How Have Some Chinese Companies Achieved Success in Foreign Markets?
HOW HAVE SOME CHINESE COMPANIES ACHIEVED SUCCESS IN FOREIGN MARKETS?
China opened its doors to foreign trade, technology and investment in 1978 seeking to secure natural resources (raw materials and fuel), acquire Western technology and know-how skills and escaping from the home market saturation (Teagarden & Cai, Learning from dragons who are learning from us: developmental lessons from China´s global companies, 2009). Thirty years afterwards it could be said out loud that some Chinese companies have successfully globalized and are on their way to becoming leaders in Western countries. The Economist (2007, p.5) points out that both modularisation and flexibility are significant features for Chinese manufacturers. However, Teagarden and Cai (2009) go further and distinguish among four different evolutionary phases when studying Chinese multinationals´ success abroad: the learning, the build-up, the internationalization and the globalization. This essay will go through each phase indicating the key features that have allowed Chinese companies( such as Lenovo, Haeir, TCL or Huawei) to emerge triumphantly overseas.
The first step Chinese multinationals take, according to Teagarden and Cai (2009) is the learning phase, where they focus on the adaption and assimilation of established technology. Instead of starting from an original idea or technology (as their Western counterparts usually do) and being aware of their lack of know-how, soft skills and experienced employees and managers in the global environment; Chinese multinationals have found acquisitions to be a valuable and quick option to establish a global presence and access to new customers. In a study carried out by the McKinsey (Dietz, Orr & Xing, 2008), 55% of the Chinese executives interviewed agreed that merge and acquisitions would be the backbone of their long-term strategies. Joint ventures, alliances and collaborations allow them not only to improve their understanding of the products and market abroad but also it helps them to develop further economies of scale with the consequent lower costs it implies (Dietz, Orr & Xing, 2008). An example was TCLs acquisition of Thomsonss TV unit in 2004 to boost its progress of flat screen technology.
The second phase, the build-up, consists on becoming proficient in applying the acquired knowledge in order to support internationalization and competitiveness (Teagarden & Cai, 2009). Adaptation of foreign best practices is as necessary as building on technology. Dietz, et all (2008) found out that 88% of the Chinese executives interviewed believed that one of the most visible issues holding up the globalization process was the lack of people with cross-cultural skills. To tackle this they could either develop adequate leaders (via training programs) or recruit foreign managers. Lenovo followed this last direction when it recruited an American, Bill Amelio,