Despite the heavy commitment of the central government impediments exist for foreign companies to successfully exploit business opportunities in China. Two major studies(Kawahara et al 1995, Carter et al 1997) suggest the most important barriers to business
operations concern the supply chain and distribution, particularly transportation. The various logistics functions form major obstacles (Peng 1995, 680). Although this paper focuses on supply chain issues also value chain issues will be touched, as many of the outbound business functions are perceived as shared responsibility of marketing and logistics(Murphy et al 1992, 14).
Table of Contents
1. Introduction
2. Barriers in logistics and their implications for foreign companies
2.1 Transport Infrastructure
2.2 Transport Services
2.3 Purchasing
2.4 Order Processing/ Documentation
2.5 Unitisation
2.6 Warehousing and Inventories
2.7 Distribution
3. Underlying key-issues of the logistics dysfunctions
3.1 Cultural differences
3.2 Political and administrative influences
3.3 Management practice
3.4 Capital constraint
4. Strategic solutions applied by foreign companies
4.1 Using local distribution and shipping service providers
4.2 Establishing joint-ventures
4.3 International providers
4.4 Creating their own system
5. Conclusions
Objectives and Topics
This literature review examines the significant logistical challenges faced by Western enterprises operating within the Chinese market. The research explores the barriers in transportation, infrastructure, and supply chain management, while evaluating various strategic frameworks that foreign companies adopt to mitigate these operational difficulties and ensure business success in a complex regulatory environment.
- Logistical infrastructure gaps and transportation bottlenecks in China
- Challenges in supply chain functions, including purchasing and warehousing
- The impact of cultural, political, and management practice barriers
- Strategic operational solutions: Joint-ventures versus self-managed systems
- The evolution of logistics strategies for foreign market entry
Excerpt from the Book
2.1 Transport Infrastructure
The single most important factor hampering operations of foreign companies in China is the insufficient provision of transportation infrastructure. Railways in 1990 were roughly one fifth of the tracks in place in the U.S. (Frewen 1995, 12). Only then a top-priority program to construct new and upgrade existing railway lines was started earmarking 30 billion Rmb annually (N.N. 1995b, 389, Kawahara et al 1995, 58). For the dynamic Pudong New Area Rmb 94.9 billion have been committed to infrastructure development until 2000 (Halim et al 1996).
Only a quarter of the national road network is paved, nodal points like bridges, ferries or urban centres always form serious bottlenecks (Kawahara et al 1995, 60). During the Seventh Five-Year plan contracts were signed to expand the state-level highways by 1.200 kilometres and rural highways by 1.700 kilometres (N.N. 1995b, 391).
Inland waterways, short-sea and deep-sea shipping suffer from poor port infrastructure, pilferage and congestion. (Kawahara et al 1995, 61). Investments are planned to increase China's total port handling capacity by 20 million tons (N.N. 1995b, 391-392). Nevertheless mainland ports managed to attract considerable freight volume from Hong Kong in the last years (McKnight 1997, 80).
Airport infrastructure also is not capable to cope with average 20% growth rates in airline passenger and freight kilometres. Apart from insufficient runway capacity as well as handling facilities, the major concern is the lack of advanced air traffic management and control equipment (Thuong 1997, 46). However, major investments are under way to enlarge existing and construct a dozen of new airports (N.N. 1995b, 394).
Summary of Chapters
1. Introduction: Provides an overview of the foreign business landscape in China and identifies the supply chain and logistics as critical areas of concern.
2. Barriers in logistics and their implications for foreign companies: Details specific operational obstacles including transport infrastructure, services, purchasing, documentation, and storage.
3. Underlying key-issues of the logistics dysfunctions: Analyzes the root causes of logistical inefficiencies, specifically cultural differences, government influence, and management limitations.
4. Strategic solutions applied by foreign companies: Evaluates four primary business strategies, ranging from local partnerships to fully owned systems, used to overcome logistical barriers.
5. Conclusions: Synthesizes the effectiveness of various corporate strategies and offers an outlook on the future of foreign-invested logistics in China.
Keywords
Logistics, China, Supply Chain, Infrastructure, Transportation, Joint-ventures, Foreign Companies, Market Entry, Distribution, Purchasing, Warehousing, Management Practice, Trade Policy, Strategic Planning
Frequently Asked Questions
What is the primary focus of this research?
The work focuses on the logistics-related challenges that Western companies encounter when attempting to establish or maintain business operations in the Chinese market.
What are the main thematic areas addressed?
The core themes include transport infrastructure limitations, supply chain inefficiencies (purchasing, warehousing, distribution), and the impact of the Chinese regulatory and cultural environment on business operations.
What is the central research question?
The study aims to identify the key logistical barriers in China and evaluate how foreign enterprises can implement strategic solutions to navigate these obstacles successfully.
Which scientific methodology is utilized?
The work employs a comprehensive literature review, synthesizing data from various academic and professional studies conducted throughout the mid-1990s.
What does the main body of the text cover?
It provides a detailed analysis of physical infrastructure issues, such as rail and road deficits, as well as institutional issues like administrative red tape and management skill gaps.
Which keywords best characterize this work?
Key terms include Logistics, China, Supply Chain, Infrastructure, Joint-ventures, and Strategic Planning.
How does the lack of transport infrastructure specifically impact foreign companies?
Inadequate road and rail networks lead to high logistical costs, frequent bottlenecks, and unreliable delivery schedules, forcing companies to develop creative, often costly, workarounds.
What role do joint-ventures play in overcoming logistics problems?
Joint-ventures allow foreign firms to leverage local knowledge and existing distribution networks of Chinese partners, which can help mitigate the difficulties of navigating local regulations and infrastructure.
Why is "creating their own system" considered a comprehensive approach?
It provides foreign companies with maximum control and flexibility, which is essential for businesses dealing with specialized goods like perishables or hazardous materials, despite the high initial capital requirements.
- Citation du texte
- Paul Freudensprung (Auteur), 1998, Logistics Issues for Western Companies Operating in China - Literature Review, Munich, GRIN Verlag, https://www.grin.com/document/186329
