The Entrance in Foreign Markets in the Field of Biotechnology and the Consideration of Socio-Cultural Particularities

Table of contents

List of Abbreviations

1. Introduction

2. China – Characteristics of the Market and the Culture
2.1 Socio-Cultural Particularities of China
2.1.1 The Theory of Hofstede
2.1.2 China’s Socio-Cultural Particularities in Comparison to Germany
2.2 Biotechnology in China
2.2.1 The Development of Biotechnology in China
2.2.2 The Acceptance of Biotechnology in China
2.3 Counterfeiting and Patent Law in China

3. The Biotechnology Company MediGene
3.1 Products and Patents of MediGene
3.2 Serving the foreign market

4. Entrance of MediGene into the People’s Republic of China
4.1 Market Entry Strategies
4.2 Evaluation of possible Market Entry Strategies for MediGene
4.2.1 Export
4.2.2 Joint Venture

5. Conclusion

Bibliography

List of Abbreviations

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1. Introduction

For many years now China represents one of the most popular target markets of the internationalisation of enterprises. The speed of economic development and social changes of China during the last years is indeed enormous and far above average.

Today, China is already the second largest economic nation and for many years received the highest foreign investments worldwide. In 2002 China became Germany’s biggest Asian trading partner taking the leadership from Japan.^[1] Additionally, 2012 shall be the German-Chinese cultural year.^[2]

A comparable rapid change and development can be seen in the field of biotechnology. Over the last few years biotechnology became more and more important, popular, and underwent a tremendous boom.

Pharmaceutical industry is a sunrise industry, especially the biopharmaceuticals, which just starts its large-scale industrialisation process. Many large biotech and pharmaceutical companies are strengthening their presence worldwide and have already entered the Chinese market - Roche, Novartis, GlaxoSmithKline and Pfizer, to name but a few.^[3] Among these as well BASF operates a joint venture together with the Chinese enterprise Sinopec for the production of high-quality chemical products and polymers.^[4]

This seminar paper evaluates possible market entry strategies for the small and medium enterprise MediGene AG into China by taking account of socio-cultural particularities. In the second chapter there will be further insight into the characteristics of the Chinese culture and the biotechnological market in the People’s Republic of China. The subsequent third chapter contains information about the products and today’s internationalisation of MediGene. The fourth chapter is addressed to the different market entry strategies into China which MediGene could choose. Finally, the seminar paper will end with a conclusion and recommendation for MediGene considering the won findings.

2. China – Characteristics of the Market and the Culture

2.1 Socio-Cultural Particularities of China

2.1.1 The Theory of Hofstede

Geert Hendrik Hofstede was a Dutch sociologist who conducted a survey in
64 countries with 116 000 IBM employees from different countries about socio-cultural characteristics. On this basis, Hofstede developed five dimensions which describe national culture:

power distance, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance and long-term versus short-term orientation.^[5]

2.1.2 China’s Socio-Cultural Particularities in Comparison to Germany

As figure 2 shows, Chinese culture is very different from the German one.

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Fig. 1: Profiles of the Chinese and German culture according to Hofstede^[6]

In the following this chapter amplifies the differences between Chinese and German culture based on the five dimensions of Hofstede, mentioned before.

The power distance index is the extent to which the less powerful members of organisations and institutions accept and expect that power is distributed unequally.^[7] Germany has a relative low value with 35 as opposed to a significantly higher ranking of 80 for China. This indicates a high level of inequality of power and wealth in the society, which is also accepted.

The preferred business organisation in each country spells out the difference. While there are strongly centralised organisational forms in China, German companies and employees prefer organisations with democratic codetermination.^[8]

Individualism is the degree to which individuals are integrated into groups. The opposite of individualism is collectivism.^[9] Germany has an average ranking with 67. This means that ties between individuals are loose and everyone is expected to look after oneself and one’s immediate family. China, however, with a ranking of 15 can be classified as deeply collectivistic. The interest of the group is superior to the individual interest. In collectivistic cultures like China employees expect that the collective represents their interests. In turn, every individual himself acts loyally towards the group. The more the individual identifies with his community, the more the distrust is towards other groups.^[10] As a matter of fact, this can easily lead to an overall bad atmosphere and maybe a strike when there is a situation which is only to an individual’s harm. Further indicators for the collectivism characteristic in China are given. Networks are the most important organisational principal, survival of those fitting in contrast to survival of the fittest, there is social control and governance by others and the main focus of business activities is on relationships.^[11]

“Masculinity versus its opposite, femininity refers to the distribution of roles between the genders […] to which a range of solutions are found.”^[12] Masculine societies are very assertive and competitive while feminine societies are modest and caring. Both China (50) and Germany (66) show index values at an average and they do only slightly differ in this dimension. Both cultures are distinguished by competitive thinking and firmness as well as by a strong distinction among the roles of gender.^[13]

This is a positive aspect for Chinese and Germans working together in a company.

The uncertainty avoidance index deals with a society’s tolerance for uncertainty and ambiguity. It indicates to what extent a member feels either uncomfortable or comfortable in unstructured, which means novel, unknown and surprising, situations. China and Germany have a mediate ranking with 40 and 65. There is a general acceptance of ambiguity in China and Chinese people follow the attitude: “What is true or what is right is less important than what works.” In comparison German people tend to be less tolerant for uncertainty and try to minimize the possibility of unknown situations by laws and rules, safety and security measures and religious belief.^[14]

The fifth dimension, the long-term orientation, often referred to as Confucian dimension, describes thrift and perseverance for long term orientation. Values associated with short-term orientation are respect for tradition, fulfilling social obligations and protecting one’s face.^[15] In Hofstede’s analysis China indicates the highest ranking factor with 118, which is true for all Asian cultures, whereas Germany is at the lower end of the scale with a value of 31. This results in the fact that consistent, long-term oriented and sustainable pursuit of objectives is an essential element in Chinese culture. One indicator for this is the high significance/status of education in the country.^[16]

All in all Chinese culture distinguishes itself a lot from German culture, especially in the long/short-term orientation, individualism/collectivism and the power distance. Yet, there is a change in the Chinese culture and an adoption of German values according to the opening of the market. The pursuit of success and wealth leads to a higher individualistic thinking. Nevertheless, differences in culture are a critical aspect for an involvement of German companies in China and can lead to several intercultural management conflicts.^[17] Down to the present day “guanxi”, which means relationships, is the most important instrument to be successful in China, whether in court or with business.^[18] So there is the urgent need to gain wide cultural knowledge before entering into the Chinese market.

[...]

^[1] cf. Zinzius, B. (2006), p. VII

^[2] cf. Anon (2009a), http://www.peking.diplo.de/Vertretung/peking/de/00__DE__Startseite/
00__Artikel/Pieper/Besuch__Pieper__seite.html (date: 30.12.2009)

^[3] cf. Holtbrügge, D.; Puck, J.F. (2008), p. 130

^[4] cf. ibid., p. 2

^[5] cf. Holtbrügge D.; Puck, J.F. (2008), p. 37

^[6] Holtbrügge, D.; Puck, J.F. (2008), p. 38

^[7] cf. Hofstede, G. (2010), http://www.geert-hofstede.com/hofstede_china.shtml (date: 07.01.2010)

^[8] cf. Holtbrügge, D.; Puck, J.F. (2008), p. 37

^[9] cf. Hofstede, G. (2010), http://www.geert-hofstede.com/hofstede_china.shtml (date: 07.01.2010)

^[10] cf. Holtbrügge, D.; Puck, J.F. (2008), p. 38

^[11] cf. ibid., p. 39

^[12] Hofstede, G. (2010), http://www.geert-hofstede.com/hofstede_china.shtml (date: 07.01.2010)

^[13] cf. Holtbrügge, D.; Puck, J.F. (2008), p. 39

^[14] cf. Hofstede, G. (2010), http://www.geert-hofstede.com/hofstede_china.shtml (date: 07.01.2010)

^[15] cf. ibid.

^[16] cf. Holtbrügge, D.; Puck, J.F. (2008), p.41

^[17] cf. ibid. p. 41

^[18] cf. Zinzius, B. (2006), p.154