Munich Personal RePEc Archive

Impact of Globalisation on baijiu — China’s spirits industry: A case study of the British Diego Plc takeover of Swellfun Company Ltd

Molintas, Dominique Trual (2012): Impact of Globalisation on baijiu — China’s spirits industry: A case study of the British Diego Plc takeover of Swellfun Company Ltd.

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Abstract

This paper examines the British takeover of the Chinese flag bearer of baijiu: Swellfun Co Ltd and the rationalisation of cross border entry mode. British distiller Diageo Plc shifts acquisition priority to the rapidly rising Asian markets, in order to compensate the decline in sales elsewhere. In 2010, Diego Plc made 32 percent of revenues from emerging economies. This forward push in Asia raised profits at 1.5 percent to value about £1.63b. On the other hand, revenues fell 3 percent in Europe, due the shrinking markets of Greece and Ireland. Early into 2000, baijiu tariffs account 34.4 percent for wine in containers below two litres and 38 percent for bulk wine. Halfway into the 2000 decade, tariffs fell to 14 percent for baijiu in containers below two litres and 20 percent for bulk wine. By so, easing regulations, costs and import barriers, an increasing number of baijiu distributors and brands have entered the market, resulting tougher competition. The Baijiu Case highlights the Chinese alcohol industry difficulty encountered as China liberalises trade policy. Given the cultural challenges with her traditional protectionist stance, the British takeover of the Swellfun Ltd Co and cross border market penetration was carried out. The case renders interesting insight on the changing economic program of China to keep control of country economy and political stability. Fundamentally, the PRC acts to ensure home grown industries get the most out of the market and continue to generate profits amidst free trade schemes. As it is, Chinese consumers have a broadened selection of competitively priced alcohol drinks, of good quality (China Statistical Yearbook 2003).

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