There is no doubt that nowadays globalization brings opportunities for companies to expand their business activities easily to take advantages of other country’s growth through investing activities. However, before investing to overseas, a company should make a careful examination of the country they are intending to invest in especially the industry related to their investment. Examining the relationship between risks will help to measure the risks the company has to encounter and the information is actually helpful for company in decisions making. Based on factual country information and financial analysis, this assignment will point out main factors that will impact Soundtech Technology’s general business activities when it starts business in China – producing low cost sound system for budget cars called “Superaudio”. This assignment will start with China background information and then six factors in PESTEL model these include political, economic, social, technology, environment, and legal will be presented. In addition, Soundtech Technology’s financial overview that includes financial factors as well as sensitive analysis will be conducted based on the data given. Lastly, some recommendations will be make to help Soundtech Technology in making investment decisions.

1. China background informations

– Area: 9,596,961 sq. km

– Population (July, 2010): 1,330,141,295. Annual growth rate: 0.494 %

– Ethnic groups: Han Chinese is 91.5%, ethnic minority and other nationalities are 8.5%.

– Religions: Officially atheist, Daoist (Taoist), Buddhist, Christian is about 3%-4%, Muslim is approximately 1%-2%.

– Languages: Mandarin is also called Putonghua is the main language in China, plus many local dialects.

– Government: Communist party-led state.

– GDP is $4.814 trillion (2009)

– Per capita GDP is $3,678 (2009)

– GDP real growth rate (2009): 8.7%

– Natural resources: mineral is plentiful including coal, petroleum, mercury, iron ore, natural gas, tin, tungsten, manganese, molybdenum, vanadium, magnetite, antimony, aluminum, lead, zinc, uranium. Moreover, China is the world’s largest in hydropower potential.

– Agriculture: China is one of the world’s largest producers of rice, wheat, potatoes, corn, peanuts, tea, millet, barley; commercial crops include cotton, other fibers, apples, oilseeds, pork and fish; produces variety of livestock products.

– Types of industry: China is focusing on mining, ore processing and others mineral such as iron, steel, aluminum, and other metals. Consumer product is one of the nation strongest industries. Transportation, electronics, telecommunications equipment as well as commercial space are major sectors.

– Trade: Exports (2009) $1.194 trillion: electrical and other machinery, including data processing equipment, apparel, textiles, iron and steel, optical and medical equipment. Main partners (2008) United States 17.7%, Hong Kong 13.3%, Japan 8.1%, South Korea 5.2%, and Germany 4.1%. Imports (2009) $921.5 billion: electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, plastics, organic chemicals. Main partners (2008) Japan 13.3%, South Korea 9.9%, Taiwan 9.2%, U.S. 7.2%, Germany 4.9%.

Undoubtedly, the electronics is the one of the leading industry in China’s manufacturing sector. Sales revenue from China’s electronics and IT industries (not including software) is estimated approximately $772.8 billion in 2008, reaching a growth of 28.3% over 2007. According to a statistical report by China’s Ministry of Information Industry (MII), sales revenue of China’s electronic information industry from January to April 2008 increased by 20.5% over the same period of last year. EE Times-China and ESM-China Market Research Dept predict that from 2006 to 2008, China’s electronics industry will maintain a CAGR of 25.5% (global sources.com).