The China Venture

Available Distribution Channels
A major problem in China is the geographic distribution of the manufactured goods. Not only
road transport is lengthy and unsafe but also railway transport is unreliable due to the
authorities’ preference policy for "strategic transports" like coal or military equipment. It is
also necessary to be accepted as a supplier for certain goods by major customers (like
wholesalers, supermarkets, etc.) - a task which mostly can be accomplished only with
sufficient guanxi. Here again the know-how of the Chinese partner is vital.
3.2.9.3 Profiles of the Partnering Companies
Small or Medium Enterprises
A small or medium enterprise planning to invest in China has to have a suitable portfolio of
products and/or services for the Chinese domestic market. As this is a pre -requisite for any
further reflection this dimension is marked 10 in the following diagram. The enterprises also
have an excellent know-how of their production technology as they otherwise could not even
survive on their home market.
All dimensions concerning local Chinese factors such as infrastructure, distribution channels
and especially guanxi are only little developed if at all and have to be backed up by a suitable
partner. However, there is a certain knowledge of the Chinese market as SME’s typically
already have a relationship with China due to export business prior to planning a direct
investment.
Financial power of SME’s generally is not sufficient in order to install a business in China so
that either external financial sources have to be found (which usually is difficult due to the
high exposure to risk) or alternative solutions have to be practised such as providing
machinery and equipment for a joint venture. However, free management resources are the
most difficult problem to solve for SME’s and at the same time are the most crucial success
factor. Without full support by management any trial to set up a business in China is most
likely to fail.
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