The China Venture

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Available Distribution Channels Market Knowledge Relationship (Guan Xi) Swisstec, Swiss Partners FIGURE 3-14: Profile of Swisstec Financial Power & Capital 10 9 8 7 6 5 4 3 2 1 0 Quality of Infrastructure Available Management Resources Suitability of Product & Services Portfolio Production Know-how Chinese Representative At a first glance, Swisstec has nearly none of the characteristics necessary for entering the Chinese business. But their way to success is very creative and probably could act as a model for other SME's. Swisstec is a co-operation of nine SME's of the machine manufacturing industry which all have customers in the Chinese market. Being unable to set up their own sales organisation in China for cost reasons, they used "western guanxi" and formed a joint sales organisation. But still the Swiss partners lacked important dimensions like market knowledge, guanxi, etc. necessary for long-term business. This was all brought in by their Chinese partner - the former representative of some of the nine SME's. In this special case the management resources are also brought in by the Chinese partner resulting in an aggressive expansion of the Chinese network. 96
Which Aspects should SME's Focus on? From the facts discussed in the previous sections there are a few vital points each SME should take into consideration when going to China: The first question to be asked is whether the engagement in China fits into one's strategy. As strategic considerations are a basic task in all business environments we would like to concentrate on specific characteristics of the Chinese market: Fund raising for investment in a high-risk environment definitely asks for tailored solutions in each respect. Section 3.2.10 discusses various approaches SME's should take into consideration. Another important subject is how to provide the vital management resources for this type of project. Questions like whether one should employ local staff or rely on expatriates are discussed in detail in section 3.2.11. Finally, anybody doing business in China should be aware of the cultural differences between Western and Chinese people. As the right approach to country and people is critical for success the "Management of Relationship" is discussed in section 3.2.12. 3.2.10 Fund Raising for the Investment in China 3.2.10.1 How can the Swiss Government Support SME's Investing in China? Besides "classic" support like the Export Risk Guarantee the Swiss Government is going to create a "Swiss-Sino Partnership Fund" in the near future to help setting up joint ventures between Swiss SME's and Chinese partners. This fund is aimed to support SME's investing in China by not only giving the necessary capital but also non-financial support like unbiased advice for both prospective partners during the negotiation and preparation phase as well as active board level representation after the formation of the partnership. In return, the Fund will be a shareholder in the joint venture. The fund serves as a pilot direc t-investment program and still has to be ratified by the Swiss Government. Therefore no information on detailed application procedures and eligibility is available yet. Further to that, Swiss embassies also provide similar functions as chambers of commerce by supporting the prospective SME with information on the market, making contact to potential Chinese joint venture partners and giving legal advice to business related subjects. Other 97
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The China Venture: Business Environ
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Table of Contents List of Figures .
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3.2.3.2 Special Funds for Setting U
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3.4.1.1 National Culture ..........
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List of Tables TABLE 2-1: THE AREAS
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GBP Pounds Sterling GDB Guangdong D
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1. Introduction: The China Venture
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After a short discussion with the p
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co-operate with other firms, especi
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The Chinese operating legal system
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First of all, Britain’s predomina
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democratic centralism, all governme
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The courts are the state organs exe
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more than three hundred intermedia
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2.2.8 Company Law China’s first n
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Things seem have to become a lot cl
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2.3.1.1 Financial sector developmen
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securities, trading, initial public
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underdeveloped compared with market
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established in January 1996 by 59 p
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Chinese Banks Foreign Banks Financi
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system formulation has been put on
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The separation of production and co
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swap centres (see also above). From
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investors with little experience an
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them, while a branch with a shortag
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Loans, public offerings of shares,
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is often to acquire foreign capital
Page 57 and 58: 2.3.3.2 Debt financing As getting t
Page 59 and 60: the approval of special authorities
Page 61 and 62: control compared to national enterp
Page 63 and 64: usiness in China and related issues
Page 65 and 66: 3. Pre-Entry Strategic Consideratio
Page 67 and 68: While the testing for the general r
Page 69 and 70: of relevant contacts to suppliers a
Page 71 and 72: partner companies with free servici
Page 73 and 74: strengths which his own company lac
Page 75 and 76: Central Committee of the Communist
Page 77 and 78: environment for foreign investment
Page 79 and 80: legal and regulatory environment of
Page 81 and 82: 3.2.4.3 Legal Framework for Foreign
Page 83 and 84: • China’s entry into membership
Page 85 and 86: • stipulates that advanced techno
Page 87 and 88: Government approval. Foreign invest
Page 89 and 90: Co-operative Joint Venture Status P
Page 91 and 92: Reflecting on these points the foll
Page 93 and 94: Success Factors concerning Products
Page 95 and 96: Success Factors concerning Company
Page 97 and 98: high-technology are eligible for th
Page 99 and 100: Available Distribution Channels A m
Page 101 and 102: Available Distribution Channels Mar
Page 103 and 104: Available Distribution Channels Mar
Page 105 and 106: Illustrative Case Studies The follo
Page 107: Available Distribution Channels Mar
Page 111 and 112: Strategy No. 1: Have Cash A comfort
Page 113 and 114: expenses have a detrimental effect
Page 115 and 116: As a conclusion, network oriented m
Page 117 and 118: 3.2.13 Case Study: Swisstec, Lyss 3
Page 119 and 120: factor which makes the foreign firm
Page 121 and 122: developed within the SME, its impac
Page 123 and 124: 3.3.1.3 The Role of Technology Mana
Page 125 and 126: Indirect export and direct export a
Page 127 and 128: maintenance or the use of establish
Page 129 and 130: Government Central Exploiting Sales
Page 131 and 132: in the most advanced provinces and
Page 133 and 134: network through which the products
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Page 137 and 138: Chinese partners. He also began to
Page 139 and 140: orders. However, a country may also
Page 141 and 142: Germany/Switzerland China democrati
Page 143 and 144: 3.4.2.4 Conversation at the first m
Page 145 and 146: only after a certain time and even
Page 147 and 148: 3.4.3 Experiences of European Compa
Page 149 and 150: ones who atte nded a course. They s
Page 151 and 152: Another Chinese tactic is, as menti
Page 153 and 154: 4. Post-Entry Strategic Considerati
Page 155 and 156: and the other one in China. The com
Page 157 and 158: experience in operating production
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In these two cases, the companies m
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5. References Aharoni, Y. (1966): T
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Dony, A. G. (1998): Market Entry St
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Islam, I. / Chowdhury, A. (1997): A
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Madura, J. (1993): International Fi
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Semkow, B. W. (ed.) (1995): China F
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6. Appendix 6.1 Fact Sheet People
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