Problem No. 1 Group Z The best entry mode. Flow of the Presentation 1.General Comparison of CJV, EJV...
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Problem No. 1 Group ZProblem No. 1 Group Z
The best entry modeThe best entry mode
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Flow of the Presentation
1.1. General Comparison of CJV, EJV and WOSGeneral Comparison of CJV, EJV and WOS
2.2. Analysis in Management AspectAnalysis in Management Aspect
3.3. Analysis in Marketing AspectAnalysis in Marketing Aspect
4.4. Case StudyCase Study
5.5. ConclusionConclusion
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CapitalCapital ProfitProfit RiskRisk
EJVEJV -According to According to proportion to equityproportion to equity-In forms of cash, In forms of cash, buildings, buildings, equipments, equipments, materials etc.materials etc.-At least 25% of total At least 25% of total equityequity
-shared proportion -shared proportion to amount investedto amount invested
-Relatively -Relatively lower lower (proportion to (proportion to amt invested)amt invested)
CJVCJV -According to terms -According to terms in contractin contract
-Shared with partner-Shared with partner
-Shared according -Shared according to terms in contractto terms in contract
-High / Low -High / Low (according to (according to terms in terms in contract)contract)
WOSWOS -Wholly invested-Wholly invested -All collected-All collected -Highest -Highest (without share (without share loss)loss)
General Comparison of Capital, Profit &Risk
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Management AspectManagement Aspect
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Conflicting Objectives in Chinese Joint Ventures
Foreign Partner Chinese Partner
Planning Retain business flexibility
Maintain congruency between the venture and the state economic plan
ContractsUnambiguous, detailed
and enforceableAmbiguous, brief and
adaptable
StaffingMaximize productivity;
fewest people per given output level
Employ maximum number of local people
Technology
Match technical sophistication to the organization and its environment
Gain access to the most advanced technology as quickly as possible
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InputsInputsMinimize unpredictability Minimize unpredictability and poor quality of and poor quality of suppliessupplies
Promote domestic sourcingPromote domestic sourcing
ProcessProcess Stress high qualityStress high quality Stress high quantityStress high quantity
OutputsOutputsAccess and develop Access and develop domestic marketdomestic market
Export to generate foreign Export to generate foreign currencycurrency
ControlControlReduce political and Reduce political and economic controls on economic controls on decision-makingdecision-making
Accept technology and Accept technology and capital but preclude capital but preclude foreign authority foreign authority infringement on infringement on sovereignty and ideologysovereignty and ideology
Conflicting Objectives in Chinese Joint Ventures
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Human Resources ManagementHuman Resources Management
Contractual Contractual Joint-Joint-VentureVenture
Equity Joint-Equity Joint-VentureVenture
Wholly-Wholly-OwnedOwned
StaffingStaffing The quality of the staff The quality of the staff depends on the venture depends on the venture party (It maybe party (It maybe / / ))
Staff quality Staff quality can be can be ensuredensured
TrainingTraining Working style maybe Working style maybe different which may lead to different which may lead to conflicts.conflicts.Take longer time to trainTake longer time to train
Less time Less time consumingconsuming
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Marketing AspectMarketing Aspect
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Target Customer
Our Target Customer :
HK firms who want to move their office to Shanghai
Do not provide any service for local firm
»»» do not need any local customer base
»»» prevent the threat of losing customer to the partner
Wholly-owned > Equity JV, Contractual JV
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Competitor
After we investigated 111 local removal companies
We found that:
11 firms had provided removal service form HK to Shanghai
only a few number of company had set up their office in China
So, the competition is Low
»»» it is better to entering this market as soon as possible
»»» to enjoy first-mover advantage
Wholly-owned > Equity JV, Contractual JV
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Market Potential
The number of new established HK-oriented firm in Shanghai :
In 2000, 419 HK firms
In 2001, 479 HK firms
No.1 - Total investment
- Number of firms
»»» The market size is Huge
So, it is better to established our own office in Shanghai as soon as
possible
Wholly-owned > Equity JV, Contractual JV
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Supplier
Our Service:
Provide a ‘package deal’ for our customer
We need:
Local property knowledge
Shipment team
Decorator
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Supplier
Our Service:
Provide a ‘package deal’ for our customer
We need:
Local property knowledge -------- employ a local staff or local
property firm
Shipment team -------- still using the existing supplier
Decorator -------- employ a local decorator
Wholly-owned > Equity JV, Contractual JV
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Cultural Difference
The cultural difference between HK and Mainland is small
Do not need any local customer base
The Legal system has become more comprehensive and mature
after entering WTO
»»» ‘Guanxi’ and local network is not so important
Wholly-owned = Equity JV = Contractual JV
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Case StudyCase Study
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iNFOiSLIVE Corporation Limited (iiL)
Interviewee: Josephine Yim
Position: Assistant General Manager of Beijing iiL Office
Office Address in Beijing: Rm 521, zhouji building no.16,
ande lu, dongcheng,
Beijing 100011, China
Date of Interview: 11/11/2002
Format of Interview: Through Telephone Interview
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Case - iNFOiSLIVE Corporation Limited (iiL)
iNFOiSLIVE Corporation Limited (iiL), iNFOiSLIVE Corporation Limited (iiL),
Leading mobile entertainment application developer in the Asia-PaLeading mobile entertainment application developer in the Asia-Pa
cific Regioncific Region
Established in 1999 in Hong Kong. Established in 1999 in Hong Kong.
Dedicated to the development of mobile entertainment applications Dedicated to the development of mobile entertainment applications
and platforms with SMS/EMS, WAP/GPRS, KJava, i-mode and and platforms with SMS/EMS, WAP/GPRS, KJava, i-mode and
embedded systems. embedded systems.
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Case - iNFOiSLIVE Corporation Limited (iiL)
Small medium enterprise – about 30 employees in HK officeSmall medium enterprise – about 30 employees in HK office
Have not much capitalHave not much capital
Similar industry – service industrySimilar industry – service industry
Have joint venture experience in foreign market, only choose Have joint venture experience in foreign market, only choose
China be their first WOSChina be their first WOS
Why choose this company?
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Why don’t choose EJV or CJV?
Concerning Problems:Concerning Problems:
Finding right partnersFinding right partners
Chinese enterprise still not well-developedChinese enterprise still not well-developed
Time for negotiationTime for negotiation
Managing problemsManaging problems
Stolen of Customer BaseStolen of Customer Base
Share of ProfitShare of Profit
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Why don’t choose EJV or CJV?
Risk sharing – Foreseeable market demand
Not familiar with the market –
china now is easy to find market information and
have well gov’t regulations on foreign investment.
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Benefits:Benefits:
Profit Profit
Easy to manageEasy to manage
Protect the customer base Protect the customer base
Easy to establish in now china regulations for foreign Easy to establish in now china regulations for foreign
investmentinvestment
Why choose WOS?
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ConclusionConclusion
Analysis of management and marketingAnalysis of management and marketing
Experience of a successful companyExperience of a successful company
Wholly-owned Subsidiary is preferred for Wholly-owned Subsidiary is preferred for establishing a company in Shanghaiestablishing a company in Shanghai
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ReferenceReference
Beamish, P.W. and Killing, J.P. (eds) 1997. cooperative Beamish, P.W. and Killing, J.P. (eds) 1997. cooperative Strategies: Asian Pacific Perspectives, SF: The New LexiStrategies: Asian Pacific Perspectives, SF: The New Lexington Press – Various articles under part two: Formation ngton Press – Various articles under part two: Formation of Cooperative Alliancesof Cooperative Alliances
Tsang, Eric W.K. 1998 Foreign Direct Investment in ChinTsang, Eric W.K. 1998 Foreign Direct Investment in China Journal of General Management. 24, 1, 15-34a Journal of General Management. 24, 1, 15-34
Vanhonacker, Wilfried. 1998. Entering China: An unconvVanhonacker, Wilfried. 1998. Entering China: An unconventional approach. Harvard Business Review (March/Aprentional approach. Harvard Business Review (March/April): 130-140il): 130-140
Child, J. & Faulkner, D. Strategies of Cooperation. OxforChild, J. & Faulkner, D. Strategies of Cooperation. Oxford: Oxford University Press, 1998.d: Oxford University Press, 1998.
http://www.yp.com.hk/business/ch/html/index.asphttp://www.yp.com.hk/business/ch/html/index.asp
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The EndThe End
00014049D Ivy Tse
00212768D Aily Lam
00250538D Davis Heung
00253308D Ming Fan
00291790D Kim Wong
00354114D Michelle Hui