The main objective of a company is to maximize the wealth of its shareholders. This can be achieved by growing the company operations and investing in potential markets where future returns can be made possible. The research includes a deep analysis and evaluation of Chinese market and the potential required for opening a new branch in the target country. An important part of the economic reform process in China has been the promotion of foreign direct investment (FDI) inflow. After more than twenty years of economic reform, China has become one of the most important destinations for cross-border direct investment (Fung et al 2002).
Developed countries are from one lateral or the other attached with the concept of dining outside their homes. This directs us to the restaurant and food industry which has its roots held full-fledged in each and every market of the world. Either it is just across the street or in a busy mall; the fast food chains and restaurants have grown worldwide. Thus there is huge potential growth for major restaurants in UK to establish their operations in China. The target research is based on the investment opportunities of Chi-Bri Restaurant Co. , Ltd in a business relationship with China.
The main focus is on how the company would be able to globalize its international operations in China. Many corporations are shifting their focus towards larger economies like China and India. The population of China (1. 3 billion) also is considered to be the largest in the world (Central Intelligence Agency, 2010). In addition, when we consider establishing a restaurant in china, the owner must decide what type of entity will own and operate the establishment. In China, this is much more difficult than in other markets such as the US, where individuals can own and operate businesses.
Fortunately, the restaurant industry is quite open and the operating entity may be either owned by a company or individual known as a Wholly Foreign Owned Enterprise (WFOE) or they have the option to partner up with a Chinese national which is known as a Joint Venture (JV) because it is not possible for a foreigner to own the restaurant business directly as a sole proprietorship (Lou, 2008) Therefore, this study will consolidate the relevant information regarding Chinese business systems and their impact on the target company. United Kingdom is an old-line developed country, one of the world economic giants.
UK is also the world’s sixth overseas investment country. It’s GDP ranked fifth in the world. In order to increase profit and to achieve competitive advantages of their products, British multinational companies (MNCs) are trying to catch the opportunities to do foreign direct investment in developing countries because of the low cost. China is the third largest country in terms of size and the largest in terms of population. China’s economic performance has been very impressive since she adopted the ‘the open-door’ policy in 1978 (Pang et al. , 1998).
China is the biggest host country among developing countries for foreign investment. According to a data by Ministry of Commerce of the People’s Republic of China . If we have a look into the last few decades of Chinese economy then we will come across the idea that the Chinese market moved from centrally planned system to market oriented economy. Previously run central planned system use to block China to interact with the international trade (Central Intelligence Agency, 2010). The increasing trend of Foreign Direct Investment (FDI) in China has made it attractive and lucrative.
China’s main attraction is its huge market, workforce, resources and liberalization of trade by the state government. Figure below shows the GDP growth of china. The restaurant industry has been converted from competition into hyper competition from one continent to another, from one country to another, from one city to another and even from one street to another. The core competencies like unparalleled, innovative and contemporary dishes, quality of food, distinguishing spices in same cuisines and the pricing strategies have made this industry the next big thing.
Economic expansion of restaurant has gone beyond the expectations. In addition to that each million pounds in restaurant sales generates an additional 25 jobs for the economy. These restaurants provide more than 70 billion eatables on different occasions in 2009. A survey has taken out that 72% of grown up youngsters like the taste of restaurant food more than if they cook the same meal at home as the same taste cannot be produced. Because of restrictions and regulations in the restaurant industry, many people around the world claim that they are eating healthy and hygienic food. (British Hospitality Association, 2007).