Take a Conservative Approach When Entering the China Market

Abstract

Economic growth in China over the past two decades has resulted in many companies making substantial financial commitments in China, typically with a Chinese joint venture partner. Many additional companies are contemplating entering China in the same way. Serious problems and high risks argue for a more conservative market entry strategy as an alternative approach. This study presents the research results of in-depth interviews with heads of joint venture subsidiaries of major Western companies in China. Results indicate it is advisable to lower expectations of success in the China market. The time anticipated to achieve objectives should be extended, standards of quality may need to be modified, the size of entry may need to be streamlined, transferring obsolete technology remains a viable strategy, and the Western firm should maintain dominant control of the joint venture or enter without a partner. These findings reveal a more cautious entry strategy that reduces or eliminates the involvement of a Chinese joint venture partner may be the optimum way for many firms to enter the China market.