1. Executive Summary 执行摘要这份报告的主要目的是为澳大利亚葡萄酒有限公司董事会成员（AVL）的商业计划。该报告批判讨论了金融在中国提供的各种渠道AVL相关的相对优点和风险，并评估不同资金来源的资本AVL的费用的影响。AVL是全球最大的葡萄酒公司在澳大利亚和产品有关的葡萄酒，每年总金额的9％中的一个。大约有超过两百万的情况下，每一年对面新西兰亚洲地区。遍布世界各地的商店有密切的联系，使最新的新闻和条件可以相互知道并服务于公司更好。根据当前的经济形势下，有必要开拓中国市场（澳大利亚葡萄酒有限公司（AVL）的投资市场，2013年）。据分析优势和在中国金融风险的来源，发现中国是最具潜力的市场销售其产品。随着可用的策略，它可以激励AVL在中国稳步发展。The main purpose of this report is to create a business plan for the Board of Australian Vintage Ltd (AVL). The report critically discusses the relative merits and risks associated with the various sources of finance available in China to AVL and evaluates the effect of different financial sources on AVL’s cost of capital.AVL is one of the largest wine companies in Australia and products about 9 percent of the total amount of wines every year. There are about over two million cases each year across from New Zealand to Asian regions. The stores all over the world have close connection so that the latest news and conditions can be known from each other and serve the company better. According to the current economic situation, it is essential to develop the Chinese market (Australian Vintage LTD (AVL) of Investsmart, 2013).According to analyze the strengths and risks of financial sources in China, it is found that China is the most potential market to sell its products. With an available strategy, it can motivate AVL to steadily develop in China.2. Introduction介绍Australian Vintage Limited is a leading wine company in Australia that produces and exports bulk and bottled wine. It is a public listed company and has developed cooperative relationship with the large distributors such as Tesco in the UK, E&J Gallo in the U.S to deliver its products to overseas markets. In this report, based on the herding theory, the market entry model export is designed to sale the bottled wine produced by Australian Vintage to China which is a huge potential market considering its population and enhancing consumption competence (Carbone, Enrica, 2010). However, the competition in this market is intensive with the domestic competitors and the foreign competitors such as companies from France, Italy, Spain and Germany. This report aims to enlighten the business environment in China and explore the feasibility of exporting to this country that gives some guidance for Australian Vintage to make optimal market entry choice.3. Current Situations of Australian Vintage Ltd 大利亚葡萄酒公司的现状AVL has been very successful – both domestically and internationally. Wine sales and consumption has been growing strongly. Wines produced by Australian Vintage are targeted to a wide range of people all over the world from New Zealand, Asia, North America, and UK to Europe. According to the research, Australia is a country with the highest wine consumption. In the production of the wine, AVL owns advanced and excellent technology in producing wines along with many advantaged places of wineries. The high-quality goods and services provided by the company draw people’s eyes and the trade strategy help AVL expand the scope of services and distribution to the foreign market. Moreover, the cultural of the company also motivates large number of employees to work hard for the company and as they said, working in AVL is a pleasure thing. The challenges they faced and the achievement they finished are treasure for them. On the other side, they also form the trading infrastructure of the company and help it gain benefit, customers and reputation.Wines produced by AVL are recognized the world over thanks to the diversity of regions, brands, production capabilities and winemaking talents (Research Report on Chinese Wine Industry, 2012, 2012). From the earliest days, AVL has championed Australian wines to the world. One of the pioneers of wine export, Fay McGuigan, has been hailed as ambassador for Australian wines in international markets. Representing approximately 50% of the business, today it exports over two million cases every year to New Zealand, Asia, North America, the UK and Europe. The capabilities also extend to private and exclusive label wines, where the demand is strengthened by the relationships with Tesco in the UK and E & J Gallo in the US. The Chinese market is now recognized as the strongest worldwide for branded wines and in early 2006.AVL continues to look for new opportunities in China through the newly formed wholesale business channel (Chu, A. C., Cozzi, G., Galli, S, 2011). AVL is pursuing a number of opportunities from this strong base into Asia. Wine demand in China continues to grow exponentially and Australian Vintage has been developing opportunities in the region for a number of years. AVL is expanding the distribution, channels and agents to capture this growth. The American market remains challenging but in the longer term could present opportunities. Our sales in Canada are growing well, and demand for Australian wines in North America is still strong.4. Discussion of the Merits and Risks of Finance in China金融在中国的优点和风险的讨论Generally, companies invest capital overseas in order to broaden the markets and diversify and receive higher returns (Marquis Codjia, 2014). AVL, as an international company, also plans to expand its market share and increase its revenues through establishing a subsidiary company in China (Branstetter, L., Feenstra, R, 1999). If AVL enters into the Chinese market, they can share the merits in China. At the same time, there are some risks in Chinese market.4.1 Merits of Financial Factors in ChinaAs it is rising for wine demand in China, it has become one of the most significant target markets for international wine manufacturers (Mertha, A., 2009). More and more consumers tend to accept western wine. Moreover, Chinese investors realize that red wine is a new investment direction to counter inflation. Therefore, it is a good opportunity for AVL to set up a subsidiary in China.China is a large country both by area and by population. It has abundant minerals and the infrastructure keeps improving with developed surface transportation network and convenient communication network. This provides the basic support for business operation in this country (Jiantang Ma, 2011).The population in China is the most advantages than other countries do not have, plus Chinese people which has been well educated is willing to get more profit by doing trade, as we know “boozy cadre culture” in China is very common, Chinese business man mostly like prefer to make a deal in restaurants rather than in his office, also family party when people getting together wine is what they need. In recent years, Chinese economy is getting bloomed, and live in China is making people wealthy, then it definitely leads to the higher level of marketing needs of wines. Therefore, the products we have, it just fit the market in China and the culture in Chinese.4.2 Risks of Financial Factors in ChinaFinancial risk, as an implicit factor in global commercial activities, reflects losses which may happen if a firm’s commercial partners can’t afford repaying debts or losses which stem from political instability overseas. Besides, financial risk in global commercial activities may result from changes in currency prices in fiscal markets (Hall, J. & Lockshin, L. & O’Mahoney, G.B, 2001). If AVL invests in China, it will also face some potential risks in this emerging market. Currency Risk: It relates to losses which may derive from currency appreciation or depreciation. Appreciation expresses that a country's central bank raises the money value. On the other hand, depreciation is the opposite. If AVL has net revenue from Chinese deals presently valued at $5 million. If the U.S. dollar declines compared to Chinese currency in six months, the net income of AVL may be decreased to $4 million, with a loss of $1 million (Jongmoo Jay Choi & Bang Nam Jeon, 2008). Credit Risk: it may result from counter-party defaults, because of going bankrupt or short-term currency issues. If AVL cooperated with a Chinese company that had a liquidity problem and may apply for bankruptcy in the near future. AVL’s net accounts receivable balance with this company is $3 million. Once this Chinese company applies for bankruptcy, AVL may lose $3 million (Leonard K. Cheng & Yum K. Kwan, 2000). Political Risk: Political instability or social unrest can also cause losses, when a company operates in another country . For example, if AVL operates in China that is experiencing political instability, it may cause the asset losses due to the political risk (Lawrence, S. V. & Martin, M. F., 2012).#p#分页标题#e#5 Effects of Financial sources on AVL’s Cost of Capital资本的AVL成本的资金来源影响The cost of capital is a concept applied in the domain of fiscal investment in relation to the cost of a firm's capital (both debt and stock), or on the view of investors, the stockholders request profits on a portfolio firm's current securities (Easley, David & O'hara, Maureen, 2004). The cost of capital is applied to assess new projects of a corporate as it is the minimum return which investors hope to supply currency to the firm, thus establishing a benchmark which a new project has to meet. The criterion method for deriving cost of capital assessments is on the base of the seminal Modigliani-Miller analyses (Titman, Sheridan, 2002).International demand for wine has grown importantly in China. Wine is not only an product of preference, but also an investment commodity. The rate and rise in value is special to the specific wine, and some wines increase (or decline) more quickly than other goods. If it occurs the credit crunch, it will influence wine price and quantity. Fluctuations in foreign currency exchange rates can result in instability of operations and may unfavorably influence the fiscal situation. For example, if AVL purchased raw materials from China, changes in the exchange rate will influence the raw material prices (Lee G. Branstetter , Robert C. Feenstra, 2002). It the exchange rate is good for AVL, it can save some material cost and reduce the costs of production. Otherwise, it cause a higher cost of production.6 Conclusion 总结In conclusion, wine consumption is growing in China. There are many wine producers , so AVL will face the cruel competition in China. Besides, when the products are exported in China, exchange rates will influence its sales and benefits (Qian Sun & Wilson Tong & Qiao Yu Journa, 2002). Because of the instable market conditions, the Board realized that it was unwise to invest more wine products in China in the near future. Nevertheless, they plan to re-evaluate whether it is necessary to invest by the year-end of finance. According to the situation, based on the pecking order theory, it is necessary to closely concern about producing the high-class wine and expand the brand effect in China (Thomas Nagel, 2013). It will go on with enhancing the capital management. The writer will continuously pay close attention to drop debt, so it can meet the commercial demands to develop the Chinese market.7 RecommendationsIn Chinese market, wine is becoming more and more prevalent. There is a certain space for new projects. It is a good opportunity for AVL to establish new vineyards and wine making equipments in this dynamic and growing market. When investing this emerging market, it is essential to follow some tips: Research the Chinese market: From analysis of the Chinese market, it can ensure the investment scale and scope of consumers, so it can design a special marketing scheme (Patrick N. Osakwe & Chantal Dupasquier, 2006). Know the competition: The 500 or so wineries in China satisfy the majority of the domestic market, but most can’t reach the global quality. Foreign companies, particularly the French, have cooperated with Chinese wineries for a decade. Study the relevant laws and restrictions: It is necessary to know the Chinese laws about wine in order to operate in China smoothly and legally. Learn the Chinese culture: For the Chinese, bigger is better; more expensive is high-quality; The red color stands for fortune and happiness (Olivier, 2013). Promote the brand via Internet and e-commerce. In recent years, e-commerce is booming, it is a good approach to promote its products through e-commerce. Reference 文献Autrralian Vintage LTD (AVL) of Investsmart. (2013). Retrieved on 17th January.Branstetter, L., Feenstra, R. (1999). Trade and Foreign Direct Investment in China: a Political Economy Approach. NBER Working Paper No. 7100.Chu, A. C., Cozzi, G., Galli, S. (2011). Innovating Like China: a Theory of Stage-Dependent Intellectual Property Rights. Working Papers 2011-14, Department of Economics and Finance, Durham University.Carbone, Enrica. (2010). Ownership Herding and Informational Herding. Applied economics letters, 17 (10), 1201-1204.Easley, David & O'hara, Maureen. (2004). Information and the Cost of Capital. The Journal of Finance, 59 (4), 1553-1583.Hall, J. & Lockshin, L. & O’Mahoney, G.B. (2001). Exploring Links Between Wine Choice and Dining Occasions: Factors of Influence. International Journal of Wine Marketing, 13(1), 36-53. Jiantang Ma. (2011). Statistical Yearbook of China. Retrieved on 14th January,.Jongmoo Jay Choi & Bang Nam Jeon. (2008). Financial Factors in Foreign Direct Investments: A Dynamic Analysis of International Data. Research in International Business and Finance, 21 (1), 1-18.Lawrence, S. V. & Martin, M. F. (2012). Understanding China’s Political System. Retrieved on 15th January.Lee G. Branstetter , Robert C. Feenstra. (2002). Trade and Foreign Direct Investment in China: a Political Economy Approach. Journal of International Economics, 58 (2), 335–358.Leonard K. Cheng & Yum K. Kwan. (2000). What are the Determinants of the Location of Foreign Direct Investment? The Chinese Experience. Journal of International Economics, 51 (2), 379–400.Lawrence, S. V., Martin, M. F. (2012). Understanding China’s Political System. Retrieved on 16th January,.Marquis Codjia. (2014). Financial Risk and International Business. Retrieved on 19th January.Mertha, A. (2009). Fragmented Authoritarianism 2.0: Political Pluralization in the Chinese Policy Process. The China Quarterly, 200.Olivier. (2013). 10 Tips to Marketing Wine in China. Retrieved on 18th January, 2014 from.Patrick N. Osakwe & Chantal Dupasquier. (2006). Foreign Direct Investment in Africa: Performance, Challenges and Responsibilities. Journal of Asian Economics, 17 (2), 241–260Qian Sun & Wilson Tong & Qiao Yu Journa. (2002). Determinants of Foreign Direct Investment across China. Journal of International Money and Finance, 21 (1), 79–113.Research Report on Chinese Wine Industry, 2012. (2012). Economics Week, ISSN 1945-6905.Titman, Sheridan. (2002). The Modigliani and Miller Theorem and the Integration of Financial Markets. Financial Management, 31 (1), 101-115.Thomas Nagel. (2013). Pecking Order. New York Times Book Review, ISSN 0028-7806.