This paper shows the results of a survey on the China activities of Swiss manufacturing companies up to 4000 employees, conducted by two students of the University of Applied Sciences Northwestern Switzerland in 2003.
Throughout the past three years, China has become the number one country for investment, attracting more FDI than the USA. How do Switzerland’s traditionally export-oriented manufacturing companies see this situation? How do they react? Do they buy Chinese companies?
New laws allow foreign companies to acquire Chinese enterprises. Through telephone interviews we collected information on the current activities and future plans of 37 Swiss manufacturing companies in China. Out of this sample we selected 18 firms to learn more about their China strategies. We found 6 companies which have experience with M&A in China.
The surveys revealed the following key findings:
The Chinese market is significantly important for Swiss exporting but also for Swiss importing manufacturers. At the same time, it is a very challenging market which requires profound preparations and research before entering and careful monitoring and supervising when expanding.
Especially in the machinery and equipment field, the Swiss manufacturing industry is a classical export-oriented industry with R&D and production done in Switzerland, deriving out of the high tech industries which originate from the Swiss precision watch cluster. Many companies entered Chinese market in order to export their products or in order to source parts in China. As in many fields of the manufacturing industry China is still 1 to 3 generations behind Western standards, some companies developed special products for the local low-end market which they also produce locally. High-tech products are still produced and developed in Switzerland, partly to protect crucial corporate know-how, but also because Switzerland offers and optimal surrounding for this industry (ETH, EPFL, industry cluster)
For more sophisticated and established companies we saw a trend to have highly independent business units for the local Chinese market in China while high-end products remain in Switzerland and are exported to Chinese customers.
Table of Contents
1. Goal of the survey
2. Structure of the paper
I. GENERAL PART
1. Foreign Investment Forms in China
2. FDI – New way to introduce Foreign fund in China
3. Definition of Mergers & Acquisition (M&A)
4. Competitiveness of Manufacturing Industry
4.1 Home base – Switzerland
4.2 Manufacturing Industry in China
4.3 Trade of the Swiss manufacturing industry with China
II. SURVEY PART
1. Methodology
2. Sample Profile of Swiss Manufacturing Companies
2.1 How we defined our sample
2.2 Definition our sample companies
2.3 Profile of the interviewed companies
SURVEY A – INDUSTRY OVERVIEW
1. Legal forms
2. Importance of the business in China
3. Business activities in China
4. Years active in China
5. Profitability of investment in China
6. Expansion plan in China for the coming 5 years
7. Summary of Survey A – Industry overview
SURVEY B – CHINA STRATEGY
1. Consulting
2. Market entrance
3. China Strategy
4. Overall corporate strategy: IR-Grids
5. Business experiences in China
6. Summary of Survey B – China Strategy
M&A AS A STRATEGIC TOOL IN CHINA
1. Attractive manufacturing industries for M&A
2. Worldwide M&A experience
3. Reasons against M&A in China
4. Reasons for M&A in China
5. Requirements for M&A in China
6. China strategy of M&A experienced companies
7. Recommendations for M&A in China
8. Summary of the M&A focus part
III. COMPARISON TO SOUTHERN GERMANY
IV. CONCLUSION
Objectives and Research Themes
The primary objective of this project is to provide a comprehensive overview of the investment activities of Swiss manufacturing companies in China, with a specific focus on the strategic role of Mergers and Acquisitions (M&A). The research explores whether these companies perceive M&A as a viable entry or growth strategy, investigates their motivations for either pursuing or avoiding such transactions, and assesses how they navigate the unique challenges of the Chinese business environment.
- The importance of the Chinese market for Swiss manufacturing firms.
- Internal and external drivers of corporate strategy in China.
- Challenges associated with management structure and human resources (expats vs. locals).
- Competitive dynamics, including the threat of copying and intellectual property issues.
- The strategic utility and prevalence of M&A transactions among Swiss firms.
Excerpt from the Book
Copying as a main threat
How can the Chinese economy catch up within a short period of time? In the Western world, we are familiar with terms like “benchmarking” and “learning from the best”. Chinese have become professionals in these disciplines over the years. Engineers have developed high skills in listening, watching, observing and analyzing very attentively and carefully in order to learn from their competitors. While Chinese often emphasize more on the learning, inspiring and improving effect of their methods – “being copied by others is a sign of quality and shows respect for your work” – Westerners rather perceive the Chinese talent as a threat which they fight. On one side, copying from the best might be a necessity for the Chinese economy to develop quickly, on the other side, it often goes too far in terms of Western standards. – At least since China became a member of the WTO many of these techniques are simply illegal.
On the highly developed east coast, “business people have the same legal understandings as Westerners. Especially in Shanghai, it is great.” In Central and Western China however, “legal security is a catastrophe. Copying, violation of intellectual property, etc., is very common.”
Every company we interviewed said copying is a topic for it. We got a lot of interesting insights, e.g. Swiss companies, which at a trade fair saw the exact copy of their machines including the prospectus just a few meters away from their own stand, even for a lower price. Investigations showed that one of the closest coworkers had copied the technical drawings after finishing his regular work in order to build the machine by himself in his spare time and opening up his own business.
Summary of Chapters
Introduction: This chapter outlines the motivation for the study, focusing on the attractiveness of the Chinese market post-WTO accession and the specific research questions regarding M&A practices.
I. General Part: Provides essential background on foreign investment forms (Rep Office, JV, WFOE), FDI statistics in China, and a competitive analysis of the Swiss and Chinese manufacturing sectors.
II. Survey Part: Describes the methodology used to collect data from 37 Swiss manufacturing companies and presents the findings regarding their activities and strategies in China.
SURVEY A – Industry Overview: Details general aspects of Swiss firms, including their legal structures, business activities, profitability, and expansion plans.
SURVEY B – China Strategy: Analyzes specific strategic approaches, including the role of consultants, internal HRM policies, and production/pricing strategies.
M&A as a Strategic Tool in China: Evaluates the specific reasons why companies choose to engage or not engage in M&A, identifying key requirements and risks.
III. Comparison to Southern Germany: Offers a comparative perspective between Swiss and Southern German manufacturing companies' experiences in China.
IV. Conclusion: Synthesizes the core findings and offers a final assessment on the future of Swiss-Chinese business relationships.
Keywords
China, Swiss manufacturing, Foreign Direct Investment, FDI, Mergers and Acquisitions, M&A, Joint Venture, WFOE, Corporate Strategy, Market entry, Intellectual property, Copying, Competitiveness, WTO, Industrial clusters.
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines the investment activities and strategies of Swiss manufacturing companies in China, with a primary emphasis on whether these companies utilize Mergers and Acquisitions (M&A) as a strategic tool.
Which companies were included in the sample group?
The study includes 37 Swiss manufacturing companies with up to 4000 employees. Out of these, a smaller selection of firms was analyzed more deeply regarding their China strategies and M&A experiences.
What is the primary motivation for Swiss companies entering the Chinese market?
The findings indicate that the main motivation is to conquer the local Chinese market with their products, rather than simply pursuing cost-saving production opportunities.
What methodology was employed to gather this data?
The research relied on qualitative and quantitative data collected through telephone interviews and questionnaires sent to company China experts, supplemented by literature analysis.
How is the "IR-Grid" model used in this paper?
The IR-Grid (Integration-Responsiveness Grid) is used to categorize the business strategies of the interviewed companies, helping to visualize the balance between central headquarter control and local adaptation.
What is the conclusion regarding M&A as a market entry strategy?
The researchers found that M&A is rarely used as a primary market entry strategy. Instead, it is typically viewed as an evolutionary tool to gain full control by buying out a joint venture partner.
How do Swiss companies perceive the threat of copying?
While almost all firms acknowledge copying as an issue, only a minority consider it a "major threat," as many believe their high-end technological advantages and service quality make them difficult to imitate effectively.
How does the experience of Swiss firms compare to that of Southern German firms?
Swiss companies generally appear to have a longer history of business presence in China and a higher propensity to prefer WFOE (Wholly Foreign Owned Enterprise) structures to maintain control compared to their German counterparts.
- Quote paper
- Juergen Simon (Author), Chun Shi Xu (Author), 2003, Survey on Activities of Swiss Manufacturing Companies in China with special focus on M&A, Munich, GRIN Verlag, https://www.grin.com/document/14138
