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Modes of Entry into Foreign Countries

Write a paper in which you complete the following:

o Identify and assess at least two modes of entry into the country selected by your Learning Team. Select the most appropriate mode of entry for your product or service.

o Synthesize cross-cultural factors relevant to your global endeavor.

o Address how these factors affect organizational structure, modes of management, staffing, recruiting, training, compensation, and expatriate policy.

o Justify your selection based on factors identified in your country risk analysis from your paper in Week Two.

Solution Preview

Selected country: China.

o Identify and assess at least two modes of entry into the country selected by your Learning Team. Select the most appropriate mode of entry for your product or service.

Trading Companies and Local Agents: Beginning December 11, 2004, foreign companies operating in China will be allowed full trading and distribution rights. This is because of China's accession to the WTO. With careful selection, training and constant contact, US firms can obtain good market representation from a Chinese trading company, many of which are authorized to deal in a wide range of products.

Representative Offices. These are the easiest type of offices for foreign firms to set up but law to performing 'liaison' activities limits them. They cannot sign sales contracts, directly bill customers or supply parts and after-sales services for a fee.

Chinese subsidiaries. A locally incorporated equity or cooperative joint venture with one or more Chinese partners, or a wholly foreign-owned enterprise will avoid import restrictions - including relatively high tariffs - and provides greater control over both marketing and management. Successful joint ventures require good partners, time and patience.

Wholly Foreign Owned Enterprises. Establishing a WFOE helps retain greater management control and IPR protection. The current law requires that firms either provide advanced technology or be primarily export-oriented and restricts or prohibits them in a number of service and public utility sectors. With WTO accession, many of these requirements are being phased out.

Licensing. Technology transfer is another initial market entry approach being used today. It offers short-term profits but runs the risk of creating long-term competitors. Due to this concern and intellectual property considerations and the lower technical level prevailing in the China market, some firms attempt to license older technology, promising higher-level access at some future date.

Franchising. As of yet, China has no laws that specifically address franchising. Many foreign companies are beginning to establish multiple retail outlets under a variety of creative arrangements, including some that function like franchise.

Direct Selling. The US direct selling industry is working pro-actively with various Chinese government departments to construct a fairer business climate in this industry. The implementation of WTO commitments promises to change this method of marketing in a rapidly changing business environment.

E-commerce. The Chinese government has a new attitude toward e-commerce. Investment is risky, however, due to the lack of defined regulatory powers over the industry, effective Chinese certificate authentications systems, secure and reliable on-line settlement systems and an efficient physical delivery system.

o Synthesize cross-cultural factors relevant to your global endeavor.

Chinese Society & Culture

The Importance of "Face" - The concept of 'face' roughly translates as 'honor', 'good reputation' or 'respect'.


Confucianism is a system of behaviors and ethics that stress the obligations of people towards one another based upon their relationship. Confucianism stresses duty, sincerity, loyalty, honor, filial piety, respect for age and seniority. Through maintaining harmonious relations as individuals, society itself becomes stable.
Collectivism vs. Individualism
. In general, the Chinese are a collective society with a need for group affiliation, whether to their family, school, work group, or country.
. In order to maintain a sense of harmony, they will act with decorum at all times and will not do anything to cause someone else public embarrassment.
. They are willing to subjugate their own feelings for the good of the group.
. This is often observed by the use of silence in very structured meetings. If someone disagrees with what another person says, rather than disagree publicly, the person will remain quiet. This gives face to the other person, while speaking up would make both parties lose face.

Non-Verbal Communication

. The Chinese' Non-verbal communication speaks volumes.
. Since the Chinese strive for harmony and are group dependent, they rely on facial expression, tone of voice and posture to tell them what someone feels.
. Frowning while someone is speaking is interpreted as a sign of disagreement. Therefore, most Chinese maintain an impassive expression when speaking.
. It is considered disrespectful to stare into another person's eyes. In crowded situations the Chinese avoid eye contact to give themselves privacy.

Business Etiquette and Protocol in China

Relationships & Communication

. The Chinese don't like doing business with companies they don't know, so working through an intermediary is crucial. This could be an individual or an organization that can make a formal introduction and vouch for the reliability of your company.
. Before arriving in China send materials (written in Chinese) that describe your company, its history, and literature about your products and services. The Chinese often use intermediaries to ask questions that they would prefer not to make directly.
. Business relationships are built formally after the Chinese get to know you.
. Be very patient. It takes a considerable amount of time and is bound up with enormous bureaucracy.
. The Chinese see foreigners as representatives of their company rather than as individual's.
. Rank is extremely important in business relationships and you must keep rank differences in mind when communicating.
. Gender bias is nonexistent in business.
. Never lose sight of the fact that communication is official, especially in dealing with someone of higher rank. Treating them too informally, especially in front of their peers, may well ruin a potential deal.
. The Chinese prefer face-to-face meetings rather than written or telephonic communication.
. Meals and social events are not the place for business discussions. There is a demarcation between business and socializing in China, so try to be careful not to intertwine the two.
Business Meeting Etiquette
. Appointments are necessary and, if possible, should be made between one-to-two months in advance, preferably in writing.
. If you do not have a contact within the company, use an intermediary to arrange a formal introduction. Once the introduction has been made, you should provide the company with information about your company and what you want to accomplish at the meeting.
. You should arrive at meetings on time or slightly early. The Chinese view punctuality as a virtue. Arriving late is an insult and could negatively affect your relationship
. Pay great attention to the agenda as each Chinese participant has his or her own agenda that they will attempt to introduce.
. Send an agenda before the meeting so your Chinese colleagues have the chance to meet with any technical experts prior to the meeting. Discuss the agenda with your translator/intermediary prior to submission.
. Each participant will take an opportunity to dominate the floor for lengthy periods without appearing to say very much of anything that actually contributes to the meeting. Be patient and listen. There could be subtle messages being transmitted that would assist you in allaying fears of on-going association.
. Meetings require patience. Mobile phones ring frequently and conversations tend to be boisterous. Never ask the Chinese to turn off their mobile phones as this causes you both to lose face.
. Guests are generally escorted to their seats, which are in descending order of rank. Senior people generally sit opposite senior people from the other side.
. It is imperative that you bring your own interpreter, especially if you plan to discuss legal or extremely technical concepts as you can brief the interpreter prior to the meeting.
. Written material should be available in both English and Chinese, using simplified characters. Be very careful about what is written. Make absolutely certain that written translations are accurate and cannot be misinterpreted.
. Visual aids are useful in large meetings and should only be done with black type on white background. Colors have special meanings and if you are not careful, your color choice could work against you.
. Presentations should be detailed and factual and focus on long-term benefits. Be prepared for the presentation to be a challenge.

Business Negotiation
. Only senior members of the negotiating team will speak. Designate the most senior person in your group as your spokesman for the introductory functions.
. Business negotiations occur at a slow pace.
. Be prepared for the agenda to become a jumping off point for other discussions.
. Chinese are non-confrontational. They will not overtly say 'no', they will say 'they will think about it' or 'they will see'.
. Chinese negotiations are process oriented. They want to determine if relationships can develop to a stage where both parties are comfortable doing business with the other.
. Decisions may take a long time, as they require careful review and consideration.
. Under no circumstances should you lose your temper or you will lose face and irrevocably damage your relationship.
. Do not use high-pressure tactics. You might find yourself outmaneuvered.
. Business is hierarchical. Decisions are unlikely to be made during the meetings you attend.
. The Chinese are shrewd negotiators.
. Your starting price should leave ...

Solution Summary

5000+ words. 14 References. Here is a small sample of what you will see: Technology transfer is another initial market entry approach being used today. It offers short-term profits but runs the risk of creating long-term competitors. Due to this concern and intellectual property considerations and the lower.......