This case study analysis examines Parker's Biscuits' strategic approach to entering the Chinese consumer market through a joint venture. The paper evaluates the company's existing core competencies, including its established Asia/Pacific manufacturing network and prior joint venture experience in Taiwan and Hong Kong, against the capabilities it still needed to develop. It also considers the competitive landscape in China, the role of Chinese government policy in encouraging foreign investment, and the importance of building collaborative relationships with local business partners to reduce market entry barriers and tailor product offerings to Chinese consumers.
China is quickly becoming just as much of a consumer nation as it is a major international manufacturer. This shift has led many foreign companies to begin operating in China — not merely to manufacture and export goods, but to sell directly to Chinese consumers. The food industry had slowly begun introducing foreign snacks and products to serve this growing consumer base, demonstrating that significant opportunity existed within the country. Parker's Biscuits was looking to expand its empire by potentially entering into a joint venture with a Chinese partner to manufacture and distribute its cookies and biscuits. Although the company needed to build certain core competencies to succeed, it already had experience working with joint ventures in Asia and therefore held a competitive advantage over foreign companies with less knowledge and fewer resources for operating within the region.
There are a number of capabilities which Parker's Biscuits needed to develop and strengthen in order to maximize its competitive advantage in China. The Chinese government had long been encouraging foreign investment through joint ventures, meaning the environment was already primed for market entry. The company simply needed to work out an investment and management strategy with the right local business partner. To that end, Parker's Biscuits needed to expand its research and development activities in China in order to appropriately evaluate and forecast the potential success of particular business partners. Part of this process involved genuine engagement within the Chinese business environment, which would also help establish stronger relationships with prospective partners (Kanter 1994).
The case study makes clear that heavy competition already existed in the region, which could make entry more difficult. Establishing strong collaborative ties with Chinese companies already operating locally would help lower barriers to entry and give Parker's Biscuits an advantage over competitors. Working closely with a local partner would also allow the company to expand and adapt its current product offerings — for example, broadening its noodle selection — to better appeal to Chinese consumers.
"Established Asia/Pacific factories and joint venture history"
Moreover, the company was already structured to conduct business in China. It had been organized into four geographic regions — each governed in terms of marketing, sales, and manufacturing. One of those regions was Asia/Pacific, which already encompassed ten factories located in New Zealand, Hong Kong, India, Indonesia, Malaysia, Taiwan, Thailand, and elsewhere. Crucially, this meant the company already operated two facilities within Chinese territory: one in Hong Kong and one in Taiwan, with the Taiwan plant already functioning as a joint venture. The Taiwan manufacturing operation had been running since 1985, giving the company decades of experience managing a joint venture in an environment closely comparable to mainland China.
The company had also gained valuable experience through its Hong Kong joint venture operating out of Shenzhen. That operation provided fine-grained insight into the practical details of doing business in China — knowledge that would prove directly applicable to structuring and managing any new mainland joint venture. China's regulatory and business environment has historically rewarded foreign entrants who arrived with regional knowledge, and Parker's Biscuits was better positioned than most to leverage that advantage.
Kanter, Rosabeth Moss. (1994). Collaborative advantage. Harvard Business Review.
Parker's Biscuits, Inc.: Venturing into China. (1997). [University].
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