The China Venture
The China Venture The China Venture
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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expenses have a detrimental effect on the revenues. Chinese partners only hardly understand,<br />
why expatriate incomes are many times larger than theirs. Under the aspect of costs it is<br />
recommended to employ as much local staff as possible.<br />
3.2.11.3 Local Staff versus Expatriates<br />
<strong>The</strong> first question during the planning phase (establishment of a representative or sales office<br />
or also a JV) always focuses on hiring new staff on the Chinese site or bring them in from the<br />
home country. Both has advantages and disadvantages: the knowledge of the home company,<br />
its products and decision making process and also Western know-how versus the<br />
understanding of the Chinese mentality, language and possibly relationship (guanxi) to the<br />
customers and State officials on site.<br />
Highly qualified and experienced managers often profit internally but also in the client’s view<br />
a certain trust. Often clients even expect that the company's representative comes from the<br />
home country. <strong>The</strong> positions of the general manager and also technical director respectively<br />
production manager mostly are filled with expatriates. In human resources departments or<br />
marketing offices often Chinese managers hold these positions. <strong>The</strong>y know local conditions<br />
and have more guanxi to potential clients or prospective workforce for the company.<br />
3.2.11.4 Expatriates and Intercultural Management Skills<br />
FIE’s also should be very aware of the personality and cultural factors. Failures in the<br />
selection process for a <strong>China</strong> assignment can become very expensive. Not only costs of the<br />
assignment or "quick repatriation exercises“ have to be considered but also and - more<br />
important - the influence of wrong management personnel on the business (turnover,<br />
revenues, market share and image). <strong>The</strong>se risks can be banned and minimised by carefully<br />
selecting and preparing the right people.<br />
Most of the questioned managers (see study below 111 ) emphasise the importance of the<br />
intercultural and negotiation skills. Also as critical they regarded knowledge of law, language,<br />
communication skills, etc.<br />
111 <strong>China</strong> - Wirtschaftspartner zwischen Wunsch und Wirklichkeit, Reisach et al., 1997, p. 205.<br />
101
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