...Advantages of Joint Ventures in China October 5, 2011 Abstract The paper analyzes the advantages of Joint Ventures in China. The opening up of China’s economy to trade and foreign direct investment has been an important component in the growth of China, particularly in industry. Joint ventures in China produce advantages for the partners. China is the world’s largest and most rapidly growing developing country, it is very important to learn the advantages of Joint ventures in China. I will discuss two types of Joint Ventures and how to establish Joint Ventures (JV). Joint ventures include Equity Joint Ventures (EJV) and Contractual Joint Ventures (CJV). Then, I will introduce why foreign investors should invest in China. There are three reasons for this. And in the end, I will emphasize the advantages of joint ventures in China. There are five advantages about it, which all create benefits for partners. So China is a worthy nation to invest. Keywords: advantages, joint ventures, China, partners, invest, investment Outline Thesis： Joint ventures in China produce advantages for the partners. Because China is the world’s largest and most rapidly growing developing country, it is very important to learn the advantages of Joint ventures in China. I. Background about the development of joint ventures in China II. Two types of joint ventures A. Equity Joint Ventures (EJV) B. Contractual Joint Ventures (CJV) III...
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...a dramatic effect on domestic economies of all countries as well as the world market. Being a general term to describe the denationalization of markets and rising of the global economy, the process of globalization has obviously larger impact on the modern world than just unification of national markets into single international one. Globalization has an enormous influence upon all spheres of people’s lives, including economic, political and cultural spheres. The process of globalization has been always accompanied by the establishment of large international corporations, in which the level of production, consumption, export, import and income depends on the decision of international centers situated beyond the certain country’s borders. As any other process that takes in the world, globalization has certain advantages and disadvantages, thus, it has its followers and opponents. For some countries globalization offers multiple opportunities of economic growth and prosperity, however, the other ones are threatened by it, due to the economic inequality and political control it can cause. Developed and developing countries have different fears concerning globalization. While some developed countries anticipate the process of globalization, because it opens new low-cost markets of developing countries and creates new competitive environment, which might not be favorable for domestic markets of developed countries; developing countries are concerned about possible political and economic...
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...Tesco goes Global Tesco goes Global International Business International Business Hugo Friedrich Hugo Friedrich ACP IBOM 2014 Spring Session ACP IBOM 2014 Spring Session Summary Introduction 3 Tesco’s international expansion began in developing countries 3 Tesco’s winning Strategy 3 Tesco’s know how for Joint Ventures 4 Innovate for winning a crowded market 5 Conclusion 6 References 6 Introduction Tesco is a multinational grocery and general merchandise retailer based mainly in the UK, Ireland, Europe and Asia founded in 1919 by Jack Cohen. Its turnover was € 80 billion in 2008. Tesco is the first group of British distribution (1,500 stores just in the UK) and the 3rd World group. Its work revolves around three areas: distribution in the UK, international distribution and financial services. This case is about Tesco’s International Growth Strategy, we will see why they decided to expand internationally, how they did it in developing and developed countries, which were the risks and which answer gave Tesco. Tesco’s international expansion began in developing countries When a firm decides to expand internationally, it has to take decisions like which market to enter, when and which entry mode to use. Tesco respected one of the most important rules in international Business, to not internationalize until they do not have a good position and control of their situation on their own market. As the company...
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...“Impact of FDI and Joint Venture on Employment Generation: A Multi-sector Experience of Bangladesh Economy” 1. Md. Nazmul Hasan, Lecturer of Finance and Banking, Daffodil International University, 4/2, Sobhanbag, Prince Plaza, Mirpur Road, Dhanmondi, Dhaka-1207, Bangladesh. (Correspondent Authors). palashdu007@gmail.com. Cell: +88-01915.653068 2. Hussain Ahmed Enamul Huda, Lecturer, Department of Finance, University of Dhaka, Dhaka – 1000, Bangladesh. Haehuda@yahoo.com. Cell: +88-01911.745255. Abstract: Foreign Direct Investment (FDI) is very crucial for the sustainable development of developing countries in general and in specific for LDCs-like Bangladesh. For Bangladesh, inflow of foreign direct investment is the major stimulus for the sturdy and long-standing economic growth which is subject to the improvement of many socio-economic and political factors. As a promising hub for foreign direct investment, Bangladesh has already conquered popularity for its simplistic, liberal and most investments friendly climate throughout the globe. Being an open, flexible and promising destination for foreign direct investment, Bangladesh has been drawing attention of the global investors into a focal investment destination within SouthAsian region. Its investment climate is mostly featured by munificent and alluring packages of incentives to investors. In addition, there is no discrimination between the local and foreign investors in facilitating the incentives they owe from the investment...
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...significance of ethical decision-making particularly in international business relations on the company’s reputation. AccuForm was a joint venture company, organized by the joining of CreaseFree, a Hong Kong OEM manufacturer of wrinkle-free clothing, and DynaCoat, a German coating’s producer. The two companies sought to develop high-tech coatings for the use on wrinkle-free clothing and fabrics for distribution throughout Asia. Because the two companies operated in different countries, they began the venture with obvious differences in corporate cultures. Throughout this analysis I will discuss the major issues raised by this joint venture. The major issues came about through the leadership and decisions made by that leadership. The major issues in the AccuForm joint venture were: (1) A lack of a joint ethical environment at AccuForm from the combining cultures of DynaCoat and CreaseFree; (2) The Laissez-Faire Management Style of Raymond Kim; and (3) lack of understanding of the Chinese culture, all of which resulted in bribery, fraud, and black market sells of inferior products. Analysis * What are the major social, ethical, legal challenges that AccuForm faces in operating a joint venture with R&D and manufacturing operations in China? How might the differences between the corporate cultures of CreaseFree and DynaCoat impact the joint venture?...
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...Global Marketing Management 1 Global Market Entry Strategies 2 Overview Target Market Selection Choosing the Mode of Entry Exporting Licensing Franchising Contract Manufacturing Joint Ventures Wholly Owned Subsidiaries Strategic Alliances 3 1. Target Market Selection A crucial step in developing a global expansion strategy is the selection of potential target markets. A four-step procedure for the initial screening process: 1. Select indicators and collect data 2. Determine importance of country indicators 3. Rate the countries in the pool on each indicator 4. Compute overall score for each country 4 Choosing the Mode of Entry Sample Decision Criteria: Mode of Entry Market Size and Growth Risk Regulatory Environment Competitive Environment Local Infrastructure Tax Breaks… 5 2. Choosing the Mode of Entry (contd.) • Emerging Countries (Vietnam, the Philippines) • Growth Countries (China, India) • Maturing and established Countries (South Korea, Taiwan, Japan) Company Objectives Need for Control Internal Resources, Assets and Capabilities Flexibility 6 2. Choosing the Mode of Entry (contd.) Mode of Entry Choice: A Transaction Cost Explanation Transaction Cost Analysis (TCA) Transaction-Specific Assets 7 3. Exporting Indirect Exporting Cooperative Exporting Piggyback Exporting Direct Exporting 8 4. Licensing Licensor and the licensee...
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...choose to stash their cash overseas, since the developing countries such as China use tax incentives to attract foreign firms to support economic growth. Launching business in the developing countries become the strategy help foreign firms to increase their after-tax returns. For example, General Electric keeps only 30.7 billion of its 85.5 billion in cash reserves in the U.S., while intends to invests more than 1.5 billion in joint ventures with Chinese state-owned companies in “key high-technology sectors”. The purpose of the paper is to present the forms of foreign investment enterprises can be taken in China and the different tax incentives are used to induce foreign investment enterprises, then to analyze their influence on selection of a particular form of FIE. Body China developed one of the biggest market in the world and is attracting more and more global investors to move into China's market. It is necessary for foreign investor to understand all the potential tax costs would be incurred in China before making an investment decision in order to operate business in a most efficient way. Learning the regulation of taxation is the first step for foreign investors who decide to invest in China. The investment forms of FIE in China In China, foreign investment enterprises take four forms which is representative office, equity joint ventures, contractual joint ventures and wholly foreign-owned enterprises. Equity joint venture takes the form of limited liability corporations...
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...1.0 Executive Summary This report aims to analyze and evaluate the international joint ventures conducted by one of the world best low cost airlines, Air Asia, through their operation years. In particular, Air Asia Indonesia, Thailand, Expedia and Air Asia Japan are being chosen to probe into This research put priority on the factors that turn Air Asia Indonesia, Expedia and Air Asia Thailand into a success throughout their operational year. The Successful International Joint Ventures of Air Asia have gained themselves the benefits from acquainting the right market orientations, in which they have secured a great amount of customers respectively. This leads Air Asia Indonesia and Air Asia Expedia to gain a massive profit and become the dominant airline being in their respective nations. Besides, the commitment is also one of the main contributing factors to the success of Air Asia IJV as well as Economy conditions of host countries had been a major factor to success in IJV. In depth analysis of local GDP of Thailand had granted Thai Air Asia to achieve their business objectives. Throughout the research, it shows that Air Asia Expedia and Thai Air Asia and Indonesia Air Asia have spared no efforts in order to succeed in the aviation industry. Conversely, this research also identified a failed IJV in Air Asia operation with Japan. The main reason behind this failed IJV was usage difficulties found in online booking website of Air Asia. These factors have led to Air Asia Japan...
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...1. PESTEL analysis: * Political/ Legal: This factors influence Shui’s business at moderate level as Chinese government is encouraging foreign investment however not prefer foreign ownership. This means US based company could not further expand and affect deeply its joint-venture in US. However, 50-50 joint- venture with Chinese offer relatively advantages since government would support this business model. Moreover, the Chinese government controls completely the business in their country, so that it is too tough to make a relative with Eastern companies. * Economic: economy development in US and China are developing in the same direction, however, US economy mainly depend on the service sector while China is favor for developing heavy industry sector. This might present the different in US and Chinese manager perspective since service sector normally fast growing while industry sector require long-term development. This might explain the problem that US based manager believe on the fast growth of business (20%) while Chinese manager believe that 5% growth is considered as successful. * Cultural: This may consider as a significant problem that US is a Western country and China is an Eastern country. The Eastern is normally “uncertainty avoidance” and “future oriented” while Western managers are relatively referring “Performance Orientation” taking risk in their business. In other words, Chinese manager (Chiu Wai) would believe that a 5% growth is a strong, reliable...
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... 1. One of the most common entry strategies for MNCs is the joint venture. Why are so many companies opting for this strategy? Would a fully owned subsidiary be a better choice? 1） wholly owned subsidiary is an overseas operation that is totally owned and controlled by an MNC. This option is often pursued by smaller companies, especially if international or transaction costs, such as the cost of negotiating and transferring information, are high. When MNCs make an initial investment in the form of a wholly owned subsidiary in a foreign country, it is sometimes referred to as “greenfield” or de novo (new) investment. The primary reason for the use of wholly owned subsidiaries is a desire by the MNC for total control and the belief that managerial efficiency will be better without outside partners. Due to the sole ownership, it has been found that profits can be higher with this venture and that there are clearer communications and shared visions. However, there are some drawbacks. Typically, wholly owned subsidiaries face a high risk with such a large investment in one area and are not very efficient with entering multiple countries or markets. This can also lead to low international integration or multinational involvement. Furthermore, host countries often feel that the MNC is trying to gain economic control by setting up local operations but refusing to include local partners. Some countries are concerned that the MNC will drive out local enterprises as...
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...profitable in a particular country? In terms of the HR domains discussed in Chapter 1, what answers are required before getting too far along in plans to open another location? Write down what you regard as the top five most important questions for which you need answers. Select a country that you believe would be a good opportunity for a Starbucks location. Then think about the variables you considered in selecting that country. Write down these variables. Starbucks is a company that has been founded, establishes, and altered based upon the United States of America standards. They have grown internationally in over fifteen locations. The growth of their company internationally is due to their specific business strategies and international partners. The three business strategies that Starbucks has is; Joint Ventures, Licenses, and company-owned operations. All three of these strategies benefit Starbucks in more than one way. It allows the company to keep growth within the company under a strong brand. It allows the company to cut cost for expansion, and it also helps the company to make sure all business ventures they embark upon are ones that will ultimately benefit the company. The most important strategy Starbucks has is Joint Venture. This particular strategy encompasses all three of their strategies. “A joint venture can help your business grow faster, increase productivity and generate greater profits. A successful joint venture can offer: • access...
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...General Electric’s Joint Ventures Sarah Henning Marian University - International Business (BUA-310) Abstract This paper will examine GE’s international business and look at their preferred entry modes into foreign countries. It will examine the pros and cons of acquisitions, Greenfield ventures, and joint ventures. The paper will look at GE transition from one entry method to another. General Electric’s Joint Ventures General Electric used to prefer acquisitions or Greenfield venture as an entry mode rather than joint ventures. While joint ventures offer firms the opportunity to share costs and risks it also gives joint control to both partners. Joint ventures have many significant disadvantages. General Electric when entering into a joint venture risks giving control of its technology to its partners. They also would not have as tight of control over their subsidiaries that it might need to realize experience curve or locations economics. Finally shared ownership arrangements can lead to conflicts and battles for control between the investing firms if their goal and objective change over time, or if they take different views to what the venture’s strategy should be. GE has found that as much as it would like majority ownership, or even a 50/50 split, sometimes it has to settle for a minority stake to gain access to a foreign market. (Hill, 2006, p. 441) There are three major benefits to Acquisitions...
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...industries in different countries Norway Belgium Switzerland West. Germany Denmark Finland France Austria Luxemburg Sweden Netherlands Ireland Italy USA Japan UK Spain East Germany Canada Greece Slovenia 43.64 38.59 37.14 36.05 35.08 33.76 33.31 33.20 33.09 32.88 32.75 29.62 27.40 22.95 22.86 22.21 21.87 21.11 21.01 16.44 13.18 South Korea Malta Portugal Czech Rep. Croatia Slovakia Estonia Hungary Poland Lithuania Latvia Turkey Russia Romania Belarus Bulgaria China Ukraine Modavia Georgia Phillippines 11.49 10.27 10.03 8.86 7.89 7.80 7.30 6.94 6.04 5.45 5.25 4.33 3.61 3.39 2.67 2.44 2.25 1.81 1.74 1.65 1.33 Data in EUR per hour, 2009 (adapted from Institut der Deutschen Wirtschaft, 2010) © 2012 R. Grünig/D. Morschett 9. Evaluating new production and sourcing locations 9.2 Total costs of Electrolux for products sourced in different regions Chest-freezers for US market USA China Washing machines for EU market Mexico Production Country = Logistics = Direct labour & overhead Western Europe China Eastern Europe Production Country = Materials & components (Electrolux, 2005) © 2012 R. Grünig/D. Morschett 9. Evaluating new production and sourcing locations 9.3 Components of procurement cost + + + + = Purchasing cost or production costs abroad Logistics Inland freight in the production country International freight ...
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...Schiller International University MULTINATIONAL BUSINESS MANAGEMENT – BA 529 Chapter – 9 Ramesh rangasamy Week 3 & Day 9 , 88725 ------------------------------------------------- Assessment 1) Understanding the ways in which companies in a supply chain improve performance by forging strategic links with other firms requires a close look at the nature of the relationships and how the partners behave. Strategic alliances have become a common feature of supply chains, with managers of companies along the chain integrating their processes to enhance competitiveness. Yet research shows that alliances do not guarantee success – and little is known about why some strengthen the market position of the partners while others do not. Evelyne Vanpoucke and Ann Vereecke set out to understand which aspects of an alliance are more likely to deliver success. Their paper – “The Predictive Value of Behavioural Characteristics on the Success of Strategic Alliances” – explores how behavioural features of an alliance – such as trust and commitment, and how partners communicate and manage the relationship – impact performance. Their research provides valuable insights into ways supply chain managers can structure their partnerships to increase margins in complex markets. Strategic Alliances: Collaboration as a Resource Companies in a supply...
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...the most attractive destinations for Foreign Direct Investments in the world. It is first destination for Inward FDI among developing countries (WTO, 2012). China has developed second world’s largest car market after U.S.A. and has been the largest car producer in the world since 2008. German company Volkswagen (hereafter VW) is the world’s second largest motor vehicle manufacturer after Toyota Motor (CNN, 2012) and the biggest manufacturer in Europe. VW is one of the earliest investors and the biggest foreign car maker in China with 15% of market shares. This report, by applying relevant theories, such as Dunning’s eclectic paradigm or Hymer’s internationalization theory, will explain why VW Company decided to invest in China through joint venture rather than acquisition or Greenfield investment. Introduction Chinese car industry, as well as many other branches, is very young, although dynamic and fast growing. In 1978 Chinese government introduced policy of open doors which allowed foreign companies to invest and operate in China. Since then car sector has developed rapidly from an infant to a mature industry. Moreover, Chinese government provides various incentives in order to attract foreign firms invest in Chinese car market, which the cause for industry dramatic development. VW entered Chinese market in 1984 setting up joint venture with the Shanghai Shanghai Auto Works which created Volkswagen Automotive Company Ltd. This was shortly followed by the Volkswagen...
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