The China Venture

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Number of Projects 60000 50000 40000 30000 20000 10000 0 Equity Joint Ventures Cooperative Joint Ventures Wholly Foreign Owned Enterprises 1979- 1989 1990 1991 1992 1993 1994 FIGURE 3-5: Development of forms of co-operation in China 3.2.6 Strategy Planning Normally businesses are only oriented to China if enterprises are convinced to have suitable products, technologies or even ideas. One knows the Home and the European markets, basing thereon successfully proven concepts and strategies and now wants to participate in the huge economic increase and chances of the Chinese market. But even the most experienced and successful businessman is confronted here with hurdles and challenges he has never met. The chances of this booming world region lure companies from everywhere. But here they meet competitors from the Asian region who profit from the advantage to be located closer to China than he is. The reason of the difficulties of Western enterprises lies also on the different culture and the complicated economic system. "Men who do not think in advance, normally face difficulties“ said Confucius. Every engagement in China therefore should be carefully planned. It needs a profound market research and a matching check with the own goals and possibilities. This means also a need for co-ordination amongst product- and productivity-profiles and market demand as well as a provisional cost/benefit-calculation. Crucial as well are a realistic time horizon and the preparation of the necessary resources. 78
Reflecting on these points the following checklist helps to find answers to various strategic questions concerning the China engagement: Subject Questions Goals Which goals do we want to achieve with our engagement within China? Do we expect higher turnover and returns or do we expect primarily a bigger market share and a physical presence in this huge and fast growing market? Time horizon What is our time horizon? Do we consider China as a sales market or as a base for production or even as a base of investment and distribution in the whole of Asia? Business field, products and services Technologies, material and process What is suitable for this market respectively which new solutions are needed? Are we capable (resources, know how) and do we wish to develop new products or innovations for this market? Which technologies are appropriate and useful for the sales respectively the production in China? Where is a need for further adapted technologies and research activities or innovations? Market Which markets (product markets, regional markets) and which clients (state, private) do we want to reach and primarily serve? Is there a fit between customer target groups and/or regional target groups with our organisational concept? W hat is to do to be Production-place & infrastructure better placed (market) and positioned (marketing) in these markets? Where are suitable production places and facilities? Can we achieve our investment goals and can we manage logistical problems? Where do we get funding? Can we rely on State promotion (tax holidays and other incentives)? Partners & suppliers Who are our partners and suppliers – state or private organisations within China or other partners from other states? Do we have to look for new suppliers or do we have to focus on other supply industries and clients? Competitors How strong is the position of our competitors? Do we know their strategies and goals? Where are they active and why? Whom do they work with? Where do we differ from our com petitors? Where do we have comparative advantages, where are we on a weak Human resources & training Product ion-place & infrastructure position? Do we have the necessary skilled human resources in our company to be active in China and even expand our activities and engagement? Is there a market for qualified Swiss/Chinese candidates that we could employ? How should training activities be organised in order to make us successful? How can we integrate our new enterprise in China in our training concept and personnel planning system? Where are suitable production places and facilities? Can we achieve our investment goals and can we manage logistical problems? Where do we get funding? Can we rely on State promotion (tax holidays and other incentives)? Partners & suppliers Who are our partners and suppliers – state or private organisations within China or other partners from other states? Do we have to look for new suppliers or do we have to focus on other supply industries and clients? Competitors How strong is the position of our competitors? Do we know their strategies and goals? Where are they active and why? Whom do they work with? Where do we differ from our competitors? Where do we have comparative advantages, where are we on a weak Human resources & training position? Do we have the necessary skilled human resources in our company to be active in China and even expand our activities and engagement? Is there a market for qualified Swiss/Chinese candidates that we could employ? How should training activities be organised in order to make us successful? How can we integrate our new enterprise in China in our training concept and personnel planning system? TABLE 3-4: Strategic questions for SME's planning to invest in China 3.2.7 Risk Analysis Risks from business engagement in China may be minimised by thorough preparation not only in the economic but also in the cultural sector as the peculiarities of China significantly 79
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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
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The Chinese operating legal system
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First of all, Britain’s predomina
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democratic centralism, all governme
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The courts are the state organs exe
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more than three hundred intermedia
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2.2.8 Company Law China’s first n
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Things seem have to become a lot cl
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2.3.1.1 Financial sector developmen
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securities, trading, initial public
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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
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Page 65 and 66: 3. Pre-Entry Strategic Consideratio
Page 67 and 68: While the testing for the general r
Page 69 and 70: of relevant contacts to suppliers a
Page 71 and 72: partner companies with free servici
Page 73 and 74: strengths which his own company lac
Page 75 and 76: Central Committee of the Communist
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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
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Page 87 and 88: Government approval. Foreign invest
Page 89: Co-operative Joint Venture Status P
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
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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
Page 121 and 122: developed within the SME, its impac
Page 123 and 124: 3.3.1.3 The Role of Technology Mana
Page 125 and 126: Indirect export and direct export a
Page 127 and 128: maintenance or the use of establish
Page 129 and 130: Government Central Exploiting Sales
Page 131 and 132: in the most advanced provinces and
Page 133 and 134: network through which the products
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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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The China Venture

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