The China Venture

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assets in negotiations; consequently, these cannot be used to the SMEs' full advantage. Again, advanced technology has a special role: it seems to be one important, if not the most important, asset. 3.3.1 The Choice of the Market Entry Mode: A Framework Co-operative joint ventures, equity joint ventures, wholly owned subsidiaries, representative offices or simply direct or indirect exporting are possible vehicles for China activities. In each category there are examples of successful companies that are happy with their specific decision as well as numerous examples of complete failures. If one market entry form turned out to be superior over others, it would be the strategy of choice for all newcomers with “China ambitions”. However, a strategy that fits for all companies, products and in every situation does not exist. There is no best strategy for China activities. Whether an entry strategy is appropriate in a certain situation depends on a multitude of determinants. The contingency approach which is one school of organisational theories can be used to explain the choice of different market entry modes. Originally, the contingency approach was one-dimensional: only one factor such as firm size or technology intensity was used to explain the existence of different organisational forms. The deficiency that only a single factor has explanatory value for the existence of different organisational forms was recognised by Kieser and Kubicek (1992) who developed the one -dimensional contingency theory into a multi factor approach. Obviously, by introducing other explanatory variables they added complexity to the approach. To remove some of the added complexity in order to make its application easier they propose to distinguish between internal determinants which can be influenced by the organisation and factors related to the external environment which are - at least for a SME - de facto given. The internal factors are linked to the nature of the SME itself, they are controllable by the SME to some extent. External factors include the microeconomic and macroeconomic environment. Though they are not necessarily a given datum, they often can be influenced to a certain degree, too, depending on bargaining power and skills. While large multinational companies may have the necessary power to influence the external environment significantly, SMEs are more likely to be in a position of compliance. Although technology formally belongs to the group of internal determinants, it merits to receive special attention. As outlined above, the nature of high technology plays an important role in the choice of the market entry mode for high-tech SMEs. Although technology is 108
developed within the SME, its impact is not limited to the internal environment. Many external determinants in the Chinese context are a function of the level of technology involved: rapid approval for high-tech ventures, waiver of mandatory export quotas under the condition that certain technology requirements are met or dedicated investment zones with superior infrastructure for high-tech companies are only a few examples. Therefore it is appropriate to introduce factors related to technology as a separate third group: Technology determinants. The following section gives an overview of an analytical framework that integrates the determinants which are relevant for the choice of the market entry strategy. Micro Environment China Understanding of own Bargaining Position External Determinants Technology Determinants Internal Determinants Choice of Market Entry Strategy Understanding the Role of Technology FIGURE 3-16: Determinants for the choice of the market entry strategy 3.3.1.1 Internal Determinants Macro Environment China Internal determinants are related to the nature of the SME. Limited financial and limited human resources are often a real impediment in risky China activities. The ownership structure, characteristics of the industry in which the SME operates, the degree of specialisation and the positioning in the market are expected to influence market entry strategies. 109
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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
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control compared to national enterp
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usiness in China and related issues
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3. Pre-Entry Strategic Consideratio
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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 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: factor which makes the foreign firm
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
Page 163 and 164: Dony, A. G. (1998): Market Entry St
Page 165 and 166: Islam, I. / Chowdhury, A. (1997): A
Page 167 and 168: Madura, J. (1993): International Fi
Page 169 and 170: Semkow, B. W. (ed.) (1995): China F
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6. Appendix 6.1 Fact Sheet People
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