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Joint Ventures with Chinese Companies

In: Business and Management

Submitted By SvenjaKr
Words 540
Pages 3
Joint ventures with Chinese companies

Some multinational companies have opened subsidiaries in China through joint ventures with Chinese companies. Not all of them are successful though; there are advantages and disadvantages of such joint ventures. In the last years, China has emerged as “a worldwide economic powerhouse”[1], becoming more and more attractive as a joint venture partner for multinational companies in order to gain access to the Chinese market.

Foreign companies can profit from Chinese knowledge of the Chinese market, their contacts to important government institutions, their knowledge of the Chinese way to do business and Chinese regional characteristics. Cheap production opportunities and an already existing team of workers can also be a huge advantage for them. In addition to that, the companies can save money and reduce their risks should a particular project fail through resource and capital sharing.[2] Especially advances in technology are really expensive, therefore pooling money and personnel can cut costs significantly. The German carmaker Daimler AG for example has recently been involved in a joint venture with China’s BYD Co Ltd to produce electric cars. That way, they are sharing the high costs of producing such a car.[3] The foreign business partner usually contributes to the cooperation with know-how about production procedures and techniques as well as excellent distribution strategies and managerial expertise. Moreover, joint ventures give smaller companies the possibility to work with larger ones to increase sales, gain access to wider markets that they otherwise cannot gain, and enhance technological capabilities through shared research and development.[4]
Ideally, both partners contribute around the same amounts of resources and capital into each business so that the mutual benefit is almost equal. This is not always the

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