The China Venture

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Success Factors concerning Chinese Partners: 106 Success Factors Success Criteria Suppliers and distributors knowledge of country and market, sources of supply, distribution channels, guanxi compatible goals at JV (Problem: same bed, different dreams) productivity, strengths and weaknesses reliability and mentality Management say import/export businesses: - no limitation of entrepreneurial liberties - fair supply conditions for both sides Joint Ventures: - sharing out of management responsibilities - consensus finding in strategic, tactic and operational questions – entrepreneurial liberties sometimes limited due to Chinese laws, rules and regulations WFOE’s: no limitation of entrepreneurial liberties but possibly difficult acting as a foreigner in an existing relationship network (sometimes also restrictions due to Chinese laws, rules and regulations) Human Resources import/export businesses: -experience and qualification of local Chinese workers and partners -employment and loyalty of Chinese workers and partners respectively fairness and experience of business agents Joint Ventures: - Chinese workers mostly come from Chinese partner, - depending on the JV contract only limited say in personnel politics (selection, compensation, dismissing) - possibly very expensive social benefits, if partner was former State enterprise - experience and qualification of Chinese staff (especially knowledge of modern technology and work tools, quality and cost awareness, accounting and calculation, marketing) - performance and loyalty of Chinese staff - high compensation amounts for expatriates, management personnel and specialists (up to CHF 500’000.- per capita per year) - intercultural collaboration, intercultural training - training and education in China and at home base WFOE’s: - possibly difficulties with hiring new personnel: direct or via Chinese (semi-) State Employment Agency - experience and qualification of Chinese staff - possibly minor loyalty to a wholly foreign-owned company - intercultural training - training and education in China and at home base TABLE 3-7: Key success factors concerning Chinese partners 106 China - Wirtschaftspartner zwischen Wunsch und Wirklichkeit, Reisach et al., 1997, pp. 139. 82
Success Factors concerning Company Structure and Administration: 107 Success Factors Success Criteria Financing import/export: - pre financing need – securities – payment methods (generally letter of credit) – international experience of involved bank co-operation: - height and settlement date of financial liabilities - take out of earnings and transfer of earnings – availability of foreign exchange - risk sharing and loss liabilities Joint Ventures: - amount of investment (equity provisions, capital investment, valuation of investments input – prerequisites and settlement dates of financial investments - take out of earnings and transfer of earnings – availability of foreign exchange - risk sharing and loss liabilities WFOE’s: - amount of investment – availability of foreign exchange and transfer of earnings – risk sharing and loss liabilities Accounting Import/export: - balancing, valuation of goods, delivery responsibilities and valuation of goods in transfer Joint Ventures and WFOE’s: - valuation of involved investment – introduction of modern accounting systems – adoption of accounting and balancing to Chinese rules and regulations (trade and tax law) Administration Import/export: - comparatively low need of adoption of organisation – securing of an efficient handling on site and in the headquarters Joint Ventures and WFOE’s: - adoption of structure to headquarters (establishing a separate entity in China or fitting in into headquarters product or business division) – securing a special report system from foreign site to headquarters TABLE 3-8: Key success factors concerning company structure and administration 3.2.9 Profiles of Partners Participating in an Investment in China 3.2.9.1 Ideal Profile From the facts discussed in the previous papers, an "ideal profile" for an entity (either being an SME on its own or together with Chinese and other partners) may be defined. The following diagrams show a combination of characteristics of partnering companies, which are considered to be essential for a business engagement in China. 107 China - Wirtschaftspartner zwischen Wunsch und Wirklichkeit, Reisach et al., 1997, pp. 139. 83
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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
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established in January 1996 by 59 p
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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 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
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: Success Factors concerning Products
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
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
Page 135 and 136: Siemens or Motorola, they may have
Page 137 and 138: Chinese partners. He also began to
Page 139 and 140: orders. However, a country may also
Page 141 and 142: Germany/Switzerland China democrati
Page 143 and 144: 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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