Introduction
The behavior of the employees and the executives at Forth Right Technologies Inc is essential for the prospects of the company in the Chinese market and the general success of the company. The behaviour of the employees is inspired and helps form the organizational culture. Scholars have posited that the organization culture of an institution comprises of the shared mental assumptions that offer guidance towards the interpretation and actions in the said institution. These shared assumptions are inspired by certain aspects that for Forth Right Technologies Inc include the following:-
Organizational Culture of Forth Right Technologies Inc
The entrepreneurial organizational culture of Forth Right Technologies Inc encompasses an immense value for creativity characterised by a tolerating environment for creativity and creative people. The company has a belief that creativity leads to seizing the opportunities available in the market. It is the belief of the company that innovation is the appropriate behaviour to solve the problems of prosperity, survival, competitor threats and environmental uncertainty. The elements of the organizational culture that augment the organizational culture include.
- Creating value through change and innovation.
- Personal responsibility and commitment to customers and work.
- Attention to details and basics.
- Hand-ons management.
- Empowerment through skill development and specialization.
- People focused.
China is a fast developing economy. More precisely, the Chinese economy has been the fastest growing economy in the last decade. The exponential growth has been influenced significantly through innovation to meet the gaps in the economy. The organizational culture of Forth Right Technologies Inc blends well into this crucial driver of the economy and will set the company on the right track in the Chinese market.
Environment Scanning Analysis
There are numerous environmental factors that affect the performance of the performance of Forth Right Technologies Inc in China. The following is the environmental scanning analysis for the Chinese Software and technological market.
- Market/Industry factors
Forth Right Technologies Inc will operate in the software industry in the country. The industry has over five thousand software companies that employ over one hundred and fifty thousand people directly and many others indirectly. Of these software companies, 60% of them are non-governmental enterprises that are owned by private entities and individuals of Chinese decent. 10% of the companies are Sino-foreign joint ventures that are co-owned by Chinese nationals and other entities or individuals from foreign countries. 30% of the companies are state owned meaning that the Chinese government has a majority stake in the companies or entirely owns the company. The country has over fifteen software and technology industrial parks in the country. This will form a fierce competitor base for Forth Right Technologies Inc (Jayaraman, 2009).
- Regulatory factors
The Chinese government is a major consumer of the software products. However, the government procurement policy discriminates against products made by foreign companies. This is in the government’s endeavor to promote homegrown products. The oversight role of the Chinese software industry falls in a number of stakeholders with overarching authority. However, the overall authority rests in the Ministry of Industry and Information Technology. The major regulations require the registration of all software with the ministry whether domestic or imported in order to be awarded with a license that is renewed after five years.
The other regulations require compliance with Chinese laws and relevant standards. The ministry also requires that trial versions are clearly marked and offered free of any charges. On a positive note, the ministry offers policy incentives for selected softwares that comply with the established regulations.
- Social factors
The population of china is one of the social factors that affect the performance and success of Forth Right Technologies Inc. The country is the most populous in the world with estimates of over 1.3 billion people. This does not translate to the potential market for our products. However, it forms a rich resource base in terms of human resource. China is known for its etiquette and ceremonies. Their citizens have a unique character that is based on their strong sense of pride for their ancient culture and history. As such, it is important for any company and more precisely Forth Right Technologies Inc to understand the ethical, cultural and business values that are esteemed in china.
Some of these elements include the punctuality of the Chinese natives; something that exemplifies the essentiality of being on time. Additionally, introduction to the locals is important as the Chinese nationals do not make business deals with strangers. It is also important to pay attention to the hierarchy in the companies in china with strong significance to rank where individuals are subordinate to the organization. As espoused earlier, the Chinese are warm and hospitable. This should not be misconstrued as signs of a positive outcome. More importantly, trust that is based on beneficial relationships is the sign of positive outcomes.
- Political factors
Having been under the communist party rule for a long time, the regulations and rules in the country are not absolute or so transparent. This is because the party exercised absolute power over legislations, cultural and economic institutions. The promotion of guanxiwang, a variant of social network has been exploited by some entities to avoid the bureaucracy and red tape. This is because of prevalent corruption and lack of transparency. As such, there is reliance on guanxiwang for foreign companies that are venturing onto the Chinese market (Jayaraman, 2009).
- Economic Factors
For multinational companies looking to venture into the Chinese market, various economic risks lie on the way. Even if China is the second largest economy in the world, multinational companies should be wary of the economic stability of the country. Companies run the risks of changes in monetary policy, fiscal policy, trade policy as well as other macro-economic factors that can affect the operations of the company. The Chinese economy is heavily reliant on exports from its myriad of manufacturing industries. As such, the Chinese economy has tried to steady against the dollar. However, the Yuan is undervalued by almost 40%. As such, changes in the Yuan can significantly affect the profitability of multinationals operating in the Chinese market. The increase on the minimum wages for the labor in China because of increased labor costs has a significant effect on the operating costs
- Technological factors
The technological landscape in China is varied and diverse. This is amplified by the effects of globalization leading to increased exchange of technologies. The Chinese government has seen the growth of technology and software parks. These parks concentrate on developing technological solutions to various problems facing the economy. Of note is the development of the mobile telephony industry in the county. However, technological advancements are more in the urban areas where the middle class population and the affluent live (Dunning, 2012).
Entry strategy
As a multinational, Forth Right Technologies Inc is at a disadvantage when venturing into the Chinese market. However, as an entry strategy, the company will look to form a joint venture with a local company. This will level the playing field for the company. It will avail opportunities for the products of the company when it comes to selling the products to the government. As a foreign company venturing into the Chinese market, Forth Right Technologies Inc could exploit the prospects presented by guanxiwang. However, this contravenes with the organizational culture of the company (Jayaraman, 2009).
Ownership structure
The ownership structure of the joint venture is going to be a majority ownership. This is important so that Forth Right Technologies Inc has control on the economic path that the venture takes. It is important for Forth Right Technologies Inc to have the majority stake in the venture. Consistent with the transaction cost theory, multinationals ought to strive to attain a majority ownership and a majority equity position so as to attain dominance. For companies that are venturing into new markets, a minority equity position is the worst arrangement because the lack of a dominant control results in an ineffective control on the transactional costs. By getting the majority equity position, Forth Right Technologies Inc can run the joint venture as if it a singly owned subsidiary of the parent company.
Organizational structure
The following is the organization structure of the joint venture:
In the organization structure of the joint venture, the highest authority rests in the chairman of the boards. He is second to none and oversees the general running of the venture. Under him is the vice chairman. The chief executive officer is answerable to the chairman of the board and is tasked with the day to day running of the venture. Below him are different officers in different capacities. This organization structure pays particular attention to ranks and hierarchy, which is in line with the Chinese culture (Dunning, 2012).
Political Risk Assessment for China
The communist party has held the reins of power for decades. Over this period, the party exercised absolute power over the legislative process, the cultural and economic institutions in the country. This was an enabling environment for the breeding of corruption. Unlike economies from the west where transparency in doing business is upheld by the governments, rules and regulations are not entirely absolute or transparent in China. Various bureaucracies and regulations are applied on large manufacturing companies, especially multinationals from foreign countries. However, such multinationals exploit guanxiwang which is essentially a social network (Jayaraman, 2009).
The relationship between the multinationals and members of the social network has a significant influence on the business environment that the multinational enjoys in the country. The social network can help multinationals from western economies avoid bureaucracy and the red tape due to the existing corruption and lack of transparency. Unlike in the western economies where the strict laws available void any relationships made, the Chinese culture supports contractual obligations and as such, one’s social network becomes very important.
Implementation strategy
Given the widespread poverty in the suburbs, the company will look for a partner to form a joint venture in the cities. The choice of the city will be based on the number of software companies located in the city. The company will establish in a city with a limited number of software companies. Most importantly, the company will stay away from zones where software parks are established. This is because the company being a multinational is already disadvantaged enough without having to face the competition for market share from already established companies (Dunning, 2012).
Additionally, the company will seek a majority equity position in order to have a controlling position. This way, the company can manage the venture as if it is a subsidiary of the parent company. In order to ingrain the interests of the company, the chairman of the board and the chief executive officer will be expatriated from the parent company. However, majority of the other personnel will be outsourced from the local population. Within the first days of inception, the venture will run a talent search in order to identify creative local students. A major source of the talent will be the science congresses held by different institutions in order to showcase the talented students.
Conclusion
It is important for a multinational to understand the dynamics of a new market when trying to expand. This is vital for its establishment in the new market. The conditions in the new market dictate how the multinational carries out its operations. However, I think it is prudent for multinationals venturing into new markets to maintain their organizational culture (Castellani & Zanfei, 2006).
References
Castellani, D., & Zanfei, A. (2006). Multinational firms, innovation and productivity. Cheltenham, UK: Edward Elgar.
Dunning, J. H. (2012). Multinationals, technology, and competitiveness. London: Routledge.
Jayaraman, K. (2009). Doing Business in China: A Risk Analysis. Journal of Emerging Knowledge on Emerging Markets. 1(1): 1-9.
