CONCLUSION
industry and its entire economy is propelled by the shift from the command
economy to an open economy that allows free flowing foreign investment.
automobile industry has yet to develop the necessary technological and
personnel expertise that an assembly line needs. (Gaba et al, 2002) This is not
to mention the capital needed in developing the industry and exporting it to
the world market. Thus, the reliance of its automobile industry on foreign technology
and capital is not altogether surprising. This implies that foreign investors
determine the course that Chinese automobile industry has to take. However, the
process of globalization in the automobile industry and accompanying global
linkages has also begun to restructure the manufacturer-supplier relations in
the Chinese auto industry.
instituted policies that will significantly help the Chinese automobile
industry. Programs such as the Five-Year plan for the Development
of the Automotive Industry will drive local investors in developing a national
industry that is both competitive and reasonably priced. Further, the
technological and skill absorption derived from the experiences in foreign
companies will bring the boost that the automobile industry needs. (Zhao, 2000)
restrictions on foreign companies should be loosened immediately. Rules
confining insurers to invest premiums in government bonds and bank deposits
should be lifted, and foreign insurance brokers should be allowed to obtain
licenses. At the same time, however, the domestic industry should continue to
receive some protection in order to give it room to develop in the face of new
foreign competitors. Restrictions on the scope of products that foreign
insurers may sell should be loosened only gradually. Geographical restrictions,
city-by-city controls, and ownership restrictions should also be loosened
slowly. Moreover, the nature and pace of structural reform and consumer demand
in
require strategies to be reviewed constantly. As margins become tighter,
producers will need strategies that both pursue market share and manage costs.
To win market share, global automakers should concentrate on their new sales
and distribution networks in
and on their product-and brand-development efforts around the world. To manage
costs and capital, contracting out the manufacturing of whole vehicles to
Chinese companies may be a leapfrog strategy for those Western carmakers that
are willing to take the first steps now.
In this time frame, manufacturing companies such
auto manufacturers have to contend to the fact that joint ventures are
essential. These companies have realized that Chinese partners are necessary to
accomplish goals in the Chinese system. In addition, partners understand the
functioning's of the markets and the business norms. Managing the
cross-cultural aspects of relationships in
is often the most difficult aspect of conducting business in
1991) Moreover, companies often approach the market in a manner similar to
their system. The difference lies in the fact that unlike the Western approach
to control of enterprises, in
a majority shareholder can make all of the decisions, but may not be able to
enforce them and put them into practice.
the study also shown
vastly different culture, language, business climate, and political environment
will continue to plague foreign investors for some time to come, and the joint
venture is still among the best way to acquire the necessary familiarity with
conditions. However, it should now be viewed as a means to an end rather than
as an end in itself. Because the Chinese have made great strides in adapting to
the Western mindset, an environment now exists in which foreign managers can
realistically envision greater control over their Chinese operations and
seriously consider the creation of wholly-owned subsidiaries, a strategy not
previously thought realistic. In that respect, and to improve the quality of
their current joint ventures in the interim, the recommendations made here
should be seriously considered.
investors have shifted their concerns about basic issues of profitability to more
sophisticated issues of securing management control and creating long-term
strategies for
market of the twenty-first century. Current investment laws in
well-suited to meet the investment objectives of at least some large foreign investors,
which seek substantial management control while maintaining the joint venture
form. (Gaba et al, 2002)
faces more restraints, being a weaker partner in its rapidly emerging global
linkages. (Zirin, 1997) This has resulted in greater policy ambivalence and
contradictions. As the experience in the automobile industry suggests,
cross-border partnerships to obtain the foreign capital and technology needed
for introducing new products and modernizing the production process. For this
reason,
has sometimes to allow the local decision units to retain more policy autonomy.
It has also to retreat from disallowing the foreign partners access to the
Chinese partners' domestic market. The process of globalization in the automobile
industry and accompanying global linkages has also begun to restructure the
manufacturer-supplier relations in the Chinese auto industry.
industries,
has witnessed the permeability of the economic boundaries thanks to the
extensive linkages it has built with the global economy. In the same industry,
had frequent opportunities to display its policy ambivalence and contradictions
towards the global market forces. The Chinese have had to rely on the global
linkages to develop their auto industry, despite their preference for having a
national industry. (Zhao, 2000) They want to develop it into a "pillar
industry", one that represents the maturing of the industrial revolution in
even though it contributes only modestly to its employment and national income.
because they do not have the technology to develop new products. Neither do
they have the capital to finance the design and manufacture of these products
or the capacity to export them to the world market. Therefore the country is a
weaker partner of the technologically and financially powerful foreign
corporations. In comparison, inter-corporate strategic alliances in the
advanced economies arise among firms of equal strength on the basis of
complementarity in skills, competencies and technology. They are pulled
together by a competitive strategy for developing better products in a faster
and/or a more efficient way.
rivals, because reliance on internal resources alone no longer suffices for
competing simultaneously across many functions, multiple cultures and many
regulatory boundaries so as to add as much value as possible in each functional
activity, wherever it is located. Thus, they have replaced bilateral
"multi-domestic" investment of the 1960s and 1970s with multi-lateral
deals of the past two decades. Unlike in a "multi-domestic"
operation, where a corporation keeps its R&D at the home country while
duplicating other functions for targeted foreign national markets, a global
firm executes each functional activity and competence at any given location for
the global market, attending to diverse national preferences from the stage of
product design onwards. (Che, 1999)
come from
shift from self-help during the first half of the 1980s to an emphasis later on
using joint ventures with foreign corporations to develop its auto industry.
(Tung, 1991) In this transition, cross-border partnerships have taken on a
fundamental instead of previously incidental function in the overall
development of this industry, one that serves to rebuild the inter-firm
organizational linkages on the competitiveness in performance. While obligated
to raise the domestic content of the car assembly, the foreign partners of the
joint venture assemblers have come to exert great influence on who may
participate in domestic sourcing and at what pace this process may proceed.
integration with the globalizing auto industry is finding expression in not
only the formal legal partnerships which its automotive enterprises have
reached with their foreign counterparts, but also certain rules and standards
in the economic system towards which they are gradually converging. The Chinese
suppliers have to worry about the quality of their products and learning to
meet the expectations of the joint venture assemblers when it comes to getting
domestic sourcing deals from the latter. This is quite a break from the past
when most of the suppliers would not care much about the minimal quality and
performance standards in production.
globalizing industry, however, remains limited. Most of its outputs, complete
vehicles as well as parts and components, are still made for domestic use only.
In other words,
has still a far distance to travel to become fully integrated with the
globalizing industry, when its complete vehicles will be exported to the Triad
and be tested in the world's toughest markets. As a first step towards that
point, it needs to get the automotive enterprises competitive at home. Whether
it likes it or not, the global linkages in place are already helping to turn
the domestic market increasingly into a battleground. In order to be truly
competitive, China will have to move away from cuddling the infant industry
with high tariffs, imports licensing, "buy import substitutes"
campaign, as well as a captive consumer base whose demands are elastic to the
government's fiscal policies instead of product price so as to escalate the
competitive pressure among both the joint venture assemblers and their Chinese
suppliers. It may want to adjust the geographical jurisdictional boundaries in
marketing and sales and building a pool of meticulous consumers, perhaps among
a rapidly growing middle-class.
References:
Che, Y. M. (1999, July 21). More
than 332,700 foreign-funded enterprises operate
in
People's Daily (Overseas
edition), p. 1.
Gaba, V., Pan, Y. and Ungson, G. (2002).
Timing of entry in international market: An
empirical study of U.S. Fortune 500 firms in
Business Studies, Vol. 33.
Tung, R. L. (1991). Handshakes across the sea: Cross-cultural
negotiating for business
success. Organizational Dynamics,
19(3), 30-40.
Zhao, J. (2000). The Chinese Approach to
International Business Negotiation.
Zirin, J. (1997). Confucian confusion. Forbes, 159(4), 136-137.
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