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05/15/2012

HK Exhibition Industry


HK Exhibition Industry

 

A.   Hong Kong exhibition industry

The immediate post-1997 period was a difficult time for the SAR government in various senses. Firstly, the sudden economic downfall was unpredicted and, for an open economy, there was indeed little the government could do. Secondly, the emergence of social, legal, and health issues in 1998 and 1999 led to a considerable degree of disgruntlement on the part of the public. In addition, the speculative attack on the Hong Kong currency and the financial market was well-coordinated, ruthless, and left little room for the Hong Kong authority to act (Li 2002). The post-1997 Hong Kong can adopt a dual economic strategy. On the one hand, the post-1997 regime can introduce drastic changes and even a reorganization of resources that were either not introduced or incorrectly deployed in the colonial era. The various strategies pursued in 1998 and 1999 contained both externally and internally oriented elements. Consolidation of the financial sector, aimed at strengthening the business role of Hong Kong, is externally oriented, whereas the widening of the economic base and promotion of long-term investment attitudes is internally oriented. While externally oriented strategies favor the business community and preserve Hong Kong's international status, there is also room for internally oriented strategies. With a population approaching seven million, the domestic market is large enough to sustain considerable economic changes (Lui & Mathews 2001). An industry that participates in Hong Kong’s business environment is the exhibition industry. The exhibition industry has firms that try to create the best trade and exhibition fairs in the region. The paper wants to make an analysis of the exhibition industry’s competitiveness and investment prospects.  The paper also will answer under what circumstances does strategy matter.

PESTEL

Political

Nationalism has remained a powerful force in Chinese politics at the same time when transnational forces are making a significant impact on China's international behavior. In asserting importance of sovereignty in China's conduct of foreign affairs, the Chinese leaders have to recognize the constraints imposed on their capacity to an act within the context of interdependence. The opening up the Chinese economy to the outside world means a significant degree of accommodation and acceptance of external standards (Dunning 2002). The notion of sovereignty has to be changed, even though this is not necessarily acknowledged. In fact, developments in Hong Kong have also influenced the mainland. As China's window to the world, information, technology, western political and social attitudes found their ways through the territory. The impact of the Hong Kong presence on the mainland and frequent visits by residents from both sides are difficult to measure, but the Hong Kong economic model has clearly inspired changes on the mainland. Associated with Hong Kong's growing influence in neighboring coastal China is the broader process of regionalization. Hong Kong's links with the rest of the Asia-Pacific have become far more significant in recent years. The territory's trade within the Asia-Pacific region has grown rapidly in the past two decades (Chan 1997).

Hong Kong’s role as the key communication center in the region will soon be further strengthen by the installation of high-speed optic-fiber transmission systems linking Hong Kong with Guangdong and neighboring economies. Hong Kong is also serving as the hub of satellite links in the region. In approaching the question of Hong Kong's involvement with the world from a broader angle, the globalization perspective concentrates on the territory's extensive external links and reliance on the global economy and its role as a center of transnational activities. It serves to demonstrate the importance of external forces in the development of the territory. It will be a major folly to overlook the impact of global transformation on the territory's development. From a narrower angle, the nationalization perspective focuses on China's importance in determining Hong Kong's future and the Chinese's of the Hong Kong community. This perspective places emphasis on the continuing relevance of the state and the centrality of sovereignty in the contemporary world. It brings us down to earth by highlighting the power of nationalism and the pivotal role China plays in determining the future of the territory (Pui-Tak 2001). To make sure that trading will be taken care of Hong Kong created a trade council. The Hong Kong Trade Development Council (HKTDC), a semi-governmental organization in charge of trade promotion, outlines the territory's importance as a business center on a routine basis. The territory is a highly popular location for international conferences and trade fairs. Hong Kong Trade Development Council is the primary government-related organization involved in trade promotion, it did not even have service industries within its promotion mandate until 1996 (Bickley 2001).Through the HKTDC, the government of Hong Kong makes sure that it maintains the exhibition industry. Any political issues in Hong Kong do not affect the exhibition industry since the HKTDC serves as a mediator between the government and businesses in the exhibition industry.  Currently some members of the exhibition industry accused HKTDC of playing favorites and showing anticompetitive behavior which the agency denies.

Economic

It is relatively common to distinguish the term economic development from economic growth, though they are used interchangeably in some cases. Economic growth has a connotation of quantitative expansions in economic variables, especially aggregate and per capita national incomes as measured by such statistics as GDP and GNI. Therefore, the analysis of economic growth is concerned mainly with measuring growth in economic variables and identifying their interrelationships such as between the national income growth rate and the speed of capital formation (Boyd & Ngo 2005). On the other hand, economic development is usually conceived as a process involving not only quantitative expansions but also changes in non-quantitative factors such as institutions, organizations, and culture under which economies operate. A country’s economic growth over the past decades rested upon the success of economic reform in opening up people’s mindset, through creating a variety of incentives and establishing multiple channels for people to gain access to technical, social and economic knowledge of the wider world. To sustain economic growth in the twenty-first century, a country has to work out its own way to build up a sophisticated civil society that allows the individual and the nation to develop hand in hand (Jomo 2003).

The government policies should help people gain access to global information and  knowledge; create incentives to encourage development of knowledge and thoughts; and formulate institutional infrastructures that support ever wider participation by people from different social groups in the management of their community, and in the social, economic and political development of the nation. Economic growth has been achieved by most East Asian countries particularly Hong Kong and China. With the exception of Hong Kong, most physical infrastructure in East Asia has been provided by governments until fairly recently, when there have been the beginnings of privatization in the provision of physical infrastructure, which has become the basis for powerful private monopolies associated with crony capitalism (Fureng & Nolan 2003). The role of government has been extremely important in providing so-called social infrastructure and services in East Asia. There is also tremendous diversity in the role of industrial and technology policies in East Asia. One extreme, of course, is Hong Kong, where there is relatively little industrial policy, although more than most opponents of industrial policy care to admit. It has been far more detailed and sophisticated in Japan and Korea at the other end of the spectrum. In Korea, industrial policy was largely oriented towards large firms, whereas in Taiwan, much more emphasis was given to medium and relatively smaller enterprises. There have also been different orientations, emphases and instruments in industrial policy in the region. For example, the role of trade policy has been very important in almost all economies in the region except Hong Kong and Singapore, while financial policy has been important in all the countries, including Singapore, but again, with the exception of Hong Kong. Since Hong Kong’s reversion to China in mid-1997, there have been many indications of the likely introduction of industrial policy for the territory, presumably in line with its new status and China’s envisaged role for the de-industrialized financial centre (Wu 2004). The success of the economy in Hong Kong can be attributed to the contributions of the exhibition industry. Around HK$19 billion was earned by the country from the exhibition industry’s trade fairs and other endeavors.

Social

The society in Hong Kong has not only been internationalized, it has maintained its passion for business endeavor. Exhibition industry is successful in Hong Kong since people are still inclined to attend fairs and trade activities amidst the internationalized culture. The project cultural internationalization has assumed special irony and impetus. The fortune and trajectory of Hong Kong are even now being decided in a spate of international negotiations and obscure power plays, in which Hong Kong society is not permitted to play an active role. Despite how international and modernized the city's facade has become, it stands as less than a nation able to prescribe its own political destiny. Culture is, however not as unrelenting as politics. While the latter is constrained, maybe the culture field can do better in securing sympathetic hearings and even respect for Hong Kong (Ma 1999). Herein lays the more imminent meaning and prerogatives of cultural internationalization embodying ideals which, moreover, are seemingly within reach with the nascent cultural vision of an alleged greater Hong Kong. The interface of Hong Kong culture with the international scene can be considered in somewhat less holistic, yet nonetheless significant, terms. Thus, even in purely outward appearances, the cultural make-up of Hong Kong displays a dazzling bricolage of motifs, style, and artifacts assembled from all over the world (Postiglione & Tang 1997).

The question is not so much one of assimilation and indigenization in the eventual consolidation of an autonomous cultural formation. It is more a question of the passive desire for the exotic, the chic, and fashionable for the ins and outs as defined someplace else in the world. That modern Hong Kong society has been acutely fashion-conscious is a common impression. The Hong Kong cultural world is as a rule marked by the quick succession of fads welding together the alleged latest trends in some legendary cultural capitals. This is certainly another distinctive mode of articulation in the problematic of internationalization, the mode that in fact endows Hong Kong culture with its prominent international, cosmopolitan outlook in real terms, the progressive articulation of this eclipsed problematic in the past years does not appear particularly striking or regrettable to the casual cultural consumers and observers. The exuberance of cultural styles, choices, or artifacts can remain undiminished. The presence of free-floating cosmopolitanism can remain glamorous and endearing all on its own. And in economic terms, the pervasiveness of cosmopolitanism also widens the market and volumes of cultural commodification (Brown & Liu 2002). Even on the political front, the vibrancy of cosmopolitanism implies that potential streaks of radicalism can become much diluted by the facile abundance of cultural choices and pluralism. The circuit from global culture into cosmopolitanism can in itself serve as the immediate scaffolding of cultural life, whether in Hong Kong or elsewhere. And what society and culture stand to lose is neither obvious nor urgent to the cultural industrialists or the consumers. After all, Hong Kong society seemingly has more pressing issues to worry about than remote pondering on cultural creativity, identity, indigenization, or their combined repercussions on external and internal dynamics. The two programs of the cultural internationalization problematic can thus have far-reaching analytical and interpretive implications. Above all, they amount to the fact that insofar as the actualities of Hong Kong society are concerned; the internationalization problematic can be taken to mean two very different cultural scenarios (Sing 2004).

Technological

Economic globalization and digitization produce a spatiality for the urban that pivots on deterritorialized cross-border networks and territorial locations with massive concentrations of resources. This is not a completely new feature (Krause & Petro 2003). Over the centuries cities have been at the intersection of processes with supra urban and even intercontinental scaling. What are different today are the intensity, complexity, and global span of these networks and the extent to which significant portions of economies are now dematerialized and digitized and hence able to travel at great speeds through these networks. Also new is the growing use of digital networks by often poor neighborhood organizations to pursue a variety of both intra- and interurban political initiatives. All of this has raised the number of cities that are part of cross-border networks operating at often vast geographic scales. Under these conditions much of what people experience and represent as the local turns out to be a microenvironment with global span. The juxtaposition between the condition of being a sited materiality and having global span captures the imbrications of the digital and the non digital and illustrates the inadequacy of a purely technological reading of the technical capacities of digitization. Such a reading would lead one to posit the neutralization of the place-boundedness of that which precisely makes possible the condition of being an entity with global span (Rawnsley, GD & Rawnsley, MT 2003).Hong Kong has acquired internet technology. Businesses and members of the exhibition industry have used the internet to market its services and promote the different trade fair. The internet technology made sure that the exhibition industry will flourish and be known to people.

Environmental

The exhibition industry has to make sure that they respect the environment and regulations Hong Kong has created to protect the environment. The exhibition industry is affected by the changes in the use of resources friendly to the environment. The exhibition industry has to make sure that resources used in trade fairs and events will be environmentally safe. The exhibition industry makes sure that the  trade fairs and conventions will refrain from using plastic and other dangerous materials.

Legal

The exhibition industry is affected by the laws in a country. Any new law on events or activities may mean additional cost for the industry since they will have to comply with what the law states. Hong Kong’s laws do not hamper the exhibition industry from performing its activities. The country is supportive of the exhibition industry and it makes sure that the exhibition industry remains competitive. The exhibition industry makes sure that it follows any laws pertaining to employment, discrimination, health and safety and other consumer related regulations. 

Five Forces

Threat of new entrants

The new entrants can be new companies that would like to try competing with the exhibition industry or international firms that would like to penetrate a foreign market. New entrants to the country or region would have high influence over the exhibition industry since this would mean newer competitors.  New entrants in the country or region might be able to provide newer processes, technologies and systems to the clients of the exhibition industry.  New entrants to the country or region might create processes, technologies and systems that can overpower the processes, technologies and systems used by the exhibition industry. This might cause the lesser number of clients.

Competitive rivalry

Competitive rivalry would have a very high influence over the exhibition industry since the exhibition industry must ensure that the strategies or processes they use will help them survive the emerging competition. Competitive rivalry can either push the exhibition industry to fail or continue to succeed against competitors.

The bargaining power of suppliers

The exhibition industry’s suppliers include the companies who provide them the venue, the materials, the banners and all other things they use in conducting the trade fair. The bargaining power of suppliers highly influences the exhibition industry since the loss of support from supply resources would mean that they cannot provide the just service to clients. If a good service cannot be given then the provider of supplies can make demands and dictate the prices of the supplies, technologies and other things used by the exhibition industry.

The bargaining power of customers

The bargaining power of customers or clients highly influences the exhibition industry since the industry needs to satisfy or give in to the wants and needs of the clients. The customers and traders dictate what type of trade fair services need to be provided and what should be the characteristics of a trade or convention. The number of customers or traders availing of the exhibition industry’s services affects the pricing and valuation for their products and services.

Threat of substitutes

As of now substitutes have low influence over the exhibition industry. Substitutes are in the form of unique services slightly similar to what the exhibition industry offers. Since there is no alternative available, the exhibition industry would not be concerned of substitutes. If ever there would be substitutes, the new services, processes or technologies that would serve as an alternative to the exhibition industry would be a threat to the industry. Any occurrence of substitute services, processes or technologies may make the exhibition industry lose its current clients or it may force the exhibition industry to start sudden changes to its services.

Advice that would be given to a new entrant to entering this industry

The new entrant to the exhibition industry would have a hard time in competing in such industry. The new entrant would have to face companies that have been in the industry for a long time. The new entrant would have to face companies like Newfair HK Ltd. And Oriental Expo Services Ltd. The two companies are already established and know the processes in the industry.  The new entrant would need to determine technologies and processes that would differentiate them from the established companies. The new entrant would also face the turmoil being faced by the exhibition industry. The exhibition industry in Hong Kong is currently entrenched in what was deemed as anticompetitive behavior wherein some firms use unethical strategies.  Companies in the exhibition industry as well as the government are in the process of determining means to reduce the anticompetitive behavior. The challenge for a new entrant is to survive in the anticompetitive environment. Moreover the new entrant in the exhibition industry should have something new to offer. If a company would enter the exhibition industry it must make sure that it will offer something different. If a company would enter the local industry it must make sure that the services it has is incomparable and it is what the Hong Kong environment need.

B.   Would entering the industry be a good investment?

Entering the industry would still be a good investment. The environment in Hong Kong played a good part in making sure that the industry would be a good investment. Hong Kong has highly favorable market, government, and competitive globalization drivers. Hong Kong, on its own, has mostly unfavorable cost drivers, but these become highly favorable when southern China is added as Hong Kong's hinterland. Hong Kong's cost globalization drivers are now its weak point. The cost of doing business in Hong Kong ranks among the highest in the world. Limited land combined with high demand for office space and housing has driven rent up to Tokyo and Manhattan levels. Low unemployment levels have driven up wages, and are not likely to go down anytime soon. Hong Kong has the worst labor situation in Asia relative to cost, availability, and turnover. This is balanced, however, by a hard-working, productive, and educated work force. This labor situation makes Hong Kong more suited to performing high-value-added tasks and professional services (Vellinga 2000). Logistics are Hong Kong's strong point in cost globalization drivers. Hong Kong is served by a highly efficient and modern transportation system, which is constantly upgraded to keep pace with economic development. Hong Kong's government globalization drivers have been the most favorable in the world for business in general and MNCs in particular. These drivers combine completely open trade, low taxes, and minimal government intervention in business on the one hand with a strong legal and social system, a highly efficient civil service, and total political stability on the other. Almost unique in the world, let alone in Asia, the government does not try to protect local industry from foreign competitors. The Hong Kong government makes no distinction between local and foreign companies, and it welcomes investment from both. There are no exchange controls, capital and profits can be freely repatriated, and there are very few restrictions on foreign investment. Hong Kong has ready access to the latest technological advances. In some cases, Hong Kong is the regional design center for high-technology firms. As there is no Chinese standard in most areas of technology, Hong Kong readily adopts standards developed elsewhere (Yip 2000).

C.   Under what circumstances does strategy matter?

Strategy matters in almost every business processes and activity.  Strategy matters in making decisions, knowing and conquering the competitors and other important processes in a business. Strategy matters because the firm’s future depends on the strategy it uses. The strategy used by a firm needs to be in accordance to what it needs and what the company desires to happen. Although it is important for a firm to identify its competitors, it is no less important to identify competitors with different strategies than it is to identify those with related strategies. In identifying the competitors the firm can know risks and problems they might encounter. The concept of the strategic group risks diverts attention from a competitive strategy known as the identification of distinctive capability (Morrison 2000). The strategic market is the minimum area in which a firm can successfully compete. It is a combination of economic markets drawn together by economies of scale and scope. Sometimes the boundaries are narrowly defined, associated with fragmented industries in which innovation is rare or in appropriable. Sometimes the imperatives of scale and scope are such that the strategic market is the world market. The successful firm dominates at least one strategic market. Any firm's core markets are those to which its distinctive capabilities, or strategic assets, are directly relevant. Without some such markets, there is no prospect of adding value. But the firm's added value can be leveraged by the addition of other markets in which the economies of scale and scope associated with its key markets allow it to serve that market more effectively or at lower cost. Firms with true distinctive capabilities generally serve their market using these in a unique combination (Phills Jr., 2005).If the BCG matrix will be used wherein high growth and high market share will be a primary concern, strategy does matter since the company will need to make sure that it maintains a high level of growth and a good market share. Strategy will be used to create some actions that will improve the current growth levels of a firm. Strategy will be used to attract clients and innovate the trends in an industry. Strategy will be used to reach more markets and thus make a higher market share.  Strategy will be used to penetrate more markets to achieve a higher market share.

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