The China Venture

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General readiness The first step of SPSC's two-fold analysis and self-examination process was to investigate the company's strengths and weaknesses in face of the new strategic goal. The results of such a SWOT (strengths - weaknesses; opportunities - threats) analysis are shown in TABLE 2-1: STRENGTHS • High quality • Well known products in niche markets • Strong production skills • Reputation for excellent service • Flexibility in business processes OPPORTUNITIES • spreading of risk and becoming global player • realisation of cost advantages • realising market potentials WEAKNESSES • weak negotiating position • limited financing resources • limited personnel, especially management resources • little internal information about target countries and markets THREATS • investments of significant magnitude • market risks difficult to evaluated • political and various other risks • potentially too high quality standards for target market TABLE 3-1: SWOT analysis for SPSC in respect to market entry in Asia In the first phase of the analysis process, SPSC therefore realised that its organisation was not prepared for the typical direct investment market entry method of many large multinational companies (MNCs). While MNCs have relatively easy access to capital markets and do not encounter difficulties in hiring able job applicants, smaller companies like SPSC are disadvantaged in both areas. The opportunities, on the other hand, especially the perceived necessity of becoming a global player, convinced the management to continue pursuing its goals, albeit with the results of the business self -examination in mind. The company's management reasoned that it needed a tailor-made market entry strategy to overcome its company specific limitations and to reduce the threats involved in large scale market entry. The result of this analysis process was a strategy of opening up only one wholly ow ned subsidiary in Southeast- and East Asia and to co-operate in the other countries closely with locally well-connected partner companies on a contractual basis. The plan was to find 58
partner companies with free servicing resources and to support these regional partners through the core subsidiary company. This strategy would allow a rapid growth in the target region through relatively uncomplicated partnership agreements while limiting SPSC's own risk exposure. Specific fit After the important first step of investigation was completed, SPSC had to do a more detailed specific fit analysis. In its particular case, it was more important to investigate the fit of partner company to SPSC, rather than the fit of a world-standard product to local necessities. For this reason, project groups were formed which investigated each potential partner in detail. To achieve reliable results in a short time, external experts were consulted, who added detailed market knowledge and a network of local contacts to the project teams. This specific fit analysis generated not only a list of promising co-operation partners, but also a good understanding about local markets and the competitive environment. Potential success factors were also side products of this investigation, as well as a list of likely future clients. Through this two fold pre -entry business self-examination, SPSC therefore created a highly successful strategy, that prepared the company in an optimal way for a more global business environment. In particular, it managed to achieve the following tasks: Transfer of strengths The own strength of superior customer service could be transferred to the target region by a carefully selected number of local partner companies. Through signing partnership agreements with 15 companies in as many countries in only a few months, economies of scale could be achieved rapidly without an overly usage of capital and personnel resources. Reduction of weaknesses As a result of the new strategy, SPSC's multinational client face an equally multinational supplier. Additionally, the utilisation of company resources could be kept to a minimum. Finally, an innovative company with global visions has now a much better chance to attract highly qualified job applicants. 59
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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
Page 19 and 20: The Chinese operating legal system
Page 21 and 22: First of all, Britain’s predomina
Page 23 and 24: democratic centralism, all governme
Page 25 and 26: The courts are the state organs exe
Page 27 and 28: more than three hundred intermedia
Page 29 and 30: 2.2.8 Company Law China’s first n
Page 31 and 32: Things seem have to become a lot cl
Page 33 and 34: 2.3.1.1 Financial sector developmen
Page 35 and 36: securities, trading, initial public
Page 37 and 38: underdeveloped compared with market
Page 39 and 40: established in January 1996 by 59 p
Page 41 and 42: Chinese Banks Foreign Banks Financi
Page 43 and 44: system formulation has been put on
Page 45 and 46: The separation of production and co
Page 47 and 48: swap centres (see also above). From
Page 49 and 50: investors with little experience an
Page 51 and 52: them, while a branch with a shortag
Page 53 and 54: Loans, public offerings of shares,
Page 55 and 56: is often to acquire foreign capital
Page 57 and 58: 2.3.3.2 Debt financing As getting t
Page 59 and 60: the approval of special authorities
Page 61 and 62: control compared to national enterp
Page 63 and 64: usiness in China and related issues
Page 65 and 66: 3. Pre-Entry Strategic Consideratio
Page 67 and 68: While the testing for the general r
Page 69: of relevant contacts to suppliers a
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 and 120: factor which makes the foreign firm
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developed within the SME, its impac
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3.3.1.3 The Role of Technology Mana
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Indirect export and direct export a
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maintenance or the use of establish
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Government Central Exploiting Sales
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in the most advanced provinces and
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network through which the products
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Siemens or Motorola, they may have
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Chinese partners. He also began to
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orders. However, a country may also
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Germany/Switzerland China democrati
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3.4.2.4 Conversation at the first m
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only after a certain time and even
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3.4.3 Experiences of European Compa
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ones who atte nded a course. They s
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Another Chinese tactic is, as menti
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4. Post-Entry Strategic Considerati
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and the other one in China. The com
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experience in operating production
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In these two cases, the companies m
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5. References Aharoni, Y. (1966): T
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Dony, A. G. (1998): Market Entry St
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Islam, I. / Chowdhury, A. (1997): A
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Madura, J. (1993): International Fi
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Semkow, B. W. (ed.) (1995): China F
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6. Appendix 6.1 Fact Sheet People
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