Entering China Which Aspects Should A Transnational Organization Consider When Entering The Chinese Market

Seminar paper from the year 2008 in the subject Economics - International Economic Relations, grade: 1.2, Fontys University of Applied Sciences Venlo, language: English, abstract: Globalization presents risk and opportunities today and in the future. Transnational Organizations (TNOs) were the beneficiaries of the globalization; they expanded their activities aboard, created an international mentality and adapted their strategies for substantial growths. Many domestic markets of TNOs are already saturated and through the process of expanding abroad TNOs have been looking for new markets with a high growth potential. Nowadays, China represents a promising target for nearly every TNO. However, many TNOs fail to enter the Chinese market successfully or are not able to capitalize their potential. The purpose of this report is to conclude why China is attractive for TNOs, what the specific risks and challenges are, when operating in the Chinese market and on which aspects a TNO should focus when entering China. In order to answer these questions, the present economic situation, including the influences by the economic crisis, is analysed to demonstrate the relevance of the Chinese market. The current situation of TNOs in China is explored to provide an understanding of the different strategies to cope with the various challenges and risks in China. As a result an outline of the key success factors and most relevant strategic decision will give advice for the implementation of an efficient strategy. Transnational organizations have to target the Chinese market in order to remain competitive in the process of globalization. Poor infrastructures, different cultural behavior, copyright violations, fierce competition or concerns on the legal systems are risks that TNOs have to face in China. Therefore, transnational organizations need to implement efficient strategies in order to exploit their full potential in the Chinese market. Entering the Chinese market can be done by four major entry modes: Exporting, Licensing (Franchising), Joint Ventures or Foreign Direct Investment. It can be concluded that TNOs have to focus on an efficient innovation strategy and incorporate local responsiveness in their culture in order to adapt their company to the market environment of China. One global strategy for all countries, as in the past, is not possible anymore. TNOs have to implement a “Think Global – Act Local” strategy. The prospects for the Chinese economy are still promising and will continue to offer TNOs enormous competitive advantages.