The China Venture
The China Venture The China Venture
Realising opportunities Participation in growing markets is realised within an organisational structure that is flexible enough to allow more aggressive growth if needed, through the finding of more wholly owned subsidiaries. On the other hand - especially in the view of the recent Asia crisis - the flexible organisational structure keeps risks at a minimum by having only very few own resources tied up in the region. Avoiding of threats Capital invested in foreign countries is kept minimal. Through the network of local contacts in connection with a wholly owned subsidiary, gathering of relevant information has become much more easy. Lastly, overall business risk is being reduced by spreading the activities over a large variety of markets. The example of SPSC shows how a detailed business self-examination can help to find a very attractive market entry strategy. By carefully relating the organisation's strengths and weaknesses to the market entry's opportunities and threats, the company could design a truly tailor-made and innovative ma rket entry strategy. Analysing the target market alone would not have been enough. Only the connection with the unique characteristics of the own company helps to avoid mistakes in the very important early phases of strategic planning for market entry. After long months or even years of planning, many - often fruitless - negotiation rounds, and finally the work intensive phase of building up or revamping Chinese production facilities, many companies are inclined to lean back and turn their attention to new projects. In a business environment that is both relatively new and alien to a European SME, as well as rapidly changing and evolving, such an approach might well be very destructive. A continuous process of re-evaluation and subsequent re-positioning is necessary in many projects and often crucial in China. As Paul started to reflect on his China business, he began to appreciate the extensiveness of Mr. Zheng’s preparatory work in the positioning of his China Venture and in the choice of partners in China. He can see the complimentary nature of his former business partners in China which Mr. Zheng had chosen to work with. Indeed, his business partners have clear 60
strengths which his own company lacks, particularly in relation to the operating environment and personnel in China. The next paper entitled “Maximising potential through strategy fit with potential partners” started to make sense even before Paul started to read it. The more he reads, the more he seems to appreciate the wisdom of Mr. Zheng in his choice of business collaborators as well as his understanding of China and doing business there. Rainer Kirchhofer, a senior Swiss banker and Stephan Lechner, a practising engineer who both chose to further their management studies at the HSG (NDU programme), wrote: 3.2 Maximising Potential Through Strategic Fit with Potential Partners (by Rainer G. Kirchhofer and Stephan Lechner) Going from Switzerland to the PRC, one encounters not only a different culture and language, but also a completely different economic system. In many aspects, e.g. infrastructure and similar facilities, China progresses at a slow pace. Yet in other aspects, such as its dynamic economic growth and its capability to plan and guide this huge empire, China is far ahead of developing countries. China’s diversity from the Yangtze Delta Zone, its vast agricultural hinterland, and its new Chinese metropolis Hong Kong, as well as its size and long independent development over thousands of years make China in every respect a special case. This can be seen particularly in its economic development and reform movement. In an atmosphere reminiscent of the "Klondike Gold Rush“, the streets of Shanghai China are filled with handily equipped foreign business people struggling to learn how to make a profit in a challenging but at the same time, frustrating, economic environment. 74 3.2.1 Issues and Scope of this Paper Having had the opportunity to visit the Shanghai area, the authors of this text realised how difficult it is to do business in China. This was seen by visiting some Joint Venture (JV) companies as well as by experiencing first-hand the rapidly growing economy. This study will focus on Swiss small and medium sized enterprises (SME's) entering the attractive Shanghai market (see Special Economic Zones (SEZ)). Whether the market entrance is independent or financially supported by other Swiss institutions or branches within China, the following points will be taken into consideration: 74 The trade volume between China and Switzerland reached over one billion Swiss Francs in imports and approx. 840 million Swiss Francs in exports in 1996 (Source: Bulletin of Swiss-Chinese Chamber of Commerce 01/1997). 61
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strengths which his own company lacks, particularly in relation to the operating environment<br />
and personnel in <strong>China</strong>. <strong>The</strong> next paper entitled “Maximising potential through strategy fit<br />
with potential partners” started to make sense even before Paul started to read it. <strong>The</strong> more he<br />
reads, the more he seems to appreciate the wisdom of Mr. Zheng in his choice of business<br />
collaborators as well as his understanding of <strong>China</strong> and doing business there.<br />
Rainer Kirchhofer, a senior Swiss banker and Stephan Lechner, a practising engineer who<br />
both chose to further their management studies at the HSG (NDU programme), wrote:<br />
3.2 Maximising Potential Through Strategic Fit with Potential Partners (by<br />
Rainer G. Kirchhofer and Stephan Lechner)<br />
Going from Switzerland to the PRC, one encounters not only a different culture and language,<br />
but also a completely different economic system. In many aspects, e.g. infrastructure and<br />
similar facilities, <strong>China</strong> progresses at a slow pace. Yet in other aspects, such as its dynamic<br />
economic growth and its capability to plan and guide this huge empire, <strong>China</strong> is far ahead of<br />
developing countries. <strong>China</strong>’s diversity from the Yangtze Delta Zone, its vast agricultural<br />
hinterland, and its new Chinese metropolis Hong Kong, as well as its size and long<br />
independent development over thousands of years make <strong>China</strong> in every respect a special case.<br />
This can be seen particularly in its economic development and reform movement. In an<br />
atmosphere reminiscent of the "Klondike Gold Rush“, the streets of Shanghai <strong>China</strong> are filled<br />
with handily equipped foreign business people struggling to learn how to make a profit in a<br />
challenging but at the same time, frustrating, economic environment. 74<br />
3.2.1 Issues and Scope of this Paper<br />
Having had the opportunity to visit the Shanghai area, the authors of this text realised how<br />
difficult it is to do business in <strong>China</strong>. This was seen by visiting some Joint <strong>Venture</strong> (JV)<br />
companies as well as by experiencing first-hand the rapidly growing economy. This study will<br />
focus on Swiss small and medium sized enterprises (SME's) entering the attractive Shanghai<br />
market (see Special Economic Zones (SEZ)). Whether the market entrance is independent or<br />
financially supported by other Swiss institutions or branches within <strong>China</strong>, the following<br />
points will be taken into consideration:<br />
74 <strong>The</strong> trade volume between <strong>China</strong> and Switzerland reached over one billion Swiss Francs in imports<br />
and approx. 840 million Swiss Francs in exports in 1996 (Source: Bulletin of Swiss-Chinese Chamber<br />
of Commerce 01/1997).<br />
61
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