Matthieu David about Senior Market in China – Daxue Consulting

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Market research China: corporate training outsourcing in Shanghai

Market research China: corporate training outsourcing in Shanghai

The market research has been conducted to give a rough estimation of the market size of corporate training in Shanghai for SOEs (State Owned Enterprises). Such “corporate training” refers to those can be outsourced by enterprises to training outsourcing companies.

What is corporate training outsourcing?

Corporate training is often competency based and related to the essential training employees need to operate certain equipment or perform certain tasks in a competent, safe and effective manner. The primary role is to ensure an employee has the knowledge and skills to undertake a specific operation to enable an organization can continue to operate. Certain companies create customized training plans for client companies, Corporate Training outsourcing, including registration, logistic back-up, curriculum design, program management and class assessment etc.

Demand for corporate training outsourcing is growing in shanghai

The SOEs in Shanghai can be possibly divided according to different industry features and thus have distinct demand for corporate training. Therefore, it is essential to group all the SOEs after figuring out all the potential demand for corporate training.

Our market research mainly focus on the corporate side and look at features of different enterprises which determine their need for corporate training: (boldface shows key words)

  • Enterprises are on the “up-curve” and have strategic plans for the coming years. They try to either search for proper talents to fill the job demand or need corresponding corporate training to train more capable employees.
  • Enterprises are seeing from their own performance appraisal report or competency model (a model that fully evaluates inner motivation, knowledge skills, self-image and social role characteristics) and find the reasons of bad performance and shortcomings of employees to see whether training demand is emerged.
  • Enterprises that have recruited a great number of freshmen, fresh graduate for instance, or new coming employees need systematic induction training.
  • Enterprises own a great number of grass-roots employees such as piece workers who require standardized qualification and need corporate training on a large scale.
  • Enterprises that are small or medium sized or have immature corporate structure urge to concentrate on immediate production growth and cost minimization, so immediate outsourced training services are in bad need.
  • High-tech enterprises that take special social and political responsibility, offer public services and have close connection with government, such as information networks, public transportation, grain reserves, usually own their systematic internal training programs and do not need to outsource for its most secret sections but outsource for other purposes like team building or team cohesiveness.

For simplicity and rough estimate, we conduct our market research by leaving out consideration of the second type enterprises whose demand for corporate training are mainly based on enterprises’ own growth and development needs, which are also determined by other not representative internal and external factors.

In government’s perspectives, SOEs in Shanghai are divided according to their different functions:

  • Competitive enterprises: market oriented and the aim is mainly to maximize the profits, earn competence and market power, better if social welfare improves.
  • Functional enterprises: occupy national special resources; mainly keep up accomplishing assigned ad-hoc and strategic tasks like achieving technical improvement, infrastructure improvement.
  • Public services enterprises: aim to maximize social welfare; guarantee city stability and normal operation and essential public services, such as public transportation, environment protection and water supply etc.

Combined with the demand analysis, pre-market research and typical enterprise categoriesabove, SOEs that need general corporate training outsourcing in Chinaare roughly divided below according to business size, industries and development phases:

  • Competitive enterprises that are still at their growing stage in China
  • Large companies that regularly outsource corporate training
  • SMEs concentrate more on training but with less capital invested in than large companies.

Apart from the above enterprises, functional enterprises and public service enterprises require more specified training outsourcing services:

  • For functional enterprises, they call for team building and enterprise culture construction related training to enhance team cohesiveness.

Reason: such enterprises require great unity and team cohesiveness to reach the targeted goal. Corporate training should be adapted to this goal.

  • For public service enterprises, they call for service standardization related training, except for too professional skills and services.

Reason: such enterprises perform to serve the country and a set of standard and scientific operation and service line is extremely significant, except for too professional skills and services.

Methodologies used for this market research in Shanghai

Our market research’s goal was to find out the total number of SOEs in Shanghai and the equivalent GDP shares in different groups. We need to find out the types of companies which have most demand on corporate training in China, how often the training services will be purchased by the same company in a certain period (one year), how soon the company will repurchase the product, how much on average each service package costs and finally evaluate different groups in this similar way. Addition to the traditional way of calculating the market size, we tend to consider mostly its substitutes, such as internal training programs. The basic and general computing method is:

The number of target enterprises X the purchase per enterprise in a year X the unit price of corporate training outsourcing service / purchase frequency = rough estimate of market size for corporate training outsourcing

The target enterprises will be divided into SMEs and large SOEs and the two sets are divided again according to their different functions. Therefore, Shanghai’s companies will be divided into 6 groups (match the calculation in the next section):

  1. large competitive enterprises
  2. large functional enterprises
  3. large public service enterprises
  4. medium and small competitive enterprises
  5. medium and small functional enterprises
  6. medium and small public service enterprises

With minor adjustment to the figures we work out –the adjustment for existing substitutes, we can get a rough estimation of the market size in Shanghai.

Market research’s key finding and analysis of corporate training market in Shanghai

corporate training market research China

Note that all the numbers above was based on Shanghai economy in 2011.

  • GDP of SOEs is measured at 20% of overall GDP in Shanghai, up to 400 billion RMB.
  • The distribution of three typical types of SOEs is derived by 42 representative SOE sample in Shanghai.

So the rough estimated proportions of three types are:

  1. competitive enterprises: 71.4%
  2. functional enterprises: 19.1%
  3. public service enterprises: 9.5%
  • The average cost of corporate training outsourcing of large SOEs are about 2% of their GDP and the cost contains internal corporate training. If SOEs assign a large part of training outside the company, we can give an approximate estimation of corporate training outsourcing costs of about 1.0-1.5% (excluding the internal training programs). For smaller companies and companies at their growing stages, the costs could be slightly lower, which is estimated to be around 1.0% (we try to ignore the difference that the smaller growing enterprises make, to regard all these kinds of firms as 1.0% of GDP).
  • The frequency to outsource for SOEs is lower than 1 product per year. For simplicity, we take 1 per year as the case.
  • Based on previous analysis on the demand of different types of corporate training, we simply take general training as 1 unit of training at a time, and specified training for functional and public service trainings are respectively 0.5 in proportion.
  • The scale of large SOEs is measured mainly by GDP, at least grow over 300 million RMB, taking up over 70% of all SOEs. However, for most of public service enterprises, the bottom line is 150 million RMB, taking up nearly 100% of all public enterprises. (National policy, 2003)

Therefore, to take full advantage of all the statistics and rough estimation, we could calculate the upper bound of market size group by group (characterized in Methodology):

 400*71.4%*70%*1.5%*1/1+400*71.4%*30%*1%*1/1+400*19.1%*70%*1.5%*0.5/1+400*19.1%*30%*1.0%*0.5/1+400*9.5%*70%*1.5%*0.5/1+400*9.5%*30%*1.0%*0.5/1=4.63 billion RMB

The lower bound of market size:

400*71.4%*70%*1.0%*1/1+400*71.4%*30%*1%*1/1+400*19.1%*70%*1.0%*0.5/1+400*19.1%*30%*1.0%*0.5/1+400*9.5%*70%*1.0%*0.5/1+400*9.5%*30%*1.0%*0.5/1=3.43 billion RMB

Great potential in corporate training outsourcing in Shanghai

Given the statistics and market research data above, we reach the conclusion that the market size for corporate training in Shanghai for SOEs is roughly estimated within 3.43 ~ 4.63 billion RMB, which takes up on average 0.86% to 1.16% of the GDP of SOEs enterprises, equivalent to 0.17% to 0.23% of total GDP in Shanghai. Therefore, it is a large number using the demand analysis and methodology in this report. In other words, we can see great potential in corporate training outsourcing for Shanghai SOEs.

corporate training Shanghai

Chinese References

Market research China

State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government:

Sina Finance news:

Caixin Finance news:

Shanghai Statistics:

Dfdaily news:

Department of finance of Guangdong Province (it shows national policies, applicable to Shanghai’s)

Hotel market in China

Hotel market in China

Due to rapid growth and development, China is becoming a major center for tourism and business. As a result, there is an increasing demand for hotels and resorts, which offer high-standard service for tourists and businesses from different parts of the world. This led to rapid development of hotel market in China during the past decade.

Classification on hotel market in China

Hotels can be divided into two major categories: holiday’s resorts and business hotels. Beijing, Shanghai, Shenzhen and many other financial and industrial centers of China mostly offer hotels for business: such facilities as conference rooms and gym are necessary. In places such as Sanya, most of the hotels are resort-type, which offer swimming pool, all inclusive board and children facilities, which are more appropriate for tourist.

hotel market in China

International hotel chains are highly rated by Chinese consumers

There is a huge number of hotels, located on the territory of China including hotel chains. Some brands as Shangri-la, Shanghai Jinjiang International Hotels, InterContinental Hotels, Guangdong (International) Hotel Management Holdings, and Jinling Hotel Corporation are market leaders. However, as long as the market is highly saturated and comprises a lot of brands-big and small-top 4 hotels currently account for only 4.3% of market share, according to market researches in China. Moreover, “love for luxury” among Chinese consumers plays a leading role in choosing a hotel. Sheraton, Hilton and Marriott are highly rated by Chinese consumers even though the hotels are not explicit market leaders. Such hotels as InterContinental and Shangri-la are also loved by Chinese consumers although these are evident leaders on hotel market in China.

What Chinese customers like about international hotel brands?

Chinese hotel chains constitute for the majority of market leaders of the industry except for InterContinental, which is originally a British company. However, international hotels are also extremely popular among the Chinese due to their “name” and high-quality hospitality standards. It is broadly accepted, that European brands are associated with high-standard service among the Chinese. It is a crucial fact on Hotel market in China.

hotel industry in China

Industry’s growth is promising

According to market research in China, the industry has been growing 9% annually for the past few years. Construction and urbanisation, which have accelerated in the country for the past decade, create more opportunities for hotel industry. Sanya, which is usually referred to as “Maldives of China”, has been recently developing and attracting more investment in the areas of hotel construction and tourism development. As a result, there are currently over 100 hotels on the island and an increasing number of tourists every year.

2010 was the most successful financial year for the industry since 2008 economic crisis. Since then, hotel market in China has been experiencing a slowdown: annual number of tourists has been reducing by 2% annually since 2011. However, massive construction and urbanisation are expected to stabilise the industry’s growth in the future.

market research China


For more information:

Market research China

SJ Grand

Market Research China: identify trends in China

Market Research China: identify trends in China

[to see more about market research in Shanghai]

FMCG Trends in China

China’s FMCG sector suffered a bit of a setback at the start of 2014, with a 1.3% drop in growth from 7.4% last year to 6.1% by end of Q1. Consultants suggests that the slowdown is due to decreased growth in household spending and the rise of average prices, but the overall trend in FMCG in China is less negative. Below are the results of market research conducted in China to provide an insight into the market and to identify trends in China, and suggestions to counteract them.

Chinese consumers are more willing to pay for premium

identify trends in China

The steady rise in China’s GDP per capita, in comparison to the relatively sluggish European and American growth rates, has led to a consumer base that is more interested in paying for premium brands and goods. According to market research, in addition to prestige items like fashion accessories, the increased disposable income has resulted in many consumers upgrading their FMCG selection in circumstances where there is an obvious high-tier next step; for instance in food, beverage and personal care products. Overall, the Chinese market is becoming increasingly sophisticated, placing an increased emphasis on quality.

Premium trends: What to do about it?

n  Identify trends and knowing your customer’s needs and purchasing patterns is even more important than before. As China’s premium brand consumption grows, companies must have concise research keeping them up to speed with their demands and brand experiences.

New trend for Healthy lifestyle products

In addition to becoming more quality-focused, the growing Chinese middle-class is becoming increasingly health conscious. Certain FMCGs like milk and baby products, while recent health scandals have devastated consumer trust in local brands, are seeing a willingness to pay higher for a safer product showed market research in China. Particularly in lifestyle products such as health care and cosmetics, consumers are looking more and more towards premium brands, and we identify a trend for imported ones.

Healthy lifestyle trend: What to do about it?

n  Leveraging the Chinese desire for healthy products to achieve penetration requires informed branding and advertising. Companies should consider conducting focus groups and surveys to test a product’s impact on the market.

Market research in second and third-tier cities are showing greater growth

The slight dip in FMCG sales is mainly focused in the tier-1 cities such as Beijing and Shanghai. Market researches in Hangzhou, Qingdao or Jinan identified that the growth still remains high in second and third tier cities as disposable incomes there begin to rise. While still flagging behind the more sophisticated purchasing markets in tier-1 cities, the consumption trends remain similar. As secondary and tertiary cities continue to grow, market insight suggests consumption in those cities will begin mimic tier-1 cities.

Growing trend in second and third-tier cities: What to do about it?

n  Increasing a brand’s footprint means establishing a wider network of distribution. Although FMCG purchasing trends in China may be similar across cities of similar tiers, there is still a significant divide between spending habits in different geographical locations; on-site market research is invaluable.

Distribution channels for foreign brands in China

The need to engage with and recruit customers at a base level has made the hands-off wholesale distribution model obsolete. In addition to the murky nature of Chinese wholesale, brand loyalty can no longer be maintained through the attractiveness of a foreign brand. Foreign companies especially need to be more proactive in converting customers and establishing contact at the point-of-sale. This requires a larger physical presence. However, online channels should not be ignored.

What to do about it?

n  Market research, such as mystery shopping surveys, should be conducted to ensure that the consumer has a good first experience at the purchasing point to ensure penetration.

Ecommerce trend has taken off in China

market research china

Although market research showed that offline sales still dominate China’s market at nearly 97% last year, ecommerce has seen rapid growth even in Q1 2014, with 32% of households reported as having used an ecommerce site at least once in that period. Since FMCG are particularly popular among Chinese consumers, and consultants identify trend of reselling of foreign products, if foreign companies haven’t set up a means of selling their products directly on local ecommerce sites, it would be advisable to do so.

Ecommerce trend: What to do about it?

n  Establishing an ecommerce shop is simple for an individual who is physically present in China. However, as online shopping habits vary, companies should analyze local competitors’ practice to identify the unique selling points that will recruit customers away from cheaper, local FMCG alternatives.

Local producers edging foreign companies out

Recent market research suggests that foreign companies are slowly losing share in China to local companies. In addition to weak brand presence, foreign companies are suffering from a lack of penetration due to unclear advertising campaigns and local alternative products. Although large brands such as Walmart and Carrefour can overcome this, and have remained roughly stable, overall loss is noticeable.

What to do about it?

n  As was mentioned above, recruiting, converting and retaining customers is crucial. Considering the speed at which the Chinese market changes, local companies may have an edge in terms of market research in China, but foreign companies that put the effort into researching and establishing a dependable and trendy brand in China can expect to experience a degree of stability.

Daxue Consulting, Market research China

See also: mystery shopping Beijing


Market research on Coffee shops in China

Market research on Coffee shops in China

China has a rapid growing coffee culture as the consumption grows 10 to 15 per cent yearly while in the rest of the world the average is about 2 per cent. Though China is far from being the largest coffee market, but many are believed that it will soon surpass many European countries and Japan, being the second largest market after the US. Our focus is a market research on coffee shops in China.

Though deeply influenced by the thousand-year-tea-drinking culture, Chinese are more and more open to western lifestyle. It is a part of the overall expansion of western food and way of life in China.

Foreign brands dominating the Chinese coffee shop market

Coffee shops in China

The very first foreign brands coming to China was Nestlé (雀巢), which now owns around 75% of the instant coffee market. But according to market research in China, this segment is seen as inexpensive (1.5 RMB per packet), convenient and lower quality among Chinese.

Unlike Nestle, Starbucks targeted the high income consumers. While China is already the largest market for Starbucks in the world, the brand will keep investing in China, aiming to have 1500 stores in more than 70 cities by the end of 2015. With an operating margin of 33,7 % in the China/ Asia Pacific region, Starbucks dominates China’s coffee shop market with 60% share. Still, Starbuck meets some slight troubles in China. Its pricing is comparatively much higher than in the US, and Starbucks have been even criticized by CCTV (China Central Television) in 2013.

Also, Starbuck has to deal with an always more fierce competition in Coffee shops market in China. As the British coffee chain Costa Coffee entered China in 2006, situation has slightly changed. It quickly captured public attention and now has a share of 8,9% in retail market. By 2016, Costa aims to have 500 stores. Other brands such as 85 Degrees from Taiwan are also entering Chinese market these years; it offers coffee with lower price and it is famous also for the fresh baked bread and pastries what Chinese consumers often drink coffee with. It is estimated to have 450 stores by 2017.

Key strategies to enter into coffee shop market in China

Compared with more than 400 cups of coffee for an average American on a per year basis, 4 cups per year for a Chinese is way too small to consider China market of coffee shop as a well-developed market. Even compared to its Asian neighbour Japan, who also has a long tradition of drinking tea instead of coffee, Chinese market for coffee still have not been fully developed. Therefore, potentiality is so huge that many other foreign brands are eying this under developed market.

Some key strategies that foreign companies should bear in mind that:

Firstly, according to market research in China, Chinese consumers consider drinking coffee as a social event; seldom people drink coffee alone or on the road, they prefer to drink coffee in a comfortable environment with friends. Thus, installing a coffee shop needs a more spacious venture.

Secondly, Chinese consumers dislike the bitter taste espresso. Just like what Starbucks did, they add fruity taste Frappuccino and other sweet drinks to adapt the taste of Chinese consumers, other newcomers should not keep the old rule, innovation and localisation are needed to get successful in China.

Thirdly, if companies want to launch business in big cities where the pre-existing competition is already fierce, the pricing strategy is essential. How to keep price low while maintaining a sustainable development is a key issue worth studying.

Coffee shop market research

Market research in China

Daxue Consulting