The happy Christmas Company

Introduction
HCC, the Happy Christmas Company, is one of the big wholesalers, based in International Trade
City in Yiwu, selling Christmas decorations and gifts from 60 million yuan annually down to 35
million yuan due to the economic crisis and the hesitance of European and American buyers.
Because of the sharp falling selling and profit, Huang, the founder of the company, would like to
conduct some marketing analysis and make suggestions on domestic market and foreign market,
which both need to consider the organizational and end-user customers. This article is going to
conduct environmental analysis, and making recommendations of marketing mix based on the
environment.
Some assumption should be made beforehand,

(1) HCC is also a manufacturer for its own product,

(2) As the name is Happy Christmas Company, and it only has a production line of Christmas
product.

(3) HCC is an international renowned manufacturer with high quality product.

(4) HCC has formed the partnership with suppliers in order to add value to delivery.

PEST Analysis of Happy Christmas Company China.

Macro-environment analysis
It focuses on five analyses, which are political, economic, social and technological forces, PEST
in short.

Political
Newspapers articles titled as China likely to be main target of trade protectionism' and China
suffers most from rising trade protectionism' have been arousing controversial issues among
people from early 2007 to 2009, after the outbreak of global financial crisis.
According to Yao Jian (2009), the Ministry of Commerce spokesman of China, some countries
and regions resorted to expanding exports to boost economic recovery after efforts to stimulate
domestic demand failed, and even depreciated domestic currency and increased subsidies to raise
competitiveness of domestic exports, he also claimed that such moves led to the rising trade
protectionism and the rising does worse the environment for the international exporters. After the
launching of the Buy America scheme, which in order to stimulate the domestic market in US
after the global downturn, the trade protectionism has been set to rise globally. In the first nine
month of 2009, the US launched 14 probes into Chinese exports, making only 184.9 billion US
dollars product exported to the US, down nearly 15 percent compared with last year, at the
meanwhile, 14.7 percent and 21.6 percent drops on exporting to Japan and EU respectively.
Another reason igniting the trade protectionism against China is the quality of made in China'
product, accusing the defective product made in China, especially toys, which having loose
magnets and containing excessive lead, causing health hazard to children. The Indian
government also announced a six-month ban on toy imports from China from January 2009. Li
Changjiang (2007), director of China's General Administration of Quality Supervision,
inspection and Quarantine, said that China strongly opposed countries, without naming any,
using product quality as a pretense to practice trade protectionism. He also claimed that the trade
protectionism not only affecting China, and doing no good on other countries.

Economic
China has been named as Rising Dragon' in recent year because of its rising economy, while it
is true that China's economy is growing at high and consistent rate. According to Jobber (2006),
China's economy has been growing at an average of 9.5 per cent for the past 20 years, and he
believed that the phenomenal growth is expected to continue.
Traditionally, low-cost labour is the advantage of China, however because of the appreciating
yuan, it is no longer the strength of China. According to the monetary policy report released by
the central bank, it mentioned that Following the principles of initiative, controllability and
gradualism, with reference to international capital flows and changes in major currencies, we
will improve the yuan exchange-rate formation mechanism, showing the motivation of
resuming yuan appreciation after the global downturn. Xing Ziqiang (2009), an economist at
China International Capital Corp, also thinks that it is an irresistible trend of yuan appreciation.
Besides, the increasing price of petroleum, raw materials, plastics and steel also are the main
factors affecting the cost of production, also increasing the exporting cost and weakening the
strength of China's manufacturing industry. Guo Zhucai (2009), preseident of the Chenghai Toys
Association, indicated that the overall output value of industry rose by 20 percent this year,
however, the profits was also halved due to the increasing of cost.

Social
China is a big country having high population density, showing China has over 1.3 billion
people. According to Kotler (2005), high population means there is a potentially lucrative growth
market. Forecasts from the United nations Population Division suggest that world population
will grow annually, the number will increase to about 8.9 billion by 2050, and China will
contribute 12 percent to that increase, which showing a the population of China is skyrocketing.
Kotler (2005) also claimed that a growing population means growing human needs to satisfy.
With the increasing of needs and purchasing power, the market offers great opportunity to
marketer for different goods and services.
To curb the population, Chinese government passed One-Child Policy' which is a regulation
limiting each family can only have one child. This policy not only helps marketer to implicate
the consumer habits, but also creates great opportunity to domestic industry. As only one child in
a family, that child becomes a treasure to the family, making them become Little Emperor' or
Little Princess', parents are willing to do anything to satisfy them, even spoil them, they would
spend large portion of the income to satisfy their children's material needs, as a result, according
to Kotler (2005), of six-pocket syndrome' which means six adults including parents and two sets
of grandparents indulge the whims of the only child. Parents in Beijing household are spending
about 50 percent of their income on their only child in the average.
Foreign culture is becoming more and more acceptable and welcoming in China, according to
China Daily, both foreigners and Chinese celebrate Thanksgiving, which is the traditional
festival in US and Canada, in Beijing. Christmas, as well as Halloween, becomes popular among
people, especially to the youngsters and children who are open-minded to different culture, this
trend also creates opportunity to toys and decoration manufacturers, as people are more willing
to spend money on festival decoration. Also according to Lei Tang (2009), parents and
grandparents like to buy gifts to their cherished only child in the festival days.

Technological
The reputation of Made in China' product has been ruined after the world's largest toymaker,
Mattel Inc., recalled about 21 million of toys which made in China. Li Changjiang (2007)
blamed that some countries used the product quality issue for trade protectionism, as a result of
the downturn of China's exportation. Looking at the bright side, according to Li, authorities have
stepped up supervision and intensify crackdowns on illegally made product and ensure the goods
are made with quality materials and certified manufacturers. He said China will provide safe
and reliable toys to children around the world', giving an injection of confidence to the world.
Thus quality control is the great issue on China's manufacturing and exporting industry.

Micro-environment analysis
It focuses on customers, competitors, distributor and suppliers.
Customers
HCC was mainly focusing on the European and North American customers who buying
Christmas decoration and gifts, it is the time to change this view. As other countries like Russia
and Japan, people have increasing consuming power on festival product. Also, develop the
market of different festival, like Halloween and Easter should have huge potential.
Not only focus on the oversea market, company should develop the domestic market in mainland
China, as mentioned before, the acceptance of different culture among Chinese people is
becoming better and better, people start to celebrate foreign festivals like Thanksgiving and
Christmas. Thus, domestic customers should be an essential issue.
Competitors
There is not only one wholesale market in China, it is easy to find other large scale wholesale
market in Beijing and Guangdong. All of them are facing the consequence of the financial crisis
and finding the ways out. Like Tianyi market, the largest wholesale marketing Beijing, has put
out Christmas items on shelves on early November in order to counter reduced consumer
spending.
Not only the domestic competitors, but also those come from foreign countries. With the
appreciation of yuan, wages of Chinese workers become no longer low, other countries with
lower labor cost such as India can be a great competitor of China.
Distributors
HCC can be it own distributor to distribute the goods in wholesale market, thus the threat of
profit margin can be minimized.
Suppliers
With the increasing price of petroleum, raw materials, plastics and steel, the cost of production is
also increase; manufacturers either reduce their own profit or weaken the desire of the customers.


SWOT analysis
Strengths
- high quality product
- renowned international reputation

Weaknesses
- appreciating yuen
- increasing cost
- lack of production line for different
product
Opportunities
- high population making high potential market
- One Child Policy', the only child is the main target
audience
- different culture acceptances
Threat
- rise of trade protectionism to China
- ruined reputation of Chinese made
product
Strengths
HCC is an international company with renowned reputation on high quality product producing.
Weaknesses
Because of the appreciating yuen, all of the cost increased, such as the labor wages. Also due to
the increasing price of petroleum, raw material, this is weakening the competitive edge.
Opportunities
High population of China brings it high potential of growing market. As China running One-
Child Policy', the only child in the family is one of the main targets the company should focus
on. As the acceptance of people to different culture increases, especially of the youngster. Thus,
those trendy people are another group of targets the company should focus on.
Threats
The rise of trade protectionism to China is a barrier which affecting the exporting. At the
meanwhile, the quality problems of product made in China is the one of the threats, thus China
government should supervisor and control well the quality of exporting product.

Marketing Mix Analysis
The marketing mix is a set of marketing tools, including 4Ps which are product, price, promotion
and place, used to achieve the objective of company in specific targeting market.
Product
The reputation of Made in China' product has been ruined, as well as the sales of the product,
after the mass toys recall because of the defective product were exported. Consumers, especially
those oversea distributors, are going to avoid any product made in China. According to the
survey by Rochester (2007), 33 percent of American would buy fewer toys due to the safety
problem of the Chinese-made product, while 45 percent said they would avoid buying any
manufactured from China. But those consumers are not to be blamed because they are afraid of
Made in Chine' label, as they are not confident about the product in China. To stamp out the
suspicions, according to China Daily (2007), the fundamental solution is a complete house-
cleaning, which means harsher quality standards and operational mechanisms, in order to re-
build the confidence and warranty of Chinese product.

Quality
Quality of product is highly related to the sales and profit, keeping the high and warranted
quality can secure the marketplace and retention of the customers. Kolter (2005) defined quality
as freedom from defects', so if Chinese made product were high quality, the recall would not
happen, so did the loss of faith of the customers. The foremost mission is to increase the quality
and show the warranty of the product in order to re-build the credit of Chinese made product.
Siemens defines quality as Quality is when our customers come back and out product don't',
which means after having customer satisfaction with improved product quality, customer
retention will be the result.
Branding
HCC should has it own brand after having improvement in quality of product, not only the
company name, but also a brand label recognized in international commercial world, having a
image of qualified product with excellent quality. Consumers treat brand important, as according
to Kotler (2005), branding can add value to the product and provide a guarantee of reliability and
quality. Consumers always buy from the same brand as the same quality is guaranteed. Then
brand awareness is raised among customers' evokes set, and increase the likelihood of
purchasing from the consumers.
Targeting new market and Product variety
What if HCC not only selling Christmas product? After building up the brand label, the product
variety should be diversified. As there are many festivals worldwide, which are worth to explore
the marketing opportunities, like Easter and Halloween not only being celebrated in West, but
also getting more and more popular in East, for example Ocean Park and Disneyland in Hong
Kong have a great competition during Halloween as both of them have special celebration events
like haunting house to attract tourists, people are love to participate in dressing up and
celebrating these foreign festivals, providing a great opportunity and market to develop and sell
the product for Halloween. Even in mainland China, people especially the youngsters keen on
celebrate those Western festival, not only Christmas, but also some traditional festivals in West
like Thanksgiving and Halloween. According to Cheong (2009), director of sales and marketing
at the Legend ale Beijing Hotel, stating in China daily, like Halloween and Christmas,
Thanksgiving is becoming more popular in big cities like Beijing and restaurants have started
promoting the Thanksgiving dinner two weeks before the festivals. The menu also has changed,
like they use Chinese chestnut when cooking roast turkey. Thus, the popularity of Western
festivals in mainland China is worth to explore and the chance expand the product line, and the
market share as well.
Product Innovation
Due to the mass recall of Chinese made product, people worry about exceeding lead in paint,
loose magnet and other defective. The new product should ease and relieve this kind of worries,
the direction of product design should be back to the basic, which mean we design the product
without using any additional components and artificial raw materials, but something come from
nature, just like wood to produce vintage items like traditional Christmas decoration. There is
evidence showing that parents in American would like to look for wooden and all-natural toys
for this Christmas because of the threat from quality of product. (China Daily,2007).

Price
Pricing Objectives
After successful brand building, the target customers should be those consumers who are
pursuing high quality product and willing to pay more to obtain that sense of safety. Thus pricing
objective should focus on achieve product-quality leadership, in which marketers use price to
signal high quality in order to position the product as the quality leader. From the case study of
1990s baked bean price wars mentioned by Kotler (2005), in which Heinz's strategy was not to
price down with their competitors but invested in the quality of the product by adding ring-pull
ends on the cans for easy opening, then Heinz's market share went up at the end,
it shows that customers are willing to pay more for better quality product.
Pricing approaches
Value-based pricing
By using value-based pricing, the target price is based on customer perceptions of product value,
and I believe that our high quality product made by natural materials should be position high in
quality seeking customers' mind as we discuss before. Thus, it is believed that the price can be
marked up high and making great profit.
Product-bundle pricing
By using product-bundle pricing, several of product are combined and offer the bundle at a
reduced price, such as the bundling of Christmas and New Year product or Halloween and
Thanksgiving product as their date are close. Even the price is lower, but it can attract more
customers and increase the sales, which end with greater profit. Moreover, leader bundling can
help the sales of non-leader product or less popular product, such as Easter product in China, in
which a leader product, like Christmas product, is offered for discount if the customer purchase
Easter product as well.
Promotion
To develop effective advertising, first starts with noticing consumer insight, then create
awareness, end with advertising.
Consumer insight
Dawn Iacobucci (2001) suggested that knowing what consumers think is the foundation of
effective advertising, in which the consumer insight pertains to how consumers use advertising
information to make brand decisions. We find that organizational customers and end-user
customers both are concerning about the quality and safety problem of the product, especially
end-user like those parents are seeking product made with natural material and without any
artificial addition like lead. Moreover, the customers are willing to pay more in exchange for
better quality product. Thus, we should use this insight to develop advertising that promotes the
high quality and safety product developed by the brand HCC.


Create Awareness
As the brand is newly built, using advertising to create awareness is necessary. According to
Jobber (2006), creating company awareness can help legitimizing its product to its customers;
advertising in this way can improve the acceptance of product.
Using public relation activity is a good way to create awareness to the public, defined by the
Institute of Public Relations, the purpose of public relation is to establish and maintain good will
and mutual understanding between an organization and its public'. Using press conference to
introduce the product to public, convey the message of high quality of the product, build up
strong image of the brand.
Advertising
Putting advertisement on major media like television, magazines and newspapers can draw most
audience attention. No matter what media we use, it is also conveying the same message of high
quality and safety product, and most important is to relate the brand to the happy atmosphere of
festival. Using charming color and music in the advertising to create festival mood, as using
color can be an effective means of prompting message recipients to elaborate on their feelings
about the product (Dawn Iacobucci, 2001), like using red color implying active and lively which
is suitable to brand of festival decoration manufacture. The ultimate goal is linking the brand and
festival in customers; mind, once they thinking of festival would consider the product of HCC.
Place
Distribution Channel
No matter consumer goods or business-to-business goods, all need a channel of distribution.
Consumer channels
As HCC it owns its production line, so it is producer, at the meanwhile, and wholesaler. So the
distribution channel can be producer direct to consumer' and producer to retailer to consumer'
which also equals to wholesaler to retailer to consumer'.
Producer direct to consumer
For the domestic customers, the Internet provides the platform to supply consumers directly
rather than through retailers, which can cut out the distributor profit margin and make greater
profit. What we need is a website with trading system and connection with physical distributing
system like FedEx to deliver the goods after consumers order it. More details are discussed in the
part E-commerce below.
Producer to retailer to consumer / Wholesaler to retailer to consumer
Buyers from overseas are mainly the retailer, who goes the wholesale market to choose and order
the goods as used to be. With using E-commerce, the oversea retailer can also order on the
Internet and wait for the delivery, which is time saving and convenient.
E-commerce
Using E-commerce in selling product can create competitive advantage, according to Jobber
(2006), like uninterrupted trading hours, lower price, lower costs, improved service quality and
greater product variety.
As the producer can communicate with suppliers and customers directly, without using an
intermediary, lower price can be provided to customers after cutting the intermediary from
transaction. Moreover, the physical shop or wholesale market is not essential, the expenditure
like rent and administration can be reduced, hence can reduce the cost.
There is no limited and uninterrupted trading hours, which mean trading can be done in 24 hours
7 days, which is convenient to the oversea customers located in the area has time difference from
China. Furthermore, the service quality can be improved as the customers can get helps or
sending enquiry by sending email, the producers also can get instance response from the email or
the feedback form filled by customers.
The store in wholesale market is physically restricted in terms of space, which causing barrier to
display the goods to customers. Using Internet can avoid the restriction of space, all items can be
displayed, and those the greater product variety shown can attract more potential customers.



































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