International Business
Introduction
As a Western manufacturing company of English Language products considering a major investment in one of the BRICS countries—preferably China—it is advisable that the company first possess an assessment of the feasibility of achieving the company’s aims in a country like China, which currently is in a trade war with the U.S. that shows no signs of letting up. Moreover, an examination of the overall context of globalized society in the 21st century will help the company to determine whether this investment would be particularly strategic at this time or not. While the general business environment in China (in the widest sense) is positive, there are a number of obstacles that Western companies face when attempting to enter the Chinese market. Cultural and institutional challenges make up the bulk of these obstacles, but, as other companies have overcome them in the past with the right approach, it is not impossible that this company should achieve the same.
This report will (a) give advice on the general business context internationally and nationally, (b) advise on entry mode and why this entry mode was selected, (c) advise on dealing with institutional and cultural differences as well as opportunities and challenges between the host and home countries, and (d) base all advice on theory supported by academic literature, evidence-based practices, relevant data, and statistics wherever applicable.
Context
Global
Altbach (2004) points out that “English-language products of all kinds dominate the international academic marketplace” (p. 11). Journals, books and other popular media formats in which English-language products are produced and disseminated can be found virtually everywhere in the world. Part of this expansive reach of English is the fact that approximately at any given time in today’s globalized world, there are 1.5 million students who are studying in some discipline outside of their native countries (Altbach, 2004). 80% of all international students, moreover, hail from developing countries—which means English is not their native language and yet it is more than likely the language in which they will pursue their education (Altbach, 2004). Bolton (2008) notes that the English language is particularly popular in Asia with more than 700 million English language learners from India to the Far East. This means means that there is certainly a market for English language products in the East. In China, specifically, it is estimated that some 500 million English language learning students (Bolton, 2008). With a population of 1.3 billion, roughly one-third of the nation’s people are engaged in some form of English-language learning.
National
As Pan and Block (2011) note, English is a “global language” viewed as such in China, where this company’s English language products are intended to be sold. Thus, there is certainly a market and a demand for this type of item among Chinese consumers. The Chinese people are, moreover, very forward-looking (Agnew, 2012) while simultaneously holding on to its traditional aspects and cultural traditions. This means that at one and the same time the Chinese are willing to spend a great deal of time and energy on learning while also keeping a safe distance between their culture and the culture of the West: in other words, the two are not the same—and the attempt by Mattel to sell its American Barbie products in China showed the extent to which the culture clash between China and the West exists (Lyles, 2008). Nonetheless, because English is recognized as a “global language” the product itself which this company aims to produce and sell in China is not likely to be met with the kind of indifference or scorn that Mattel faced when it entered the country. China is, after all, one of the largest countries in the world in terms of sending students to the West (Altbach, 2004). In short, there is a great deal of national interest in China in having access to the English language. Likewise, with China’s economy growing at an exponential rate in the 21st century—10% year over year in recent years (Bolton, 2008)—there is a great economic advantage to entering the Chinese market. This market, moreover, is fertile: “by 2020, it is estimated that 300 million, or 40 per cent of the Chinese population [will] be in the middle class” (Bolton, 2008, p. 8). As part of the middle class, these 300 million Chinese consumers are also more than likely to be English-language learners—and indication that the market for English language products in China is ripe.
Entry Mode
Options
Options for entry mode into China include: entering the market by way of establishing contracts with distributors, suppliers, licensees and/or franchisees (Brouthers & Hennart, 2007). Other options include establishing the firm itself within the country, establishing subsidiaries for sales and/or manufacturing either via joint venture (JV) or through a WOS—wholly owned subsidiary. At the turn of the 21st centuries, foreign companies were “generally free to choose their mode of entry into the Chinese market from among such forms as equity joint ventures (EJVs), wholly foreign-owned enterprises (WFOEs), contractual (or cooperative) joint ventures (including licensing and technology transfer agreements), joint exploration, and cooperative development”...
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