (www.nuskin.com) and explore the company’s international operations. Then, identify which theory of foreign direct investment best explains Nu Skin’s strategy. Nu Skin is initially targeting the Chinese market by establishing retail locations, however, the company hopes to utilize its traditional method of distribution by 2004 when China’s ban on direct selling ends. Discuss how policy instruments such as China’s current ban on direct selling have influenced Nu Skin’s investment in the country. In your opinion, would Nu Skin still make the decision to invest in China if the ban were not ending? Finally, discuss why Nu Skin is following its competitors to China. With its bigger rivals already established, Nu Skin is currently an underdog in the Chinese market. How will its underdog position affect the company’s growth strategy? Source: "Nu Skin Is Set To Take Plunge In China Market," The Wall Street Journal, 11/9/02, p. B3B.




2			China is currently a hot recipient of foreign direct investment (see also exercise 3 above). The country boasts an emerging market of urban consumers, a government that is taking a more relaxed approach to foreign companies, a strong entrepreneurial spirit, and a growing retail system. Together, these attributes are creating a very favourable environment for foreign companies expanding into China. Some foreign companies are gaining favour with the Chinese government by providing assistance to struggling local firms. America’s Kodak for example, took over three debt-laden state firms and their workers in exchange for a government ban on new foreign-invested film factories for a four-year time span. France’s Danone has acquired several Chinese companies but maintained their Chinese identities and product lines—a strategy that has won points with a government that is keen to see national brands succeed. Go to http://www.chinafdi.org.cn/ and examine how China is making foreign investment more attractive than ever. Next, search the website of the Federal Department of Foreign Affairs for information on business and investment opportunities in China. You’ll find that DFAIT is divided into several categories such as trade issues, investment, politics etc. and all of these have content dealing with specific countries in Asia. Then, discuss why China has emerged as such an important location for foreign companies, and explain the costs and benefits of the investment from both the perspective of the host country and the home country. Source: "Cracking China’s Market," The Wall Street Journal, 1/9/03, p. B1.

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