The China Venture

from within China to assess local market conditions. It was in particularly necessary to find
out which level of sophistication the Chinese labelling market had reached, which trend could
be expected in future, how the company's European clients met their labelling needs in Asia,
and whether they were satisfied by the product variety and quality currently existing in China.
The result of this investigation was the finding that LLSC's target market, sophisticated self-
adhesive labelling syste ms, was growing quickly, albeit from a relatively small basis. The
majority of labels used in China were still based on older techniques.
The competitive environment was of particular interest for the company. There were clear
indications that international competitors had started to enter the self -adhesive labelling
market recently. Judging from the development of European and US markets, as well as from
the interest of the company's - mainly Japanese - competitors, the market potentials seemed
very promising.
General Readiness
Taken alone, the findings of the specific fit investigation would have suggested to pursue the
goal of market entry into China vigorously. This conclusion was not drawn however, as a
general readiness analysis lead to different recommendations.
LLSC is a relatively conservative company with firm control and leadership methods, which
were well proven in Switzerland's stable environment. It does not boost large reserves in
capital and management resources. Knowledge of foreign markets, especially the Chinese
one, is also very rudimentary.
This background led the company to pursue a prudent expansion strategy in Europe and the
US. Each of its subsidiaries was founded in co-operation with a local entrepreneur who
contributed local market familiarity and a significant share of capital to LLSC's mainly
technical know -how.
A similar strategy of co-operation with sophisticated local entrepreneurs was not found
feasible for China. Most co-operation strategies in China between foreign and Chinese
businesses are joint ventures between the foreign firm and usually a state owned or state
affiliated company or organisation. While these organisations or companies may contribute a
lot of market knowledge, experience of other foreign companies in the Chinese market has
shown that operating a joint venture successfully demands a lot of skills from the foreign
party. In particular, the generation of a sound understanding of the Chinese market and the
Chinese way of business must not be neglected. While local partners generally offer a variety
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