REED EXHIBITION CHINA PESTEL ANALYSIS

1. Introduction

Reed Exhibitions is one of the top events operator all over the world with an increasing portfolio of 500 events in exhibitions, meetings and conferences. It serves 43 industry sectors (such as aerospace, engineering, food and IT) in 30 countries (RELXGroup, 2015). Reed Exhibitions build a platform which enables enterprises and their customers to conduct business, to communicate and to network effectively and efficiently. The headquarters of Reed Exhibitions is located in London, and has principal offices in Beijing, Paris, Sydney, etc. In this paper, we will focus on its office in China.

Due to the dramatically increase of China’s economy, China’s exhibition industry has developed rapidly over the past ten years. Based on the statistical data of the Global Association of the Exhibition Industry (UFI), China’s indoor exhibition space (4,755,102 square meters) took the second place of the world after the US in 2011, occupying 15% of the world’s and 72.04% of Asia/Pacific’s total (UFI 2014). In 2015, China’s total exhibition space amounted to about 89,000,000 square meters (CCPIT, 2015), and it was predicted that the revenue in Convention and Exhibition Services industry would be 4.7 billion dollars in 2016, increasing by 7.9% compared to 2015 (IBISWorld, 2016). Thus, China was regarded as a valuable market for exhibitions industry.

Reed Exhibition has entered in China’s exhibition market for more than 30 years with high-speed development. By merging exhibition companies in China, Reed Exhibition in China has 9 member companies and joint ventures. Compared to other foreign-fund exhibition companies, Reed Exhibitions was ranked No.1 by holding 30 exhibitions in 2015 (CCPIT, 2015). As for the exhibition area, the exhibition space of Reed Exhibitions was 1.23 million square meters and took the third place after UBM Asia (1.55 million) and Messe Frankfurt (1.5 million) (CCPIT, 2015). In the annual report of RELX Group in 2015, the exhibition market in China was still seen significant growth rate even though the total growth of revenue was -4%. Therefore, the China’s market is more and more important for Reed Exhibition Group.

In order to continue maintaining a sustainable competitive advantage in China, it is essential to analyze external environment and factors in case of a change. In this paper, the PESTEL framework will be used to identify Reed Exhibitions Group’s macro environment. Besides, the paper will analyze whether Reed Exhibitions is now ready to take advantage of Environmental factor.

2. PESTEL

• Political

Regarding the political factors, one main opportunity stands out: the fact that under the supports of the local government, companies can reduce their operating cost. The supports of the government can be divided into two points.

The first one is government subsidies or related preferential policies, but different regions have different policies. Taking Suzhou as an example, in the document of “Instructions on take incentive to encourage the development of exhibition industry in Suzhou”, the government provided subsidies to key exhibitions which were satisfied the instruction. Based on the actual numbers of the booths in the exhibition, each booth could be subsidized 500 yuan with the maximum amount not exceeding 500,000 yuan for 3 years (Suzhou Bureau of Commerce, 2011). The second one is that the government will provide related services for exhibition companies. In the “Act for encouragement of the exhibition industry in Kunming”, the local government was responsible for filing, guiding, coordinating and servicing of local exhibition activities (Kunming Exposition Affairs Bureau, 2015). For example, the government can coordinate public security and the fire department for the safety of customers. These benefits from government allow companies to save cost and communicating effectively among local government departments.

However, the exhibition industry has a main political threats which is the inefficient administrative approval process. This would therefore increase the uncertain problems, for example the time of an exhibition might be delayed. But based on the new policy pronounced in 2015, those approval processes in different cities will be cancelled one by one.

• Economical

The economic factors that have effect on the exhibition industry are as follows. Not only is the development of China’s economy increasing, but also the increasing numbers of convention and exhibition centers brings opportunities to hold exhibition all over the China and create profit. Based on the World Bank data, the GDP per capita in China has been increasing from $955 to $7920 since the year of 2000, which indicate the profitability of the China’s market and purchasing power of buyers. By the end of 2014, there were 178 professional convention exhibition centers which were distributed in 30 provinces, and the total available area for exhibitions was 6,864,663 m2 (CCPIT ,2015). The great amount of choices provides exhibition companies chances to attract potential suppliers and buyers.

As for the threats of economical factor, both of the imports and exports of goods and services (% of GDP) began to decreased from 2011, which was accordance with the weak trade performance among Pacific area (Yao, 2016). The effect on imports and exports might have negative influence on the profit of exhibition industry. However, some efforts would be done by China’s government to save exports, such as stimulating borrowing from banks (The Guardian, 2016).

• Social

Globalization was considered as one of the driving forces for the growth of the exhibition industry in China because globalization increased the demand of holding exhibitions due to the inflow of products, foreign direct investment and capitals (Jin, Weber and Bauer, 2010). Therefore, more and more exhibitions began to be hold in emerging markets especially in China. On the other hand, as the Increase of international standing and prestige in China, some Large-scale international events were shifted to China, such as the 2008 Olympics Games in Beijing, Expo 2010 Shanghai China, and 2016 G20 Hangzhou summit. As China had more opportunities to cooperate with international events, there would be tremendous potential for exhibition industry in China. However, the awareness of safety for events in China has become increasingly important in the eyes of consumer because of the terrorism. It is therefore vital for exhibition companies to show that they are socially responsible in order to make sure the safety of customers and have abilities to deal with accidents.

• Technological

Regarding the technological factors, the main opportunity is how highly innovative the ways of communicating with target markets. It is able to rapidly respond to exhibitors’ requirements, increase the activity of participants and further address potential buyers. In China, the most popular way of communicating is Wechat, which provide functions like Public Platform, online shopping, company promotion etc. These function provide exhibition companies a great opportunity to connect with customers, market penetration and ordering booths online.

Since the mature of Virtual Reality(VR) and Augmented Reality(AR) technology, the demand of holding VR/AR exhibitions has been rising recently. VR technologies could be used on touch-screen displays and Internet for an exhibition, and AR technologies provided an intuitive and interesting ways for buyers to interact with exhibitors (Wojciechowski, Walczak, White and Cellary, 2004). Reeds has caught this trend by investing and acquiring some technology companies, such as C-Touch in China (touchscreen technology and manufacturing) (RELXGroup, 2015). However, the new trend of VR/AR could also be a threat to Reed Exhibition, because it cost a lot to invest in this area. Furthermore, as Rines (2000) pointed out, virtual exhibitions could be a potential threat to the physical exhibitions, so the existed exhibitions of Reed would be influenced negatively.

• Environmental

In 2016, China launched its 13th “Five-Year Plan” (FY13) which was highly related to solving environment issues such as climate change, air pollutions and clean energy (Davies, 2016). The FY13 will create new atmosphere for industries of energy conservation and environmental protection, and therefore provide opportunities for exhibition companies to hold a series of environmental-related exhibitions, meetings and conferences.

Even though the hot topic of global warming will bring exhibition companies opportunities, the problem of climate change in China will bring risk for cancellation. Taking Wuhan in 2016 as an example, it suffered from flooding in both downtown and rural areas due to continuing heavy rainfall. The transportation systems (trains, buses and airplanes), water and electricity supplies in Wuhan are badly influenced. Thus, the 43th Wuhan International Yangtze River Crossing Festival was canceled based on the terrible flood.

• Legal

Protecting the Intellectual Property Rights of an exhibition was one of the most important area in China now (Torremans, Shan, Erauw, 2007). It used to be the weakest part in China, but the government begins to work on this problem especially from the 12th Five Year Plan. They have launched related regulations and measures in case their IPs are copied or stolen. The strict control of IP will attract more foreign companies with their own IP to come to China for trade fairs. In term of protecting IP, Reed Exhibition works with Schmitt & Orlov Intellectual Property in order to provide services on intellectual property for foreign exhibitors.

In China, there is no national legal act on managing key aspects of exhibitions. Instead, constitution law, consumer protection law or procedural law will be used to deal with different kind of issues during an exhibition. Even though there are some regional regulations for exhibitions, the level of these regulations are low in China’s law system (Zhang, 2015).

3. Reeds Exhibition and environmental challenges today

Under the atmosphere of increasing demands for “Green” product, exhibitions with environmental theme have been a hot spot for exhibition companies. In 2015, based on the data collecting from exhibition information website, China hold 132 large-scale exhibitions related to Green and Environmental Protection. It is necessary to analyze whether Reed Exhibition prepared to take advantage of environmental trends or to deal with difficulties, and therefore standing out from other exhibitions.

Based on the exhibition plan of Reed Exhibition in 2016, there are 70 exhibitions in all, but only one exhibition is related to energy conservation and environmental protection. Regarding this opportunity, one can say that Reed Exhibition started to catch the trend of the energy conservation and environmental protection. At the end of 2015, Reed Exhibition (China) signed an agreement with China Foreign Trade Guangzhou Exhibition General Corporation to hold “Pollutec China” together. “Pollutec China” was originally from France that was focus on how to reduce the influence of people’s activities on the environment, industry, local authorities and the service sector in South China. Reed Exhibition was aimed to build the first exhibition of industrial environmental protection. Beside this, there is still much potential for Reed to expand such professional platforms for other environmental-related sectors, like green energy, household products, etc., and for other geographical sectors, like the south-west and the north-east.

Climate-related risks are raised suddenly and unpredictable, especially for exhibitions which are supposed to organize at least half a year in advance. It is hard to predict this threat, but companies should provide a backup or emergency plan for any exhibition activities. In term of the threat of climate change in China, Reed Exhibition has a good team to deal with emergency. Based on Yue (2008), who was worked for Reed Exhibition in China, the International Sales Group will prepare a plan for any exhibitions in case of accidents, so the loss could be decreased to minimum.

4. Conclusion

In conclude, the PESTEL report provides Reed Exhibition a references for taking into consideration, and therefore profile a possible scenario for the future. From this report, it can be seen that the macro-environment in China’s market is favorable and worth to explore in the long term. Reed Exhibition can take advantage in these opportunities and deal with threats confidently in 2016.

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