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Managing

International
Economy
Assignment

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1Introduction

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1.3 China market
Since the economic reforms in 1979, China has succeeded in attracting foreign
direct investment. Until 2001, joint ventures have been the most popular foreign direct
investment enterprises, accounting for 56% of the total number of foreign direct
investment enterprises in China. On the contrary, only 31% of the investment is in the
form of direct investment. This shows the popularity of joint ventures in China. In the
three decades of economic reform, the Chinese market is still a new thing for foreign
enterprises. Due to the uncertainty, the small number of agents, opportunism, bounded
rationality and lack of understanding of the local market, foreign companies have little
investment in China. The Chinese market is not a single market and foreign companies

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need to respond to the local market. The success of foreign direct investment in China
depends on what is decided to be produced and in which area of China. It also depends
on how you organize your business relationships and deal with the local jurisdictions.
SP Setia decided to invest in China immediately after the start of the Belt and Road
initiative to gain a huge new market.

2 Environmental analysis
2.1 Macro analysis
2.1.1 Political
China adopted a socialist system or a communist system in its decision-making
process of governing the country. China's only ruling party is called the Chinese
Communist Party. The government has the only power to control what citizens do, just
as the communist system described in managing a country. Hiller, H. H. (2006).
The Chinese government is quite stable because the government's management is
made public to the public through news or the Internet. Due to the severe restrictions
imposed by the government, citizens have a lower degree of political participation.
However, under the economic system in which China, one of the major countries in the
world, is located, the policies and laws imposed by these policies are very effective.
Due to China's cheap labor, the rapid development of industry and manufacturing.
However, the government still faces the problems of environmental deterioration,
population pressure and rural immigration.
In the past few decades, China relaxed its foreign trade policies in the trades,
import and export industries. Factors that affect the cost of free trade include
prohibitions and restrictions on the import and export, import and export licenses,
opaque tariff classification, complicated regulations and standards, subsidies,
restrictions on state trading in certain commodities, markets for services, issues
concerning intellectual property protection Property rights As well as inconsistent and
perishable customs management have increased trade costs.
China's corporate income tax rate is moderate, higher tax rates. In addition to

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allowing foreign-funded institutions to enter the national financial institutions to
provide foreign exchange, the government encourages more new-technology
businesses in the market. Due to the low corporate tax rates, many multinational
corporations started to operate in China and the volume of foreign direct investment
increased rapidly.

2.1.2 Economic
In recent years, the continuous rise of China's GDP, a symbol of China's economic
development, also marks the people more and more rich, housing is the basic needs of
people's lives, in good economic conditions, people's housing needs will become more
and more Strong, this is a major factor in promoting the development of the real estate
market. Kleiböhmer, W. (2001) In other respects, the increase in the deposit reserve
ratio of large and medium-sized deposit-taking financial institutions has caused a
certain impact on the real estate market. At the same time, banks have seen more
rewards in deposit business and less risk, and people tend to prefer living in this way.
Then the funds used to buy a house have been reduced.
China's real estate has already caused the People's Bank of China to issue too much
yuan. If prices fall, so much printed money will cause the prices of Chinese products to
soar and serious inflation will occur. Serious departure from price and value. Hiller, H.
H. (2006). On the contrary, housing prices continue to climb up, all industries and
people can no longer afford the high cost of housing prices, people ask for a pay rise to
meet the high cost of living, all sectors to increase product prices to meet the high cost
of production, high prices began to promote prices of various industries Rising, coupled
with the excess of money flows, the advent of inflation can not be denied. The most
reliable way is to stabilize housing prices and then stabilize the Chinese economy by
reducing the amount of money put in when social products increase, together with other
policies such as raising interest rates, raising the reserve ratio of commercial banks and
reducing the size of credit.

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2.1.3 Social
At present, China's family structure has undergone significant changes to the
development of miniaturization. This is the result of the combined effect of the family
planning policy and rising divorce rates. At the same time as the concept of change,
many young people do not want to live with their parents after marriage, home purchase
demand increased. Most of those born in China in the 1970s and 1980s have already
gained a foothold in the city and their demand for houses is extremely rigid. In addition,
the generation born in the early stages of family planning is now also the housing
consumer group. Kleiböhmer, W. (2001) The spending power of these people is huge.
First, they are in good financial conditions. Second, the sponsorship they receive from
their parents will also be great. These objective reasons make the outside world
generally do not report the recent decline in house prices hope. The real estate industry
will still be very prosperous in the short term. It must also be mentioned that while
China's economy is developing rapidly, the old rural population in China will gradually
move to the cities. About 12 million people migrate from the countryside to cities every
year. The increase of these urban population will inevitably lead to the real estate
industry.
From the policy and social perspective, the Chinese market has many opportunities.
But a bubble in the economy could be a threat.

3 Cultural
3.1 Cultural similarities and differences
Malaysia's culture is partly influenced by China, especially by immigrants along
the southeast coast. Malaysian art is very rich, there is the traditional Malaysian chess,
there are a variety of dance and music art performances. Malaysian national culture is
also very rich, most people here have their own beliefs, so religious culture is an
important part of Malaysian culture, where people believe in Islam, Hinduism and
Buddhism. Malaysia is rich in cultural heritage and is one of the countries in the world
that enjoys cultural and historical value. Religious, ethnic, traditional ethnic festivals,

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style architecture, natural beauty are desirable. Malaysia is a multi-ethnic and
multicultural country. The largest population is Malay, followed by Chinese, followed
by Indians and ethnic minorities. All ethnic groups have retained a wealth of traditional
culture. Although they are of the same nationality, there are still some cultural
differences between the ethnic groups.
The cultural differences between China and Malay are more notable in the
following points: First, the concept of family. Malays are generally married early, men
are married between the ages of twenty-twenty and twenty-five and women are married
between the ages of eighteen and twenty-two. The marriage age of Chinese people is
relatively late, men generally before the age of 30, women will not be married after the
age of 25. In addition, legally, Malays allow polygamy and a man can marry four wives.
China only allows monogamy in law, and bigamy is a crime. Malay families encourage
fertility, with a couple usually having four to six children, while Chinese families have
fewer children and a couple with one to two children is quite common. Second, eating
habits. The staple food of Malays is basically rice, and like to eat curry, almost can not
be separated from curry, whether it is chicken, seafood, vegetables, are preferred to
curry cooking, and like to add shrimp paste, lemongrass leaf, coconut milk seasoning
material. China's diet tastes more varied, salty, spicy, but also sour and sweet. Chinese
seasonings are soy sauce and cooking wine, ginger and garlic are often used for cooking.
Instead of sitting in a chair while eating, the Malays simply grabbed food by hand only
on their hands and placed their food on the mat, sitting and eating, with water on their
seats so they could dine Wash your fingers at any time. China uses chopsticks, spoons
and forks and usually dines at the table. In addition, there are many taboo Malay diet,
such as eating pork dog meat, avoid drinking alcohol. Malay think the left hand is dirty,
can not eat and pass things with his left hand. There are basically no such taboos in
China. Second, wear dress. Malay women must wear headscarves, can not show their
arms and thighs, can not wear sleeveless tops, shorts and short skirts. They usually wear
traditional clothing. Chinese people rarely wear cheongsam and other traditional
clothes on weekdays. They usually only wear on the auspicious occasions such as the

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New Year or birthday feast, and the choices of costumes are more. Malay and Chinese
also have different preferences for color. Malays generally love green, and as green for
auspicious color. Chinese people like red, the general gift packaging and home
decoration will be mainly red. The difference in beliefs is one of the main reasons for
the cultural differences between Chinese and Malays. Most Malays are Muslims.
Muslim doctrines permit polygamy and limit women's clothing, and consider pigs and
dogs unclean, so believers are not edible. Chinese people are more pluralistic in beliefs.
Most Chinese do not have faith. Some of them believe in folk beliefs. Some believe in
Buddhism. Others believe in Christianity. Religions have their own characteristics and
taboos, and there is no certain regulation. Therefore, in contrast, the common beliefs of
the Malay beliefs deeply influence the living habits and customs of the entire Malay
ethnic group.

3.2 managing cultural differences


Human Resources
In China, one of the biggest challenges for Malaysian companies is human
resources. Malay employees tend to be divided and their power is flexible. However,
Chinese employees are accustomed to a more hierarchical structure and each one has a
definite role. This difference often leads to pressure from Western managers who are
accustomed to proactive employees who often follow high-level instructions.
Malay companies must have a clear set of job incentives and penalties for the
performance of unqualified jobs. In addition, regardless of the size of the company,
employees should be divided into small groups, each group has a clear leadership, is
responsible for monitoring the team, and report directly to their superiors. In order to
motivate your Chinese employees, it is necessary to pay close attention to their work,
while encouraging them to creatively take risks. Abramson, N. R., Moran, R. T., &
Harris, P. R. (2017).
business culture
To succeed in China, Malay companies must be aware that they can not adopt the

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same business model and can not simply copy into the Chinese market. We need to be
flexible enough to carry out business activities with a "Chinese characteristic" closely
linked to the Chinese tradition. Abramson, N. R., Moran, R. T., & Harris, P. R. (2017).
relationship
A Chinese word you hear when doing business in China is relationship. The word
translated into English, generally means the relationship. Building strong business
relationships is not a new concept for Western companies. However, in China, the role
of relations is far more important than in the West. Elsewhere in the world, as long as
you pass an official business meeting, you may be able to reach an agreement. In China,
it is necessary to take time to meet Chinese colleagues outside the meeting room during
dinner time.

4 Entry strategies
Once a company decides to market in a country, it must choose the best way to
enter. The main options available are: indirect exports, direct exports, licensing trade,
joint ventures and direct investment. Although different companies have different
preferences for how they enter the market, companies must learn to capitalize on and
master all of these ways to enter the market and determine the best way through risk
analysis of the host country. Chang, S. (2015)
Sales - Technology Transfer - A Robust Approach to Joint-Venture Development
Multinational corporations to enter the Chinese market generally in accordance
with the sales, technology transfer, joint-venture steps of orderly development. Chang,
S. (2015) By the last stage, as the amount of capital and profits invested in the countries
they enter increases, multinationals reconsider how to best organize and manage their
global operations and one of the key features of their performance is the formation of
an investment holding company . Multinational companies often set up representative
offices in the Chinese market to sell their products and understand the demand for
products and the market capacity in the Chinese market. Then transfer technology to
the local, select some manufacturers to produce popular products. Then, if this partner

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is satisfactory. Hindelang, S., & Hedrich, D. (2015) On the basis of transfer of
technology, with its joint venture production, that is, the establishment of joint ventures.
Finally, through the merger, acquisition and other means, the establishment of wholly-
owned enterprises, and as investment projects continue to grow, the establishment of
investment holding company.
Supporting investment, for the old customers to provide access to complementary
products
Such as Germany Henkel Company, Germany Zimmermann Company, GKN
Company and BASF, are all companies that have invested or transferred technologies
to Shanghai Volkswagen and have reached about 180, among which 60 have set up joint
ventures in China. Hindelang, S., & Hedrich, D. (2015)These companies stepped up
their trade and technology transfer steps when entering the Chinese market and went
directly to the joint venture stage because of the relatively stable market demand for
their products.
Follow, access to defensive foreign investment
For example, Henkel in Germany is a major manufacturer of synthetic detergents.
After introducing metal treatment agents into China, considering the rapid development
of well-known companies such as P & G in China, Henkel is determined to enter the
synthetic detergent product line in China. The same is followed by the United States
Johnson & Johnson's Sally company, followed by the German Volkswagen's Ford and
other companies. These companies, thanks to their defensive strategy of follow-up,
have a much lower market risk than their first entrants, and thus can cross the market
for trade. At the same time, these companies have their own strong capability in
production technology development and marketing, thus crossing the stage of
technology transfer or even joint ventures and entering the Chinese market through the
direct acquisition of Chinese enterprises that now have a large market share.
First of all, SP Setia can begin to sell in China through joint ventures, establish the
image of the product and the company's reputation, and conduct analysis and research
on China's production and market in preparation for a larger scale to enter the Chinese

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market. And start with the transfer of technology, improve the local production
technology. Then, seek greater investment and development. In order to occupy the
Chinese market share, SP Setia can even prepare for a loss of seven or eight years.
Acquisition, mergers and acquisitions is SP Setia company to achieve its entry into the
Chinese market, an important strategy. Fighting for local government support is SP
Setia's success in entering the Chinese market

5 Conclusion
This article discusses how SP Setia should enter the Chinese market under the Belt
and Road Initiative and conducted a macroeconomic analysis to conclude that both
policy and society are SP Setia opportunities, but the economy could be a threat. The
article also analyzes the similarities and differences between China and Malaysian
cultures and suggests that SP Setia should operate in China according to different
cultures. Finally, it analyzes the strategy of entering China and the choice of entering
strategy.

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