INTRODUCTION
As a person with knowledge of the issue regarding the revaluation / appreciation of renminbi, I have always brought up to my superiors the viability of strategy formation regarding the analysis of this issue and at times fail to understand the reasons or logic behind certain strategic implementations imposed on it.
By delving into this project paper, I intend to have better insights into how the perspectives of the US and China regarding the revaluation issues of renminbi are thought up, formulated and then imparted down. I hope to have an in-depth understanding as to how these perspectives enable China and the US to compete effectively and profitably in this era of internationalization where competition is extremely intense.
In order to reinforce the learning objectives, two key focal issues were focussed upon i.e. innovation and diversity. Innovation was discussed with regard to the issue regarding the revaluation / appreciation of renminbi where it was renowned for its developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation I considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the issues being discussed.
The issue regarding the revaluation / appreciation of renminbi can be summarized by the varying perspectives of China and the US. China aims for appreciation of the renminbi because their government thinks that this will result into the efficient and effective implementation of the policies and tasks necessary to satisfy the needs of their citizens, only that they do not agree to the fast pace of appreciation that the US government suggests. The United States, on the other hand, believes that the immediate appreciation of renminbi will help them towards their careful management of the processes involved in the production and distribution of their products and services.
More often than not, small countries don’t really have the capabilities to directly influence the appreciation of their currencies. Instead, these countries engage in activities that various schools of economics typically associate with currency value management. These activities include the manufacturing of trade products, product development, production and distribution.
However, the issue regarding the appreciation deals with all operations done within countries and global economies. Activities such as the management of purchases, the control of inventories, logistics and evaluations are often related with appreciation / revaluation. A great deal of emphasis lies on the efficiency and effectiveness of processes. Therefore, the issue regarding the revaluation / appreciation of renminbi includes the analysis and management of internal processes within China and the US.
CHINA‘S PERSPECTIVES
China aims for sustainable growth as a broad market leader in various industries as well as for segment leadership in most of its products. In both cases, the renminbi currency of China will play a crucial part. China believes that through the appreciation of the renminbi they will be able to establish a broad leadership by acquiring shares in global markets, leading to the efficient marketing of their products all over the world. China also believes that the appreciation of renminbi will enable them to offer even more job opportunities for their people, improve the country’s operations, and be able to introduce new technologies that can reinforce the positions of their products and services. This will practically result in economies of scale that will enable China to create a distribution network for both their local and international products and services ( 2002).
Through the appreciation of renminbi, China will be able to secure the growth of their industries in a sustainable manner, while at the same time constantly improving the country’s profitability. The strategy to achieve this involves four elements:
US PERSPECTIVES
The United States believes that the fast and immediate appreciation of renminbi will be of great benefit to them, especially in the process of segmentation. Segmentation is a key factor especially in markets where a broad leadership position has yet to be fully developed ( 1989). In these markets the US strives for strong positions especially in the premium/import and specialty segments. Good examples here include the US’s leading position in the supermarkets as well as in the recently established convenience stores in China. In both examples, the United States shows its desire to establish autonomous growth through the selling of more and more brands and expansion through the distribution networks as well as growth through acquisitions (2001). And they believe that the faster appreciation of renminbi will all the more contribute to the success of their segmentation plans especially in China.
ADVANTAGES OF RENMINBI APPRECIATION
Among the competitive advantages that will be both enjoyed by China and US upon the appreciation / revaluation of renminbi are:
· Economies of Scale and Scope in manufacturing and research and development arising from its numerous facilities situated in China, US and other countries worldwide.
· Unique Quality Technology owing to heavy emphasis on research
US and China’s commitment to research & development activities has always been one of its top strategies to remain competitive in the market, and it will be further be boosted by renminbi’s appreciation.
· Differentiated Products
Through the production and marketing of differentiated products originating from the appreciation of renminbi, China and US will be able to create its own specific advantages. The continuous pursuit of research and development processes will enable China and US to produce a steady stream of originally differentiated products which makes it difficult for competitors to find substitutes. Because of this differentiated approach, China and US will be able to market their products worldwide, which enables them in turn to maximize the returns on research and development expenditures and the appreciation of renminbi.
DISADVANTAGES OF RENMINBI APPRECIATION
Political Trends
The possibility of the occurrence of political crises upon the fast-paced appreciation of renminbi within the ASEAN region will not be helpful at all to US and China’s strategy to solidify their top position in the global market. While the appreciation of renminbi promotes common tariffs among member countries, other non-member countries will have no choice but to follow the individual national tariffs imposed on their products. Nevertheless, both the US and China should view the appreciation of renminbi as an opportunity rather than threat as the earlier issues have identified.
Economic Trends
The possibility of the occurrence of global recessions brought about by the appreciation of renminbi may have a direct impact on US and China’s strategy of dominating the world market. Also, there are huge differences in terms of the GDP per capita earnings among the ASEAN member countries. This situation should make both the US and China ponder about its positioning strategies in certain ASEAN countries.
Social/Cultural Trends
With the rise in the middle to upper-middle class households in certain countries within the ASEAN region, there exists a strategy mismatch for not considering the potential for consumer market.
Technological Trends
There is a need for both the US and China’s business strategy to be aligned to any revolutionary changes impacting the appreciation of renminbi.
Industry Rivalry
There is a possibility of the occurrence of a high level of rivalry between and among Asian countries upon the appreciation of renminbi. This certainly may have a grave impact on the overall industry profitability within the US and China, and pose a threat to them.
FORECAST AND EXPECTATIONS
Deriving from the analysis between the environment, strategy and capabilities, many strategic options would become imperative. It is therefore essential to evaluate these strategic options as to whether they are appropriate to the issues addressed, whether they are feasible enough to be implemented and their acceptability to key stakeholders.
There is definitely a need to reconcile both the inside-out and outside-in capabilities. While both the US and China’s business strategies involve focusing on their core competencies with market position following their resource base, both countries will be put into a disadvantageous position should they choose to neglect the pros and cons of the appreciation of renminbi. Therefore, China and US have to be aware of the latest changes in the value of renminbi, as well as changes in political, economic, legal and even demographic trends in order to develop the outside-in capabilities, such as market sensing, customer linking, channel bonding and technology monitoring ( 1997).
The potential advantages that will be enjoyed by China and US following the appreciation of renminbi may come in the form of increased revenues. Knowing what the market demands and the latest currency trends could help both China and US fully exploit their research and development capabilities to come out with products and services which are not only cost-effective but also high in quality and performance. The strategic option can even be used as marketing tool where the focus is on staying close to their investors and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on China and US.
Nevertheless, the mentioned strategic option seems the most practical in the wake of globalization, since there is a sudden shift towards a more integrated and independent world economy. The key stakeholders too should not have any objections so long as US and China’s core industries are not threatened. By virtue of their centralized control over the appreciation of renminbi, it is being expected that major barriers should not exist in carrying out such an option except additional time may be required given the scope and span of the operations of both countries.
CONCLUSION
The results of the analysis carried out on the perspectives of China and the US regarding the appreciation of renminbi indicated very significant effects, even amidst the threats of unrest. Therefore, we could conclude that the perspectives of China and the US could still be expected to improve faster than average.
The review of the advantages of the appreciation of renminbi revealed very little inconsistencies regarding the strategies of China and the US. This is coherent with their traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for both countries.
The analysis of the disadvantages of the renminbi appreciation revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure the competitiveness of China and the US even after the renminbi appreciation.
Also, the US and Chinese government have to find a balance between adherence to internal forces within the management and to the changing forces of the environment in order to implement such strategic options.
REFERENCES
Credit:ivythesis.typepad.com
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