[...] Those milestones will be outlined in the following chapters. Concerning the structure of this thesis, it will start off by giving a general description of the Chinese market and its economic development, as well as trade and investment opportunities and motives. After that, an overview of the Chinese culture will be given, including a description of Chinese behavioural patterns and the difference to German behaviour. Furthermore negotiation style and techniques will be pointed out. Based on all the information given, potential entry strategies will then be pointed out, including each strategy’s advantages and disadvantages. Besides, industrial and foreign direct investment opportunities policies regulated by the Chinese government will be illustrated and major investment opportunities will be outlined. This chapter is followed by a description of the choice of location, which also includes an overview about certain investment incentives which are offered in specific regions. The following chapter deals with a complete risk analysis for the Chinese market. The second but last chapter deals with companies, which have managed to enter the Chinese market. This chapter also includes a description of the reasons why these companies have been so successful in accessing the Chinese market. Finally, the most important information will be summarized and a final conclusion will be drawn. Figures and tables are part of the appendix.
Table of Contents
1. Introduction
2. China as business location
2.1 General facts on China
2.2 Economic development of China
2.3 Foreign Trade
2.4 Foreign Investment in China
3. Cultural habits
3.2 Social and cultural general conditions
3.2.1 Comparison of German and Chinese cultural elements
3.2.1.1 Hofstede’s 5-D-Model
3.2.1.2. Cultural habits and behaviour
3.2.1.3 Negotiation strategy
4. Choice of entry mode
4.1 Exporting
4.1.1 Legal requirements for exporting to China
4.2 Piggybacking
4.3 Licensing
4.4 Franchising
4.5 Representative office
4.6 Joint venturing
4.6.1 Legal background
4.6.2 Approval procedure
4.6.3 Kinds of joint ventures
4.7 Direct investment
4.7.1 Wholly foreign owned enterprise
4.7.2 Foreign-Invested Joint Stock Corporation
5. Choice of location
6. Risk analysis
6.1 Security Risk
6.2 Political Stability Risk
6.3 Government Effectiveness Risk
6.4 Legal & Regulatory Risk
6.5 Macroeconomic Risk
6.6 Foreign Trade & Payment Risk
6.7 Tax Policy Risk
6.8 Labour Market Risk
6.9 Financial Risk
6.10 Infrastructure Risk
7. MNCs in China
7.1. Siemens
7.1.1 The company
7.1.1.1 Corporate History
7.1.1.2 Major Businesses
7.1.2 Siemens in China
7.1.2.1 External Environment
7.1.2.2 Entry strategy
7.1.2.3 Conclusion
7.2. Toyota
7.2.1 The company
7.2.1.1 Corporate History
7.2.1.2 Major Businesses
7.2.1.3 International markets
7.2.2 Toyota in China
7.2.2.1 External Environment
7.2.2.2 Entry strategy
7.2.2.3 Conclusion
8. Conclusion
Objectives and Core Themes
This thesis examines the strategies and challenges associated with entering the Chinese market. It aims to provide comprehensive insights into the Chinese economic and cultural environment, guiding firms through the practical milestones required to establish a successful and sustainable presence in this rapidly evolving market.
- Economic development and structural transformation of China.
- Cultural dimensions and their impact on business negotiations and management.
- Evaluation of various market entry modes including exporting, licensing, and joint ventures.
- Comprehensive risk assessment of the Chinese business environment.
- Case studies on the market entry experiences of multinational corporations (MNCs).
Excerpt from the Book
3.1.1.3 Negotiation strategy
Negotiations with Chinese partners are difficult to handle. Chinese negotiation partners are said to be tough, stubborn, calculating and not always fair. Searching for common grounds, imparting one's social position and testifying respect to the negotiation partner are central elements influencing the course of negotiations. The first phase during a typical negotiation is called "warming-up-phase", and serves to get to know each other and exchange compliments. Most Chinese begin with small talk, especially when the hosts and guest do not know each other. For the foreign partner, it is not always easy to choose the right topics during the conversation in advance of the negotiations. Topics, that Chinese like to talk about are career, visits of foreign countries, sports, history, traditional wisdom and all topics which contribute to a nice and pleasant situation, e.g. conversation about music and theatre. Topics that should be cut out include: self-praise including praise of one's wife and children, critical or depreciative remarks, negative events (diseases, mistakes...) and topics which refer to conflicts (human rights). Furthermore, Chinese respect their private life and allow only few people to enter it. In China, unknown people are kept at distance with respect and politeness.
If the first phase dealing with exchange of compliments is over, the actual negotiations start off. When a meeting begins, the Chinese host will indicate that. Concerning the executives taking the decisions, one should not be astonished if they do not participate at the negotiations, as negotiations can involve a loss of face. During the negotiation it is important to refer to results of which a consensus has be made, before topics are taken up of which one thinks to reach an agreement. Difficult parts of the negotiation are left open. The most difficult part of a negotiation is to develop a position, which is difficult to reject.
In negotiations, reciprocity is important. If the Chinese give concessions, they expect the same from their guests. To sum it up, whereas Western negotiation parties are rather result - oriented, the Chinese partners consider negotiations as a process ending up in a consensus Building up a stable relationship is more important than objectivity.
Summary of Chapters
1. Introduction: This chapter highlights the necessity of internationalization due to globalization and introduces the structural transformation of the Chinese economy as a key opportunity for foreign firms.
2. China as business location: This chapter provides essential facts on China’s geography, demographics, government, and economic development, detailing the shift from a centrally planned to a market-oriented economy.
3. Cultural habits: This chapter focuses on the importance of understanding the Chinese mentality, utilizing Hofstede's 5-D-Model to compare cultural elements and discussing the significance of "Guanxi" in business.
4. Choice of entry mode: This chapter evaluates diverse strategies for entering China, ranging from exporting and licensing to joint ventures and foreign direct investment, weighing their relative risks and benefits.
5. Choice of location: This chapter discusses factors influencing site selection in China, including infrastructure and investment incentives offered in specific regions like Special Economic Zones.
6. Risk analysis: This chapter systematically analyzes various risks of doing business in China, such as political, legal, economic, and infrastructure-related vulnerabilities.
7. MNCs in China: This chapter presents practical case studies of Siemens and Toyota, analyzing their specific market entry paths, strategies, and successes in China.
8. Conclusion: This chapter summarizes the main findings, emphasizing that while China offers massive potential, success requires deep cultural adaptation, long-term commitment, and robust risk management.
Keywords
China, Market Entry, Globalization, Foreign Direct Investment, Joint Venture, Cultural Habits, Guanxi, Hofstede, Risk Analysis, Siemens, Toyota, Economic Reform, Business Strategy, Negotiation, Industrial Development
Frequently Asked Questions
What is the core focus of this research?
The work provides a detailed framework for Western companies to successfully enter and operate in the Chinese market, addressing economic, cultural, and strategic considerations.
Which specific themes are covered in the book?
The book covers the economic transformation of China, cultural nuances like "Guanxi," different market entry strategies (exporting, franchising, JV), and a comprehensive risk analysis for foreign investors.
What is the primary goal of the author?
The primary goal is to provide a comprehensive guide that helps companies understand the Chinese market environment and make informed decisions regarding their entry strategy and location selection.
Which scientific methodology is applied?
The work utilizes a descriptive, analytical approach based on literature analysis, economic data from established sources (e.g., IMF, CIA Worldfactbook), and cultural frameworks such as Hofstede's 5-D-Model.
What topics are discussed in the main section?
The main sections cover China's business landscape, the importance of cultural soft skills, the technical and legal requirements for various entry modes (like WFOEs and EJVs), and a sector-specific risk assessment.
What are the characterizing keywords of the work?
Key terms include China, Market Entry, Joint Venture, Guanxi, Hofstede, FDI, and strategic diversification.
How does the author explain the concept of Guanxi?
Guanxi is described as a fundamental relationship network that prioritizes personal connections over formal rules and is considered the key factor for business success in China.
What does the book conclude about Joint Ventures in China?
The author concludes that while Joint Ventures are a popular way to overcome ownership restrictions and access local expertise, they involve significant management challenges and risks of technology and skill leakage.
- Quote paper
- Christian Herbst (Author), 2004, Entry strategies in the Chinese market, Munich, GRIN Verlag, https://www.grin.com/document/39897
