China and the WTO

In addition, Legend advantages from search and type service within the Chinese Academy of Science.

China's Personal computer industry is a lucrative prize for firms that will infiltrate it successfully. While more than 70% of China's population lives in rural areas and cannot afford PCs, the urban population is wealthier and represents the size from the U.S. market (Schmit 01B). Further, though over 50% of American homes own a PC, only 2% to 3% of China's homes are equipped with 1 (Schmit 01B). Though Legend has enjoyed its success in large measure because it doesn't face the restrictions quite a few foreign competitors do, all of this may perhaps transform with China's ascension for the Globe Trade Corporation (WTO).

Once China's membership inside the WTO is finalized, Legend will face increasing pressure from foreign competitors like IBM and Dell. As Paul Bai, assistant vice president at Taipei, argues, "The most essential impact on Legend right after China joins the WTO is rising competition from Dell, Toshiba, and IBM" (Hung PG44). China's membership within the WTO ways it will be forced to drop tariffs on imported components and products. In accordance with Schmit, in the Personal computer sector "such tariffs amount from 6% for chips to 30% on full systems" (01B). Organizations that make and sell PCs in China like Legend have no these kinds of tariffs. Despite this impact of WTO membership, Legend keeps its costs low, approximately 10% to 15% lower than foreign competitors (Schm

 

Anonymous. Lengthy Yongtu: Accession to WTO: 2 major trends for China. Beijing Evening News, Might 22, 2002: 1.

Schmit, J. Legend during the making: U.S. businesses lag as Chinese firm's marketplace share in China soars. USA Today, Dec 6, 1999: 01B.

Recently Legend executives took component during the 2002 Commercial & Industrial Summit: International Opportunities and Challenges of Chinese Enterprises after Entry into WTO. At this time executives argued that a couple of primary trends must be successfully managed if Legend is to remain the top seller of PCs in China. As Lengthy Yongtu noted, "One trend is changes in legislation; 580 regulations were abolished with additional unreasonable local regulations gradually abolished...the other is expansion of China's open policy to reduce tariffs and establish a transparent predictable system" (Long 1). WTO reforms and increased competition will really enhance China's competitive power. Improvements in region efficiency because of WTO membership will also have a sure impact on Legend.

With respect to lowered tariffs, Legend does import this kind of merchandise as chips, difficult drives and operating systems, so it is going to also benefit from WTO membership lowered tariffs. China continues to have the lowest labor costs that will support maintain costs low for Legend. In addition, Legend's inventory management ought to allow it to keep prices low and win industry share from other countries despite its WTO membership. For example, Legend's inventory level is generally less than 20 days as compared to 30 days for firms like Compaq. As Chi Lo argues, even following WTO entry, "Inventory liquidation has put pressure on provide levels and, together with low labor costs, enabled China to cut export costs and win marketplace share from its neighbors" (23).

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