CASE STUDY: A FIRST TIME EXPATRIATES’S EXPERIENCE IN A JOINT VENTURE IN CHINA
Why Businesses Enter Into Joint Ventures
Intense competition has forced many firms to seek competitive advantage beyond their native boundaries. The economic achievement of China during the last two decades has been impressive. As a result, China has become the place where many Western companies are eager to gain competitive advantage through the exploitation of its abundant resources. Numerous international companies have been competing for business opportunities in China in the form of JV. As Fryxell (2001) notes, when entering Chinese market joint ventures are increasingly common form in China. In joint ventures the ownership is shared by two companies, one of which is usually foreign. Joint ventures agreements and arrangements may vary, most of the times membership on the board is shared, foreign company has personnel on site who provide technical support and serve controlling functions (Child, 2000). The mode of entry through JV is considered practical for overcoming trade barriers or expanding current production techniques into Chinese facilities (Yan, 2000). According to Yan (2000), the most frequently mentioned foreign objectives for creating joint ventures in China investment are, to gain a strategic position, opportunity for long-term profit and low labour costs. Nevertheless, despite the potential opportunities that gaining a foothold in the Chinese market may provide, many companies have already experienced JV failure (Thesis 2005).
JV Failure
According to (Child and Faulkner, 2000. p.165) ‘the dissolution rate for joint ventures is reported to be about 50 per cent’ they observe that for many companies the temptation to succeed where other have failed often overwhelms common sense. Many organizations rush into joint ventures without first considering the impact that the different environmental and social conditions will have on their business; others simply ignore the warnings, jumping on
Intense competition has forced many firms to seek competitive advantage beyond their native boundaries. The economic achievement of China during the last two decades has been impressive. As a result, China has become the place where many Western companies are eager to gain competitive advantage through the exploitation of its abundant resources. Numerous international companies have been competing for business opportunities in China in the form of JV. As Fryxell (2001) notes, when entering Chinese market joint ventures are increasingly common form in China. In joint ventures the ownership is shared by two companies, one of which is usually foreign. Joint ventures agreements and arrangements may vary, most of the times membership on the board is shared, foreign company has personnel on site who provide technical support and serve controlling functions (Child, 2000). The mode of entry through JV is considered practical for overcoming trade barriers or expanding current production techniques into Chinese facilities (Yan, 2000). According to Yan (2000), the most frequently mentioned foreign objectives for creating joint ventures in China investment are, to gain a strategic position, opportunity for long-term profit and low labour costs. Nevertheless, despite the potential opportunities that gaining a foothold in the Chinese market may provide, many companies have already experienced JV failure (Thesis 2005).
JV Failure
According to (Child and Faulkner, 2000. p.165) ‘the dissolution rate for joint ventures is reported to be about 50 per cent’ they observe that for many companies the temptation to succeed where other have failed often overwhelms common sense. Many organizations rush into joint ventures without first considering the impact that the different environmental and social conditions will have on their business; others simply ignore the warnings, jumping on