Problem No. 1 Group ZProblem No. 1 Group Z

The best entry modeThe best entry mode

Flow of the Presentation

1.1. General Comparison of CJV, EJV and WOSGeneral Comparison of CJV, EJV and WOS

2.2. Analysis in Management AspectAnalysis in Management Aspect

3.3. Analysis in Marketing AspectAnalysis in Marketing Aspect

4.4. Case StudyCase Study

5.5. ConclusionConclusion

CapitalCapital ProfitProfit RiskRisk

EJVEJV -According to According to proportion to equityproportion to equity-In forms of cash, In forms of cash, buildings, buildings, equipments, equipments, materials etc.materials etc.-At least 25% of total At least 25% of total equityequity

-shared proportion -shared proportion to amount investedto amount invested

-Relatively -Relatively lower lower (proportion to (proportion to amt invested)amt invested)

CJVCJV -According to terms -According to terms in contractin contract

-Shared with partner-Shared with partner

-Shared according -Shared according to terms in contractto terms in contract

-High / Low -High / Low (according to (according to terms in terms in contract)contract)

WOSWOS -Wholly invested-Wholly invested -All collected-All collected -Highest -Highest (without share (without share loss)loss)

General Comparison of Capital, Profit &Risk

Management AspectManagement Aspect

Conflicting Objectives in Chinese Joint Ventures

Foreign Partner Chinese Partner

Planning Retain business flexibility

Maintain congruency between the venture and the state economic plan

ContractsUnambiguous, detailed

and enforceableAmbiguous, brief and

adaptable

StaffingMaximize productivity;

fewest people per given output level

Employ maximum number of local people

Technology

Match technical sophistication to the organization and its environment

Gain access to the most advanced technology as quickly as possible

InputsInputsMinimize unpredictability Minimize unpredictability and poor quality of and poor quality of suppliessupplies

Promote domestic sourcingPromote domestic sourcing

ProcessProcess Stress high qualityStress high quality Stress high quantityStress high quantity

OutputsOutputsAccess and develop Access and develop domestic marketdomestic market

Export to generate foreign Export to generate foreign currencycurrency

ControlControlReduce political and Reduce political and economic controls on economic controls on decision-makingdecision-making

Accept technology and Accept technology and capital but preclude capital but preclude foreign authority foreign authority infringement on infringement on sovereignty and ideologysovereignty and ideology

Conflicting Objectives in Chinese Joint Ventures

Human Resources ManagementHuman Resources Management

Contractual Contractual Joint-Joint-VentureVenture

Equity Joint-Equity Joint-VentureVenture

Wholly-Wholly-OwnedOwned

StaffingStaffing The quality of the staff The quality of the staff depends on the venture depends on the venture party (It maybe party (It maybe / / ))

Staff quality Staff quality can be can be ensuredensured

TrainingTraining Working style maybe Working style maybe different which may lead to different which may lead to conflicts.conflicts.Take longer time to trainTake longer time to train

Less time Less time consumingconsuming

Marketing AspectMarketing Aspect

Target Customer

Our Target Customer :

HK firms who want to move their office to Shanghai

Do not provide any service for local firm

»»» do not need any local customer base

»»» prevent the threat of losing customer to the partner

Wholly-owned > Equity JV, Contractual JV

Competitor

After we investigated 111 local removal companies

We found that:

11 firms had provided removal service form HK to Shanghai

only a few number of company had set up their office in China

So, the competition is Low

»»» it is better to entering this market as soon as possible

»»» to enjoy first-mover advantage

Wholly-owned > Equity JV, Contractual JV

Market Potential

The number of new established HK-oriented firm in Shanghai :

In 2000, 419 HK firms

In 2001, 479 HK firms

No.1 - Total investment

- Number of firms

»»» The market size is Huge

So, it is better to established our own office in Shanghai as soon as

possible

Wholly-owned > Equity JV, Contractual JV

Supplier

Our Service:

Provide a ‘package deal’ for our customer

We need:

Local property knowledge

Shipment team

Decorator

Supplier

Our Service:

Provide a ‘package deal’ for our customer

We need:

Local property knowledge -------- employ a local staff or local

property firm

Shipment team -------- still using the existing supplier

Decorator -------- employ a local decorator

Wholly-owned > Equity JV, Contractual JV

Cultural Difference

The cultural difference between HK and Mainland is small

Do not need any local customer base

The Legal system has become more comprehensive and mature

after entering WTO

»»» ‘Guanxi’ and local network is not so important

Wholly-owned = Equity JV = Contractual JV

Case StudyCase Study

iNFOiSLIVE Corporation Limited (iiL)

Interviewee: Josephine Yim

Position: Assistant General Manager of Beijing iiL Office

Office Address in Beijing: Rm 521, zhouji building no.16,

ande lu, dongcheng,

Beijing 100011, China

Date of Interview: 11/11/2002

Format of Interview: Through Telephone Interview

Case - iNFOiSLIVE Corporation Limited (iiL)

iNFOiSLIVE Corporation Limited (iiL), iNFOiSLIVE Corporation Limited (iiL),

Leading mobile entertainment application developer in the Asia-PaLeading mobile entertainment application developer in the Asia-Pa

cific Regioncific Region

Established in 1999 in Hong Kong. Established in 1999 in Hong Kong.

Dedicated to the development of mobile entertainment applications Dedicated to the development of mobile entertainment applications

and platforms with SMS/EMS, WAP/GPRS, KJava, i-mode and and platforms with SMS/EMS, WAP/GPRS, KJava, i-mode and

embedded systems. embedded systems.

Case - iNFOiSLIVE Corporation Limited (iiL)

Small medium enterprise – about 30 employees in HK officeSmall medium enterprise – about 30 employees in HK office

Have not much capitalHave not much capital

Similar industry – service industrySimilar industry – service industry

Have joint venture experience in foreign market, only choose Have joint venture experience in foreign market, only choose

China be their first WOSChina be their first WOS

Why choose this company?

Why don’t choose EJV or CJV?

Concerning Problems:Concerning Problems:

Finding right partnersFinding right partners

Chinese enterprise still not well-developedChinese enterprise still not well-developed

Time for negotiationTime for negotiation

Managing problemsManaging problems

Stolen of Customer BaseStolen of Customer Base

Share of ProfitShare of Profit

Why don’t choose EJV or CJV?

Risk sharing – Foreseeable market demand

Not familiar with the market –

china now is easy to find market information and

have well gov’t regulations on foreign investment.

Benefits:Benefits:

Profit Profit

Easy to manageEasy to manage

Protect the customer base Protect the customer base

Easy to establish in now china regulations for foreign Easy to establish in now china regulations for foreign

investmentinvestment

Why choose WOS?

ConclusionConclusion

Analysis of management and marketingAnalysis of management and marketing

Experience of a successful companyExperience of a successful company

Wholly-owned Subsidiary is preferred for Wholly-owned Subsidiary is preferred for establishing a company in Shanghaiestablishing a company in Shanghai

ReferenceReference

Beamish, P.W. and Killing, J.P. (eds) 1997. cooperative Beamish, P.W. and Killing, J.P. (eds) 1997. cooperative Strategies: Asian Pacific Perspectives, SF: The New LexiStrategies: Asian Pacific Perspectives, SF: The New Lexington Press – Various articles under part two: Formation ngton Press – Various articles under part two: Formation of Cooperative Alliancesof Cooperative Alliances

Tsang, Eric W.K. 1998 Foreign Direct Investment in ChinTsang, Eric W.K. 1998 Foreign Direct Investment in China Journal of General Management. 24, 1, 15-34a Journal of General Management. 24, 1, 15-34

Vanhonacker, Wilfried. 1998. Entering China: An unconvVanhonacker, Wilfried. 1998. Entering China: An unconventional approach. Harvard Business Review (March/Aprentional approach. Harvard Business Review (March/April): 130-140il): 130-140

Child, J. & Faulkner, D. Strategies of Cooperation. OxforChild, J. & Faulkner, D. Strategies of Cooperation. Oxford: Oxford University Press, 1998.d: Oxford University Press, 1998.

http://www.yp.com.hk/business/ch/html/index.asphttp://www.yp.com.hk/business/ch/html/index.asp

The EndThe End

00014049D Ivy Tse

00212768D Aily Lam

00250538D Davis Heung

00253308D Ming Fan

00291790D Kim Wong

00354114D Michelle Hui