Market Entry Strategy Selection in China
Market Entry Strategy Selection in China
Introduction Foreign firms deciding to entrer a host country face numerous options of entry modes, which include equity joint ventures, wholly foreign owned enterprises, acquiring existing firms, franchising and licensing, contractual joint ventures, representative offices, build-operate-transfer and so forth. However, the most important process a foreign company should do before deciding an entry modes is to make sure it know the targeted market very well by considering the production factor, the market factor, and environment factor in host country. This essay will give a general introduction about the location choice of foreign direct investment (FDI). After that, it will focus on China’s location factors which have an influence on FDI. Then, four main entry modes in China will be discussed including advantages and disadvantages. Finally, some available and realitic entry modes in China will be suggested.
Literature Review International investment is becoming an increasing important part in doing business worldwide for multinational corporations. Dunning’s compromise theory of international production proposed in the 20th century 70’s indicates that there are three basic elements, namely the advantages of ownership, internalization and location, if a company intend to do international investment (Yan, 2003). The classification system of foreign direct investment (FDI) adopted by Guiming (2002) is four fold: the production factor in host country, the market factor in host country, environment factor in host country, geographical conditions, cultural diversity factors and other factors. Focusing on China, due to the various economic and non-economic factors, FDI in China is different from region to region. Dunning divided the locational factors whicn affect FDI into four groups: market factors, trade barriers, cost factors and the investment environment. The location selection factors influencing FDI can be
Introduction Foreign firms deciding to entrer a host country face numerous options of entry modes, which include equity joint ventures, wholly foreign owned enterprises, acquiring existing firms, franchising and licensing, contractual joint ventures, representative offices, build-operate-transfer and so forth. However, the most important process a foreign company should do before deciding an entry modes is to make sure it know the targeted market very well by considering the production factor, the market factor, and environment factor in host country. This essay will give a general introduction about the location choice of foreign direct investment (FDI). After that, it will focus on China’s location factors which have an influence on FDI. Then, four main entry modes in China will be discussed including advantages and disadvantages. Finally, some available and realitic entry modes in China will be suggested.
Literature Review International investment is becoming an increasing important part in doing business worldwide for multinational corporations. Dunning’s compromise theory of international production proposed in the 20th century 70’s indicates that there are three basic elements, namely the advantages of ownership, internalization and location, if a company intend to do international investment (Yan, 2003). The classification system of foreign direct investment (FDI) adopted by Guiming (2002) is four fold: the production factor in host country, the market factor in host country, environment factor in host country, geographical conditions, cultural diversity factors and other factors. Focusing on China, due to the various economic and non-economic factors, FDI in China is different from region to region. Dunning divided the locational factors whicn affect FDI into four groups: market factors, trade barriers, cost factors and the investment environment. The location selection factors influencing FDI can be