Managing Multinational Operations essay
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In the current time, organizations have to keep moving and even break into foreign countries in order to make use of the available opportunities and therefore become successful. However the firms have to formulate strategies and act according to the prevailing factors and situations that exist in those foreign markets. Every foreign market has different social, political and economic conditions that have to be adhered to. According to Ambler, Xi & Witzel (2008) China has become a target for most multinationals because of its large population and domestic demand which have made its economy to grow steadily. Coming up with a successful business strategy to operate in China requires a very accurate and realistic understanding of risks and rewards. Similarly long term investment would require an accurate understanding of the attributes and etiquette of doing business in China.
Success factors to consider for doing business in China begin with understanding the import and export restrictions. For instance there are some products that currently have no import licensing quota control. Such products include motor vehicles, vehicle tires, natural rubber, and oil products. On the same note imports like agricultural products are keenly monitored e.g. wheat, cotton and grains. Similarly, there are restrictions on export of certain commodities like domestic resources which are in short supply or might end up being depleted and therefore need conservation. Ambler, Xi & Witzel (2008) explain that goods being exported to countries with limited market capacity are also restricted. This is therefore an important factor because it dictates the kind of products that will leave or enter China. The benefits of any company will definitely depend on the laws or regulations upon imports and exports.
Supplier financing is also another important factor. The current trade flows have created some competition amongst suppliers operating in China forcing them to bear more risks. This has made them to look for alternative means to make it possible to have open-account transactions. Depending on their sophistication and size, they can reduce the risk with currency hedging and customer analysis. It is even possible for them to go for credit insurance. As Ching (2008) puts it, there is also a record of all the suppliers both international and local in order to maintain negotiations or transactions and therefore create good coexistence. Similarly it is mandatory that any new investors establish good partnerships and relationships with suppliers in order to establish a more productive business.
An understanding of labor relations in China is of great significance. For instance, it is said that China labor law allows an enterprise to decide the means and time at which they will recruit staff including the number and requirement for successful recruits. According to Ching (2008), employment agencies with labor and social security departments could be used to recruit staff. This could be done through mass media or human resource affairs. Furthermore, the labor law in China demands that a contract has to be signed between the enterprise and the employee creating the basis of the relationship between both parties. Since the foreign company will definitely depend on local man power for their labor, these labor relations are very essential. Considering the fact that the labor in China is much cheaper compared to other countries, it could be of great benefit to the company to come up with an agreement with the employees regarding their rights. This could go along way in creating a harmonious organizational culture.
Understanding the tax rules in China is also important. It's stated that reductions and exemptions of income tax includes the profits gained by foreign investors from their foreign investment enterprises and the interest revenue acquired by international financial institutions from any loans that might be acquired from state banks or the Chinese government. There are some exemptions like paying foreign enterprises royalties for the support they provide to the development of China in areas like scientific research, transport, forestry and animal husbandry, agricultural production and technological developments (Saxon, 2007). Some local tax exemptions also exist in various autonomous regions, provinces and municipalities.
Sources of long-term and short-term Debts should also be known. In China, short-term debts could be acquired from local and government banks or any existing big company that provides funds for doing business within the country. Companies like fast-food chains and mobile companies are just but a few. On the other hand long-term debts could be acquired from the World Bank, the International Monetary Fund and other international banks that are mostly based in the US. Money from such sources helps in running China's stock market and the economy in general. Saxon (2007) argues that it is much easy to pay short-term debts than long-term debts. The company should therefore consider this factor because the debts affect the Chinese economy as a whole.
As much as it is very important to consider the factors stated above, this would not guarantee success of the company unless it obeys the Chinese business etiquette. For instance when holding business meetings, one has to be sure that all that will be discussed is made clear to those expected to attend the meeting well in advance. According to ChinaSavvy (2011), no surprises are to be made. Punctuality is also considered a virtue. However, the head of the group is normally the first person to enter the venue of the meeting. Important guest are normally to the venue and on to their seats. Moreover, the principle guest seats directly opposite the principle host normally on a chair or sofa set opposite the door. Under all circumstances, the host should be at the venue before the guests.
Business cards are also very important means of making contacts and therefore should be kept in plenty (ChinaSavvy, 2011). They are normally exchange when the meeting has just begun and should be exchanged on one on one basis. Throwing business cards on a table is considered to be a very rude gesture. Having one side of the card written in Chinese could be an added advantage. Moreover, you need to stretch out and receive a business card with both hands and even show your interest by going through the details on the card. Picking a card and putting it directly into ones pocket is also a rude gesture.
Meetings normally begin with small talk before getting down to business. Chinese normally like taking their time to know who they are dealing with before getting down to real business. Short sentences are important. Names are also important and individuals prefer being addressed by their family names. ChinaSavvy (2011) explains that formality is considered a sign of respect and therefore it is important to clarify how you would address an individual the first time you meet which is most probably during the first meeting. All these are very meaningful tips to be considered however small they might seem.
Since the CEO is the head of the company, it is important that his antitheses are also considered. The advantages and disadvantages of the issues the CEO might raise will be researched, discussed and properly assessed. Evaluations will also be made to in order to come up with issues that will be beneficial to the company as a whole. The data that will be created will then be helpful for assessing the success of the company in the Chinese market. A proper assessment of all the factors will therefore be important so that the company can decide what products are best suitable for the business and how it might survive in the environment.