A study of Internationalisation process and motives for multinationals.docx
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AstudyofInternationalisationprocessandmotivesformultinationals
1.0INTRODUCTION
1.1Introduction
Sincethelate1970sChinahasmovedfromaclosed,centrallyplannedsystemtoamoremarket-orientedonethatplaysamajorglobalrole-in2010Chinabecametheworld'slargestexporter(chinaeconomy).TheforeigncompaniespreferChinesemarketprospect,andtheforeigncompanieswanttoentertheChinesemarket,however,whentheforeigncompaniestoenteranunfamiliarmarket,thecompanywillfacemanynewproblemandhowtentertheChinesemarket.MultinationalcompanieshowtocontroltheinformationbetweenChinesemarketandgovernment,andtoadjustthestrategytorealizetheprofitofthecompanystructure.
1.2Background
Inglobalmarket,WTO(WorldTradeOrganisation)asanassociationhasattractedalotofmemberswhichprovideaadvantageenvironmenttopromotetheinternationalizationprocessandmotivesformultinationals(Cantwell,1998).ThebackgroundofinternationalisationprocessandmotivesforChinacorporationshastwoaspects.Since1990s,multinationalcorporationsstartedtoextendtheirmarkettoChina.Duetoglobaleconomicsdevelopment,everycountrycannotdevelopsimplybytheirownpower.Ithastoopentheirmarketandbecomemultinationals.AlthoughtheChinesegovernmentafteraccessiontotheWTOontheregulationoftheindustryhascontinuallyrelaxed,however,therestrictionsinmanyindustriesisstillevident,eveninsomealreadyopenedindustries,theinstabilityofChina’spolicyalsohaveriskformultinationalcompanies.Sincetheworldeconomyisbecomingglobal,thatprovidesalotofbusinessopportunities.Everymultinationalwantstoimprovetheirprofitthroughinternationalisation.Theinternationalisationprocessofmultinationalsisincloseconnectionwithbehavioralmodels.Therefore,internationalizationmustbeunderstoodintheprocessinwhichmultinationalsmanagetoachievetheircurrentinternationalstatus.
AnumberofdifficultiesapplytoforeigncompanieswishingtooperateinChina,asfollows(Roger1999):
1.Thereareshortagesofpeoplewithbusinessskill.
2.Consumerincomerareverylow
3.Distributionsystemsarepoor
4.Therearefewancillarybusinessservices.(advertisingagencies,marketresearchfirm,etc)
5.Commerciallawswereonlydraftedinthe1980s,andarefrequentlyimprecise.
6.Thereislittleinformationonconsumertastesandpreferences.
1.3Researchquestion:
ThisacademicresearchprimaryaimstoexploreinternationalisationprocessandmotivesformultinationalsinChina.Giventheprimarydirectionofthisresearch,ithasaseriesofresearchquestionsinvolvingrelevantareasofthetopicasthebreak-downofthestudy:
1.WhatarethemostcommonprocessesofinternationalusedbyorganizationinChina?
2.Whataretheorganizationalmotivesforinternationalization?
1.4Researchobjectives
TheobjectiveofthisstudyistodeterminetheprocessofinternationalizationinChina.
Toestablishorganizationmotivesforinternationalisation.
1.5structureofthereport
Byliteraturereviewsandanalyzedcasestudy,themotivesofinternational,theinternationalisationprocess,entrystrategyandmotivesformultinationalinChinawillbediscussedinthisdissertation.Throughcasestudyanalysisandinformationobtained,hopetheoutcomecanbehelpfulandprovidetheanswerformultinationalinChina.
2Literaturereview
Itisimportanttonoticethearrangementandchoiceofliteratureresource,whichmaybeinfluencethescientificityofthisresearch.First,thisliteraturereviewfocusesontheseliteraturesfromChineseacademiccommunity,whichisdeterminatedbythethemeofthistopicthatresearchonMultinationalCorporationinChina.Second,thevoiceandexperienceofChinaisimportanttosustainabledevelopmentofMultinationalCorporationinChinaandworld.Certainly,itisfactthatmoreandmorescholarsoutsideChinapayattentiontotheresearchonChineseMultinationalCorporationgotoworldandMultinationalCorporationcomefromothercountriesenterintoChinamarket.SothebodyofliteraturereviewmainlyincludesliteraturecomefromtheChineseacademiccommunityandEnglish-speakingacademiccommunity,buttheliteraturecomefromtheChineseacademiccommunityoccupyanimportantpartforthisliteraturereview.
WANGGen-bei,ZHAOJing,WANGXin-yi(2010)intheirresearchpointoutthatChina’sdevelopmentpathhasbeenwidelyrecognizedasbeingunique,withgradualprivatizationandmarketization,massiveprivatecapitalinflows,andextensiveexportingandanactiveinvolvementofgovernmentinbusinessaffairs.ThisuniquenessofChineseinstitutionalchangechallengesthecapabilitiesofpresenttheoryofinternationalbusiness,includingresearchontheentrymode.Theoptionsavailabletoaforeignfirmonlyincludejointventureandsoleventure.SeveralfactorsthatdeterminethechoiceofaChinesemarketentrymodehavebeenidentifiedinthispaper:
Thesefactorscanbeclassifiedintofourcategories,China’sprogressofmarketization,theproductivityheterogeneityofmultinationalcorporations,globalcompetivenessofhostingcountryandbilateralpoliticalrelationshipbetweenChinaandothercountries.Thisstudyexaminestheindependentinfluencesofthesefactorsonthechoiceofthemultinationalcorporations’entrymodeinChina.ML-BinaryLogitregressionmodelisemployedtotestthehypothesizedeffects.Theempiricalresultsarebasedonasampleofover1400foreignentryactivitiesintoChinabetween1980to2008.Thefindingsprovidesupportiveevidenceforeighthypotheses.Basedontheseempiricalfindings,thispaperproposesthefollowingsuggestions:
Firstly,centralgovernmentshouldbuildsthedifferentiatedmicro-regulationmechanismonmultinationalcompanyinChinaaccordingtothefirm’sproductivityheterogeneity;Secondly,centralgovernmentshouldmakesuchapolicywithwhichMNCexchangetheiradvancedtechnologyforthesakeoftheirnationaltreatmentandmarketentryinChina;Thirdly,inordertoprovidemutualandequalnationaltreatmentandmarketentryforChineseoverseafirms,centralgovernmentshouldtransferthepoliticaldiplomacyintoeconomicdiplomacy.
HUOJie,JIANGZhou-wen,andYANGHong-qing(2011)intheirpaperUsingdataon65670foreigninvestmententerprices,thispaperstudiestheimpactofpsychicdistanceonthemodesofenteringChinesemarketbymultinationalcorporations.Usinggroupedlogitmodels,regressionsindicatethatdifferencesinlanguagesanddifferencesinindustrialdevelopmentaresignificantlynegativelyrelatedtotheoddsratioofwhollyownedmode,differencesinreligionsaresignificantlypositivelyrelatedtotheoddsratioofwhollyownedmode,whereasthereisnostatisticallysignificantcorrelationbetweenmultinational’sentrymodesanddifferencesinlevelsofeducationanddifferencesindegreeofdemocracy.
ChenZengsheng,CuiGeng(2011)giventheriseofChinesemultinationalcorporations,howtheymakeforeignmarketselectionandentrymodedecisionswarrantssystematicinvestigation.WithasurveyofmanufacturingfirmsinChina,wefindthattheirforeignmarketselectionandentrymodedecisionsvarysignificantlyacrossthetypeofFDIoperations.WhilebothdevelopedandlessdevelopedeconomiesrepresentimportantexportopportunitiesforChinesefirms,developedeconomiestendtoattractmoreFDIfromChinesefirmsinmarketing,productionandR&Doperations.Thefindingsshedlightonthedistinctivemotivationsforforeignmarketselectionandentrymodedecisionsbyemergingmarketmultinationals.
GEJing,JINRui-rui(2010)intheirpaperreviewstheresearchonrelationshipbetweeninternationalizationandfirmperformance,andconcludeslinearshaped,inverted-Jshaped,Ushaped,inverted-Ushaped,andSshapedrelationship.TheyanalyzesinfluencingfactorsoftherelationshipandcomparesresearchesatChinaandabroad.
FengPeng-cheng(2009)considersthattheallocationofresourcesinworldwideisthesubstanceofmultinationalcorporationsinternationalR&D,butMNCsR&DcentersinChinaareatthebottomof“R&Dchain”.ThusifwewanttoacceleratedevelopmentofHigh-techindustry,optimizethetradestructure,buildstateinnovationsystem,weshouldemphasisonindependentinnovationinsteadofmerelyinternationalR&D·
DUDe-bin(2005)Accordingtothedifferenceoftheirinvestmentmotivationsandlocationchoices,theauthorsummariesMNE’soverseasR&Dlabsasthreecategories.ProductionsupportingR&Dlabsareaimattechnologicallocalizationandsupportingtheoverseasproductioninhostcountries,andaregenerallylocatedneartheiroverseasproductionaffiliatesinthosehostcountrieswithabiggermarket.TechnologytailingR&Dlabshaveaincentivetomonitorandacquiretheircompetitor’sknown-howandothertechnologicalinformation,sotheypreferthelocationtoclosetheircompetitor’sR&Dfacilitiesinmoreadvancedcountries.ThemotiveoftechnologyresourceexcavatingR&Dlabsistoutilizethehostcountry’sprofessionaltalentsandothertechnologicalresourcesotheyareusuallylocatedinthescienceandtechnologycenters,especiallynearfamousuniversitiesandinstitutes,inthosehostcountieswithabundantprofessionallaborsandbetterresearchatmosphere.
KANGWan-zhu(2007)thinksthatInthecourseofChineseenterpriseinternationalization,correspondingsenseofcultureshouldbeestablishedanddevelopedinlightofdifferentstages.Reasonableculturalcountermeasuresshouldbeputforwardinenterprises.Meanwhile,managersshouldendeavortocutdownculturalconflicts,lowertheinternationalbusinesscostssoastoputintoeffecttheirmanagingstrategie