Professional Documents
Culture Documents
1. Overview
Although being a “later starter”, the Chinese consumer electronics (CE) market which
boasts “the second-biggest market in the world” and the largest market share in the
Asia-Pacific region has become an alluring market for foreign investment (see
Appendix 1) (Michael, 2007, p.71; Euromonitor, 2009, p.1; Datamonitor, 2010, p.7).
For the latest period 2005-2009, it has “generated total revenues of $28.1 billion,
representing a compound annual growth rate (CAGR) of 10.4%” and accounting for
approximately 1-2% of GDP (see Appendix 2, Appendix 3 and Appendix 4)
(Datamonitor, 2009, p.7; Farrell, Gao and Orr, 2004, p.27).
In the future, the CE market in China will continue to enjoy stable growth guaranteed
by the strong and stable GNP growth rate, “the substantial high-income population”
the continuous development of innovation, online retailing as well as the sales in rural
areas, although “the performance of the market is forecast to decelerate” for the
coming 2009-2014 (see Appendix 5), (Euromonitor, 2009, p.1-5; Datamonitor, 2010,
p.8, p.32).
2. Market Segments
The CE market of China can be divided into three segments.
The premium segment: Multinational players such as Canon, Nokia and Sony
dominate in this segment (Euromonitor, 2009, p.3). Their competitive edge not only
lies in the quality and innovation of their products but also rests with the lower labor
costs in China. They target at consumers who “have long tired of the poor quality and
image of China’s domestic brands” (Euromonitor, 2009, p.4). A vast, low-end
segment: It is mainly served by local companies with low-quality and
undifferentiated products, who now aim at providing new offerings that ratchet up
quality but cost consumers much less. Middle market: This segment, occupying
“nearly half of all revenues in some product categories”, is growing faster than the
above two segments and can be the target of JV (Euromonitor, 2009, p.3).
3. Competition (see Appendice 6)
The analysis of the competition of CE market in China will take retailers as players.
The key buyers will be taken as consumers, and manufacturers and distributors of
consumer electronics as the key suppliers. Generally, the similarity of players to each
other in the current marketplace creates a competitive situation based on branding
strength and players' ability to differentiate their products through constant research
and development. The dynamic and ever-changing nature of the consumer electronics
market continues to offer organic growth for existing players as well as new entrants
with sufficient capital outlay (Datamonitor, 2010, p.11).
4. Regulation
Due to the nature of CE industry (i.e. not politically sensitive, job-heavy state-owned
enterprises), the Chinese government applies a relatively “hands-off approach” and
intervene little in the day-to-day operations to the CE market (Farrell, Gao, and Orr,
2004, p.28). Under the new Foreign Trade Law, individuals as well as legal persons
and other organizations are allowed to engage in foreign trade, after they go through a
procedure of registration with MOFCOM, which can be considered as a significant
regulatory and commercial development as compared to previous years (PWC, 2009,
p.78).
Although the labour supply in China is still increasing and will follow this trend in the
immediate future, the rate has been decreasing due to the Chinese government’s
family planning policy and ageing of the population. Meanwhile, a structural shortage
in the labour force is becoming an obstacle for foreign companies expanding into
China. In particular, they are experiencing difficulties in recruiting managerial staff
and skilled workers. The difficulties can be even more acute in second and third tier
cities. As a result, foreign companies are facing fierce competition from both foreign
and local competitors when seeking to hire employees in the local market (PWC,
p.91-92). Besides, the output per worker of Malaysia is over two times higher than
that of China (see Appendix 7).
Nanjing
1. Overview
Located in the developed area of East China, Nanjing is the political, economic and
cultural centre of Jiangsu Province, as well as the centre of commerce, finance and
logistics in the Yangtze River Delta. Well known as an important comprehensive
industry production base in China, Nanjing possesses five state-level development
zones, eight provincial-level development zones and several key industrial parks,
which have become a hot spot for foreign investment (PWC, 2009, p.2).
3. Infrastructure
Nanjing is also an optimal choice for JV to locate its warehouse, due to its sufficient
land, the low acquisition cost and development for industrial land and the low
construction cost and monthly rental cost (see Appendix 12, Appendix 13 and
Appendix 14).
Understanding cultural, societal and national operating
systems for alliance success:
The cultural, societal and national operating systems between
Japan, Germany and the United States are profoundly different: “the
language, values and communication formed there are the
‘heritage’ that makes each culture distinctive” (Iwata, 2000). It is
therefore necessary to identify the key national, cultural and societal
differences between Japan, United States and Germany which may
be indicative of how Eagle Electric Inc, Samurai Electronics KK and
Vaterland Elektro Ag will engage and interact within the strategic
alliance. This is achieved through analysing (Hofstede, 2009)
cultural dimensions.
As per (appendix 1), Japan has low levels of individualism compared
to Germany and American. Japan is a collectivist culture, with strong
integrated decision making groups with mutual needs rather than
individualistic needs. Samurai Electronics KK therefore needs to be
prepared for an empowered and individualistic approach to decision
making from the German and American alliance partners (Harper &
Varallo, 2000). Additionally, Japan is a highly masculine society
which is observed as a large gap between the equality and status of
women compared to men in the workforce. Samurai Electronics KK
therefore needs to be flexible and tolerant in negotiating and
interacting with female associates from Eagle Electric Inc and
Vaterland Elektro Ag, where women hold equal power and authority
as their male counterparts (Merkin, 2000).
(Hofstede, 2009) cultural dimension of the United States reveals low
levels of uncertainty avoidance compared to Germany and Japan,
which refers to society or business’ comfort in structured or
unstructured decision making. Eagle Electric Inc needs to be aware
and flexible that Samurai Electronics KK and Vaterland Elektro Ag
management may prefer a carefully planned and structured decision
making process within the alliance, governed by rules and
procedures to reduce potential risks and uncertainty
(ClearlyCultural, 2009).
East Asian cultures such as Japan view personal, social and business
interactions with a long-term perspective, maintained through
“continuous long term associations with the goal on long-term
reward and outcomes” (Ryu, 2005). American and Germany take a
short-term perspective, viewing social and business transactions as
‘isolated occurrences’ with emphasis on “immediate gains from the
transaction” (Ryu, 2005). With Eagle Electric Inc, Samurai
Electronics KK and Vaterland Elektro Ag looking to combine capital,
resources and knowledge to the strategic alliance, Eagle Electric Inc
and Vaterland Elektro Ag need to adopt a long-term approach within
the partnership, especially considering the huge investment of new
technologies and manufacturing facilities on a global scale.
Appendix 3
Appendix 4
Appendix 5
Appendix 6
Buyer power (moderate)
- Key buyers: consumers and retailers
- The largest and best-known players in this market are often very
important to buyers (retailers) as the retailers must be able to offer
their end-users (consumers) the brands that they have grown to know and
trust (see Table 5), since over 95% of sales of consumer electronic
products in China is based on retailing (See Table 6, Euromonitor, 2009,
p.13).
- Many buyers are large enough to exert some pricing pressure.
- Some buyers may focus on lower priced, unbranded products.
- Buyer power is dampened by the possibility that players might forward
integrate and sell their products direct to consumers (e.g. Online direct
sales are a common example of this, but bricks-and-mortar outlets are
also possible-Apple)
Appendix 7
Appendix 8
Appendix 9
Appendix 10
Appendix 11
Appendix 12
Appendix 13
Appendix 14
Appendix 1:
Appendix 2:
Appendix 4:
Chan, P., & Wong, A. (1994). Global Strategic Alliances and Organisational
Learning. Leadership and Organisational Development Journal , 1-6.