SITUATION
Bill Moss and several other small business owners joined a trade mission to China to explore market opportunities there. The group learned that China has a population of 1.3 billion and is the third-fastest-growing export market for small and medium-sized U.S. fi rms. Average annual income for farmers in China is approximately $413 per person; typical urban income is about $1,322, with an average of $3,442 a year in more prosperous cities like Shanghai.

In any given year, the Chinese software market grows by 30 percent and the number of Internet users quadruples.

Furthermore, the demand for management consulting services is increasing, especially information technology consulting. Members of the group were surprised by the number of people who had cell phones and regularly surfed the Internet, especially in large urban centers such as Beijing, Shanghai, and Guangzhou. On the downside, they found that counterfeit goods (from clothing and leather goods to software and CDs) were readily available at a fraction of the cost of legitimate merchandise and that local merchants expressed an interest in doing business only with vendors with whom they had established relationships.

Question 1 What types of businesses would prosper in China? Why?

Question 2 What are the challenges and risks associated with doing business in China?

Question 3 What steps should Moss take to address these challenges and risks in order to increase his chance of success in the market?