Before the outbreak of the Second World War, Shanghai was referred to as the ‘Paris of the Orient' but after the Communist revolution of 1949 its significance diminished. Today, however, there is talk of it surpassing even Hong Kong in the not too distant future as a capital of enterprise. In the first four months of 1993 business-to-business output surged by more than 20%. American firms such as AT&T, Dupont, Merrill Lynch, Hilton and Sheraton have made their way to Shanghai, joining Volkswagen, Hitachi, Pilkington and many others.

It is on the east side of the city in the Pudong New Area that the business-tobusiness activity is most in evidence. During the past three years more than 1000 foreign firms have located there and investments have approached nearly $5bn. The Chinese government has chosen Shanghai to become the trade and banking centre not only of Asia but of the whole world by 2010, or at least to surpass Hong Kong as a financial giant. Commercial advertising in Shanghai is gaining in importance. In 1992 advertising appearing on city buses alone sold for more than 10 million yuan.

There are some 16 million hoardings on Shanghai's public transport buses every workday. In Shanghai today, chic young Chinese promenade on the Bund, the waterfront where European, US and Japanese colonial powers built one of the first commercial enclaves in China. Along Nanjing Road a million people pass every day. There the shops are full of foreign luxury items. New businesses in Shanghai are being established at the rate of five an hour.

But this growth in the business-to-business and commercial sector has created cost of living rises of around 20% a year. Moreover, the bill for a couple of drinks in a luxury hotel can amount to more than half a month's income for a Chinese peasant. Chinese women, like their Western counterparts, take a great deal of interest in their appearance and cosmetics are much valued. However, cultural factors have a very strong impact on their tastes, beliefs and attitudes. For example, in 1988 an exhibition in a northern city produced information that revealed that a cosmetic was required that would both moisturise the face and whiten it.

To meet this requirement, a new product ‘Xiafei Gold Brand Special Whitening Honey' was developed and introduced to the market, breaking the sales record with 20 million items sold in four years. ‘Xiafei' and ‘Olice' feature among the most well-known brands of cosmetics in China. Both products were introduced to the market by Cao Jianhua, who has just introduced yet another new product, ‘Chaotian'. Xiafei's success is attributable to its middle price position and suitability for a wide range of people. Olice was formulated by adapting a product and adding a biological ingredient known as SOD, which was supposed to protect middle-aged women from signs of age.

With the name ‘Blue Noble', the packaging was given the image of elegance in order to satisfy the customers' desire for fashion and modernity and the product was an immediate success. ‘Chaotian Beauty Treasure' was introduced in 1993 into the top ten department stores in Shanghai and this too has been an immediate success. The brand names, supportive of the positioning strategy adopted, were considered very important to their success. The names sound bright and modern in Chinese - ‘Xiafei' means ‘the brightening of a colourful morning glow' and names such as ‘Whitening Honey', ‘Blue Noble' and ‘Beauty Treasure' give the impression of safety, nutrition and grace associated with expected levels of product quality.

Question

1. Discuss the kind of marketing research that might well be undertaken with regard to fast-moving consumer and fashion goods in China.