The China Venture

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These partnerships may not only be advantage ous in respect of increasing the investment capital but also because of combined experience and market presence. Provided the other partners come from within the same business field also the base of potential customers is enlarged (it is assumed that this partnership does not interfere with the home market of the partners). 109 A further advantage of a partnership between Western companies may be the shared financial exposure of the single company and thereby also the reduced risk. So for example the cost for expatriates or marketing campaigns in China could be shared. 110 These are just examples of using probably already existing relationships for the China business. Definitely the success of these partnerships depends on the creativity of each single partner. 3.2.11 Management of Human Resources As we have seen already under section “Available Management Resources” SME’s rarely have enough free human resources capacity to allow the management to focus seriously on setting up new businesses in China. Various factors have to be regarded as critical. 3.2.11.1 Managing Labour Law The labour law applies broadly to all enterprises and individuals hiring staff or workers within China. This means that the law covers the representative offices and branches of foreign investment enterprises as well as domestic entities. Managing labour is highly sensitive and it is advisable for FIE’s to pay careful attention to the Chinese regulations. The main advantage of investing in China may be the pool of low-cost labour, but one should be conscious that exploitation of labour is viewed very seriously by the Chinese authorities. It is recommended to enter into individual labour contracts whenever possible. 3.2.11.2 Human Resources as a Cost Factor Cost factors can play an important role considering the assignment either of local staff or from the home country. For the salary of an expatriate (costs of several hundred thousand CHF per year all inclusive) one can hire four local employees at the same level (also with comparable education). The high wages of expatriates often raise discussions in many JV’s, because these 109 Paper 3.2.13 Case Study: Swisstec. 110 Paper 3.2.13 Case Study: Swisstec. 100
expenses have a detrimental effect on the revenues. Chinese partners only hardly understand, why expatriate incomes are many times larger than theirs. Under the aspect of costs it is recommended to employ as much local staff as possible. 3.2.11.3 Local Staff versus Expatriates The first question during the planning phase (establishment of a representative or sales office or also a JV) always focuses on hiring new staff on the Chinese site or bring them in from the home country. Both has advantages and disadvantages: the knowledge of the home company, its products and decision making process and also Western know-how versus the understanding of the Chinese mentality, language and possibly relationship (guanxi) to the customers and State officials on site. Highly qualified and experienced managers often profit internally but also in the client’s view a certain trust. Often clients even expect that the company's representative comes from the home country. The positions of the general manager and also technical director respectively production manager mostly are filled with expatriates. In human resources departments or marketing offices often Chinese managers hold these positions. They know local conditions and have more guanxi to potential clients or prospective workforce for the company. 3.2.11.4 Expatriates and Intercultural Management Skills FIE’s also should be very aware of the personality and cultural factors. Failures in the selection process for a China assignment can become very expensive. Not only costs of the assignment or "quick repatriation exercises“ have to be considered but also and - more important - the influence of wrong management personnel on the business (turnover, revenues, market share and image). These risks can be banned and minimised by carefully selecting and preparing the right people. Most of the questioned managers (see study below 111 ) emphasise the importance of the intercultural and negotiation skills. Also as critical they regarded knowledge of law, language, communication skills, etc. 111 China - Wirtschaftspartner zwischen Wunsch und Wirklichkeit, Reisach et al., 1997, p. 205. 101
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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
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2.3.3.2 Debt financing As getting t
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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 105 and 106: Illustrative Case Studies The follo
Page 109 and 110: Which Aspects should SME's Focus on
Page 111: Strategy No. 1: Have Cash A comfort
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
Page 135 and 136: Siemens or Motorola, they may have
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
Page 159 and 160: In these two cases, the companies m
Page 161 and 162: 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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