The China Venture
The China Venture The China Venture
Internal Determinants � Organization and ownership structure � Size � Financial Resources � Type of company: niche producer, quality leader, etc... FIGURE 3-17: Internal Determinants 3.3.1.2 External Determinants � Human Resources � Industry Characteristics � Degree of specialization External determinants are divided into macroeconomic factors and microeconomic factors. Laws and regulations, market data, infrastructure and Chinese technology policy form the first group, characteristics of Chinese companies, be they customers or potential partners for a joint venture or co-production belong to the micro environment. External Determinants Macro Environment Micro Environment � Laws and regulations 1. Trade barriers 2. Investment regulations 3. Licensing and Patent Laws 4. Export requirements 5. Employment regulations 6. Investment incentives 7. Repatriation of profit � Market data 1. Economic growth 2. Demand for foreign high-tech products (industrial and consumer) � Infrastructure 1. Physical infrastructure 2. Scientific infrastructure 3. Supplier infrastructure 4. Human resource infrastructure 5. Financial services infrastructure � Technology policy of central government TABLE 3-11: External Determinants � Chinese Customers 1. Need for technology 2. Preferred business model for technology transfer 3. Financial situation, access to hard currency 4. Size � Chinese Joint Venture Partners 1. Type of company (ownership) and its characteristics 2. Technological capabilities 3. Size 4. Guanxi 5. Financial Situation 110
3.3.1.3 The Role of Technology Management of SMEs is certainly aware of the importance of proprietary technology and know-how for the company, yet the role of technology in the internationalisation process and especially in the Chinese context may not be fully understood. � History of Chinese technology imports � Type of technology (process or product) � Competition for the specific technology � Protection of technology TABLE 3-12: Technology Determinants Technology Determinants 3.3.2 SME’s Objectives for China Activities � Transferability of technology � Dependance of SME on that technology � Payment for Technology � Length of technology cycle Unlike the “conventional” proceeding, that is to investigate pros and cons of the different market entry vehicles, the concept of underlying “objectives”, which initially trigger the SME’s China activities, shall be introduced. The reason is that in the logical sequential process companies define an objective such as “cheap production for the world market” or “e xploiting domestic sales opportunities” before they select a vehicle to accomplish the chosen objective. Depending on the underlying objective, one and the same entry mode could be either the best choice or totally inappropriate. A given objective may reduce the number of appropriate market entry vehicles to chose from; a company that intends to use China as cheap production base for example, will certainly not consider exporting as viable strategy to reach its goal. The “underlying objective” is the element of the company’s overall strategy which defines the company’s goal for international activities. It determines which of the internal, external and technology elements are relevant and influence the market entry mode decision. Speaking in terms of a contingency approach, the underlying objective is a new variable on a higher level, determining the relevance of internal, external and technological factors. 111
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Internal Determinants<br />
� Organization and ownership structure<br />
� Size<br />
� Financial Resources<br />
� Type of company: niche producer,<br />
quality leader, etc...<br />
FIGURE 3-17: Internal Determinants<br />
3.3.1.2 External Determinants<br />
� Human Resources<br />
� Industry Characteristics<br />
� Degree of specialization<br />
External determinants are divided into macroeconomic factors and microeconomic factors.<br />
Laws and regulations, market data, infrastructure and Chinese technology policy form the first<br />
group, characteristics of Chinese companies, be they customers or potential partners for a<br />
joint venture or co-production belong to the micro environment.<br />
External Determinants<br />
Macro Environment Micro Environment<br />
� Laws and regulations<br />
1. Trade barriers<br />
2. Investment regulations<br />
3. Licensing and Patent Laws<br />
4. Export requirements<br />
5. Employment regulations<br />
6. Investment incentives<br />
7. Repatriation of profit<br />
� Market data<br />
1. Economic growth<br />
2. Demand for foreign high-tech products<br />
(industrial and consumer)<br />
� Infrastructure<br />
1. Physical infrastructure<br />
2. Scientific infrastructure<br />
3. Supplier infrastructure<br />
4. Human resource infrastructure<br />
5. Financial services infrastructure<br />
� Technology policy of central government<br />
TABLE 3-11: External Determinants<br />
� Chinese Customers<br />
1. Need for technology<br />
2. Preferred business model for<br />
technology transfer<br />
3. Financial situation,<br />
access to hard currency<br />
4. Size<br />
� Chinese Joint <strong>Venture</strong> Partners<br />
1. Type of company (ownership) and<br />
its characteristics<br />
2. Technological capabilities<br />
3. Size<br />
4. Guanxi<br />
5. Financial Situation<br />
110
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