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A Foreign Perspective On Potential Problems And Conflicts In Sino Foreign Joint Ventures

3762 words - 15 pages

1. Table of Contents1. Table of Contents Page 12. Introduction Page 23. Problems and conflicts in Sino-foreign joint ventures Page 33.1. Different expectations of joint venture partners Page 33.2. Technology transfer Page 43.3. Localization of content Page 53.4. Control Page 63.5. Lack of trust Page 73.6. High employee turnover Page 83.7. Cross-cultural differences Page 93.7.1. Addressing problems Page 93.7.2. Precedent versus innovation Page 103.7.3. Responsibility and motivation Page 113.7.4. Performance Assessment Page 113.7.5. Leadership behaviour Page 123.7.6. Guanxi Page 133.7.7. Solutions to reduce cross-cultural differences Page 134. Conclusions and Recommendations Page 155. Bibliography Page 182. IntroductionSince China opened its doors to foreign investment and implemented economic reforms in the early 1980s, growth of international business partnerships in China has been dynamic. International joint ventures (JVs) between foreign and Chinese state owned enterprises have been the dominant mode of entry (Child & Yuan 1996, pp. 106-107).This year alone the number of Sino-foreign JVs has increased by 33.03 % (Ministry of Foreign Trade and Economic Cooperation, PRC 2003).JV failures in China are generally very high and only 44% of all Sino-foreign JVs are considered to be a success (Blanchot & Mayrhofer 1998).Due to the many failures and problems in Sino-foreign JVs, this report will analyse some potential problems and conflicts that foreign companies might experience in a Sino-foreign JV.After exploring the potential problems in these international JVs (IJVs) I will provide some recommendations for foreign organizations on how to solve these problems and improve the performance the IJV.3. Problems and conflicts in Sino-foreign JVsThere are many reasons why so many Sino-foreign JVs have failed or experienced difficulties. The following section takes a closer look at the causes of the problems and conflicts that were experienced by many foreign companies involved in an IJV in China.4.1. Different objectives and expectations of JVGenerally, the parties involved in an IJV have different objectives and expectations. These different objectives and expectations frequently lead to conflicts (Campbell 1997, p. 105).Normally, foreign companies are interested in market access to China, making profit, inexpensive labour and loose regulations.Chinese on the other hand are more interested in capital, acquiring and learning about advanced technology, foreign management expertise and earning foreign exchange through export. Are either party's priorities in danger, conflict is almost certain (Luo 1998, p. 157).In almost all US-foreign JVs it occurred that the US partner was mainly interested in penetrating the Chinese market, whereas the Chinese considered the JV as a way of increasing exports. Compromise appeared to be the best way to solve this conflict. A strategy for this case is to come up with a mutual decision to divide the products of the...

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