A study of Internationalisation process and motives for multinationals.docx

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