The China Venture

Exploiting Sales
Opportunities
Micro Environment China
IP Trading
Understanding of
own Bargaining
Position
SME’s Objectives in China
External Determinants
Technology Determinants
Internal Determinants
Choice of
Market Entry
Strategy
Exploiting Comparative Cost Advantages
FIGURE 3-18: The choice of Market Entry Strategy
Understanding
the Role of
Technology
Macro Environment China
Research
Cooperation
The following sections attempt to categorise the objectives of high-tech SMEs who engage in
business activities with or in China. Feasible business vehicles are listed for each of the five
identified categories without giving a ranking or an evaluation.
3.3.2.1 Objective 1: Exploiting Domestic Sales Opportunities
The acceleration of technological change has shortened product life cycles and made product
development more costly, especially for companies in R&D intensive high-tech industries.
Foreign sales may help to recover R&D expenditures quickly before the product or
technology developed becomes obsolete or imitated by competitors. Besides, economies of
scale in R&D make it too expensive for SMEs to engage in several isolated research projects
in parallel (Lindquvist 1991). Without diversification through product and process
development, accessing foreign markets may be the only viable option for growth.
Export only
The first objective SMEs may have is to exploit perceived sales opportunities for their high-
tech products without building substantial operations in China. SMEs who follow this path
consider their products to be competitive on the Chinese market or want to test customer
acceptance. Initially, these companies do not intend to produce locally but rely on their
manufacturing sites which are located elsewhere, most likely in their home country. Often a
market entry through “sales only” is a first step in sequential market penetration process.
Maintenance and
After Sales Servivce
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