TABLE OF CONTENT

1.0 1.1 1.2 2.0 2.1 INTRODUCTION............................................................................................... 2 Question ....................................................................................................... 2 Definition of Important Terms and Background of Countries Involved .... 2 PROBLEM STATEMENTS .................................................................................. 3 FACTORS ....................................................................................................... 3 Culture Factors ...................................................................................... 3 Political and Laws Factors ...................................................................... 5 Economic Factors ................................................................................... 7 Geography Factors................................................................................. 8

2.1.1 2.1.2 2.1.3 2.1.4 3.0 3.1 3.2 3.2.1 3.2.2 4.0 4.1

SOLUTION .......................................................................................................10 DRAWBACK..................................................................................................10 BENEFITS .....................................................................................................10 JOB ELIMINATION ...................................................................................11 INTERNATIONAL TRADE vs. FREE TRADE ...............................................11

RECOMMENDATION .......................................................................................12 SHORT TERM AND LONG TERM ..................................................................12 Cultures .................................................................................................12 Political and Laws .................................................................................14 Economics .............................................................................................16 Geography.............................................................................................17

4.1.1 4.1.2 4.1.3 4.1.4 5.0 6.0 7.0

CONCLUSION ..................................................................................................18 REFERENCES ...................................................................................................19 APPENDIX .......................................................................................................20

GT00603: INTERNATIONAL BUSINESS

1.0

INTRODUCTION

1.1 Question You are the production manager for European-based firm that is considering outsourcing its manufacturing to a producer in China. You are asked by your firms CEO to prepare a report that outlines the benefits and drawbacks of this potential change. During your research, you find international trade theories that say protectionist actions restrict imports and harm nations standard of living- an argument for free trade. Yet you know that free trade and global competition is driving firms like your own to move production to cheaper location abroad, thereby eliminating jobs in their home countries. Clearly, the gains and losses of free trade are not always distributed evenly across the population. As part of your report to the CEO, argue either for or against the need for measures that protect domestic production and therefore, jobs at home. 1.2 Definition of Important Terms and Background of Countries Involved Our company, Grand Demand Incorporation is one of the largest companies in Great Britain that actively producing home based products such as foods, clothes, household necessities. Operating in Great Britain since 1997, our company always works to cater our customers the best products from us. In order to sustain and generate more profit, our company plan to open a new branch in Shanghai, China. Therefore, to make it success, a report from a research about everything in China had been done. Great Britain, the dominant industrial and maritime power of the 19th century, played a leading role in developing parliamentary democracy and in advancing literature and science. At its zenith, the British Empire stretched over one-fourth of the earth's surface. As one of five permanent members of the UN Security Council, a founding member of NATO, and of the Commonwealth, the UK pursues a global approach to foreign policy; it currently is weighing the degree of its integration with continental Europe. A member of the EU, it chose to remain outside the Economic and Monetary Union for the time being. Based on ancient writings, back some in 3300 years, China has developed as a strong sense of their real and mythological origins and kept voluminous records. With a population about 1,336,718,015 until July 2011 in about 9,596,961 sq. km., China declared to be one of the countries crowded of people. China governed by Communist party-led state and declared Beijing as the capital city. The major race dominated by Han Chinese (91.5%) and Mandarin as their official language. With Gross Domestic Product about $5.88 trillion and $10.09 2 UNIVERSITI MALAYSIA SABAH

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trillion of purchasing power parity, a chance to open a new branch in China cannot be ignored by our company.

2.0

PROBLEM STATEMENTS

A problem statement describes the research problem and identifies potential causes or solutions. A problem statement also conveys the reason the problem is important and who is affected by the problem. In this part, we will let you explores the challenges that our company had analyzed in order to penetrate market of China. We describe that the major problems are: I. II. III. IV. Culture Politics and Laws Economics Geographic

Each national business environment is composed of unique cultural, political, economic and geographic characteristics that define the business activities within the nation borders. These scenarios never make our company special because the same things happen to us. The differences between two or more countries exist greatly especially in two different continents. How people attitudes, values, beliefs and institutions differ from one to another how these affect our business will be examined. Therefore, we will elaborate them separately.

2.1

FACTORS

2.1.1 Culture Factors Chinese culture is one of the world oldest and most complex. The area in which the culture is dominant covers a large geographical region in eastern Asia with customs and traditions varying greatly between towns, cities and provinces. Important components of Chinese culture include ethnic groups, food and drinks, national holidays, traditional festival and religion. There are more populations in China. Therefore, many cultures exist in that area. We can explain the culture factors and five parts: I. II. III. Ethnic Groups Food and Drinks National Holidays in China 3 UNIVERSITI MALAYSIA SABAH

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IV. V.

Traditional Festival in China Religion

I.

Ethnic Groups There are 56 ethnic groups in China. Han Chinese is a majority group in China. They lived in the middle and lower reach of the Yellow River, Yang Tze River and the Pearl River and also in the Northeast Plain Region (Song Liao Plain). There also have 55 minorities in China such as Achang, Bai, Blang, etc. Zhuang has the largest population (more than 16 million) of minority ethnic groups. In order to ensure that the 56 Chinese ethnic groups live together in harmony, the Chinese government introduced a series of policies including ones to secure the equality and unity of ethnic groups, give regional autonomy to ethnic minorities and promote respect for the faith and customs of ethnic groups.

II.

Food and Drinks As a country that pays great attention to courtesy, their cuisine culture is deep rooted in China's history. As a visitor or guest in either a Chinese home or restaurant we will find that table manners are essential and the distinctive courtesies displayed will invariably add to the enjoyment of our meals. They practiced respect first in their food culture. Chinese people stress filial piety all the time. The practice of presenting the best or fine food first to the senior members of the family has been observed for countless generations. In ancient times the common people led a needy life but they still tried their best to support the elder mother or father who took it for granted. Before starting to eat dinner, the host may offer some words of greeting.

III.

National Holidays in China National holidays in China are those festivals designated by the Chinese government that everyone gets to enjoy. Everyone has the right to have the appointed days off work. These holidays fall into two types: those that all citizens enjoy nationwide, and those that some citizens enjoy.

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IV.

Traditional Festival in China Characterized by diverse styles and themes, traditional Chinese festivals are an important part of Chinese history and culture, both ancient and modern. A close relationship exists between many of the traditional festivals and chronology, mathematics, the Chinese calendar and the twenty-four solar terms. Many of the customs connected with the traditional festivals have links with religious devotions, superstitions and myths. The form which most of the festivals take today was established around the time of the Han Dynasty (206BC - 220) and for many years, various eminent poets have written countless masterpieces describing the festivals and are still recited regularly today. Almost every festival has its own unique origins and customs which reflect the traditional practices and morality of the whole Chinese nation and its people. The grandest and most popular festivals are the Spring Festival, the Lantern Festival, the Qingming Festival, the Dragon Boat Festival, the Double Seventh Festival, the Mid-autumn Festival, the Chongyang Festival, and the Laba Festival.

V.

Religion Confucianism, Taoism and Buddhism are the three major religions in China. Although it is true to say that Confucianism is a school of philosophy rather than a religion. Generally speaking, Chinese people do not have a strong religious inclination but despite this the three main faiths have had a considerable following. Someone summarized the true attitude of Chinese intellectuals as they followed the teachings of Confucius and Mencius when they were successful but would turn to Taoism when they were frustrated. Many people say they are Buddhists yet have never read the sutras. Most people will say they believe in gods, destiny, fate, luck and an afterlife.

2.1.2

Political and Laws Factors

A political system includes the structures, processes and activities by which a nation governs it. All companies doing business internationally confront political risk where a government or a society will undergo political changes that negatively affect business activities. It can threaten the market of an exporter, the production facilities of a manufacturer, or the ability of a company to pull out the profits in which country they are earned. Therefore, we categorized political risks according to the condition of our company. Some risks that we had found are:

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I. II. III. IV. V. I.

Conflict and Violence Property Seizure Policy Changes Local Content Requirements Corruption Conflict and Violence Local conflict in China such as picket is strongly discouraging investment by international companies. This is because international companies loss their investment and asset in China. Violence also disturbances impair a company ability to manufacture and distribute products, obtain materials and equipment and recruit talented personal. Actually conflict and violence also threatens both physical assets such as office building, factories and production equipment and the lives of employees. Conflicts arises from several sources such as international terrorism, ethic split demonstration and religion extremism. This conflict destroys political system in China. Therefore, companies doing business in China still face the risk that conflict and violence will disrupt business operations.

II.

Property Seizes Usually, the property seize the other countrys assets is for their own businesss benefits. There are three categories of property seizure such as confiscation, expropriation and nationalization. Confiscation is they seize the property from a company without give them any money or compensation. Then, expropriation is they seize the company property but they give the compensation. While, nationalization means government will takeover of an entire industry. For example property seizure in China, farmers are almost their victims. As we know, farmers have their own lands. They seized the farmers land because usually the farmers place peace from any pollution. So, it is suitable for their projects. When they want to seize the farmers lands, usually they only give the farmers a few days to tore down their houses. In statistics, on 1994 and 2004, there are 70 million farmers have been victims of land seized.

III.

Policy Changes Apparently, the policy of a country can only be changed by their government. In 2006, China has announced a policy initiated on indigenous innovation that established the guidelines to reduce dependence in foreign technology. It seems threaten the foreign companies from selling their intellectual property in market

of China. However, in January 2010, the Ministry of Science and Technology 6 UNIVERSITI MALAYSIA SABAH

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issued a notice to modify the policy. The notice stated that applicants must be legal person in China, owns the IP rights and have the trademark right to use for their products to be marketed in China. Moreover, the products should also be advanced and reliable in quality for the eligible in accreditation by the government of China. Since this happen in China, it is not easy for our company to penetrate China market and wise strategies are needed. IV. Local Content Requirements In certain countries, the government fixed that a specified amount of goods or raw materials have to be purchased by the foreign companies as if they want to market their products or services. This is called local content requirements where foreign investors where foreign companies required to use local source of the country or outsourcing. It is not limited by only that, certain countries strongly recommend that the foreign companies need to employ a minimum number of local workers. The local country does not want their citizen to be neglected in their own country. Therefore, they fixed the laws and regulation so that their citizen welfare are not being ignored. In China, the ability of a company to sell their existing products are restricted firmly if the products were not manufactured in their country with their facilities or raw materials. V. Corruption Corruption is one of the global problems that lead to the misallocation of resources, may hurt the development of economic, damage the integrity of a nation and destruct a relationship of society and business. In China, people rush to get rich is accompanied by deep distrust of the system where then created a business environment that is steeped in dishonesty and corruption. Even though Chinese government anti-corruption drives are not cynical exercises. However, the effect is minimal because the overall system is almost incompatible with honesty. 2.1.3 Economic Factors Many aspects we need to consider before doing business in china. Especially in term of economic. Such as: I. II. III. Inflation China Intellectual Economic Transitions 7 UNIVERSITI MALAYSIA SABAH

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I.

Inflation Recently, in October 2011 it was reported that China inflation rate achieved 5.5%. This rate considered higher than our expectations to invest in that country and open the new branches. As a big brand of products that has a benchmark for the countries that will be invested by our company is not more than 4.0%. However, the inflation rate of China is too high for us. Ironically, there are also reported that China is the one of the major player in economy where its experienced the rapid growth in their gross domestic product (GDP) with 42.5 billion, it is a big chance for us to market our products in China. There is a high possibility that our products will be accepted and used widely among Chinese.

II.

China Intellectual The enforcement of Intellectual Property Right (IPR) in China today has been weak but IPR has been acknowledge and protected in the Peoples Republic in China since 1979. Protection of intellectual property law has also been established by government legislation, administrative regulations. Instead that, China today is known as dangerous country in the world with low respect to protection of intangible asset. Theft of sensitive informed and intellectual property increases every week.

III.

Economic Transitions Economic transition is a process of changing a nations fundamental economic organization and it will create new free-market institutions. Because of economic transition, problem will exist in their transitions process such as lack of managerial expertise. These problems exist in our company because of skills of employees. The labors in China are not skilled and not familiar with our new machine compared than our own workers at European. It also will take a long time to be skilled in using machine. This will affect our productivity. Besides, shortage of sources becomes a problem that will also exist in our company. It is because our company cannot use material from outside other than China; all the raw materials sources for product also need to be inside the China. This situation will impact our company if some of the resources needed are not sufficient and not available at China.

2.1.4 Geography Factors I. Populations Problem

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Knowing how the population increase is going to affect the economy requires an understanding of the global economic market. China's population has risen to more than 1 billion. The increase results in a competitive manufacturing market. Numerous products that are sold in the United States were made in China. This has pushed China into the forefront of politics, which further affects the global economy by the money China lends to foreign governments. How this trickles down to the everyday person is the fact that our economy is tied to China's and those of other countries. When economies fail in foreign countries it creates a domino effect. Our gas prices are determined by prices set by another country. Therefore, every time we use oil in our cars, we are affecting not only our market but others. II. Environmental ills China may be getting richer as it turns into the workshop of the world, but as Beijingers rich and poor admit, what good is money if you can't breathe the air? If the economy keeps roaring along, within three decades China could overtake the U.S. as the world's largest source of greenhouse gases, associated with global warming. China continues to rely on coal for 75 percent of its energy, spewing out some 19 million tons (17 million metric tons) of sulfur dioxide a year (the U.S. produces 11 million tons [10 million metric tons] a year) and contributing mightily to acid rain. People in barely a third of 340 monitored Chinese cities breathe air that meets national airquality levels, which are below World Health Organization (WHO) norms. Indoor air pollution from coal burning takes more than 700,000 lives a year, and respiratory diseases cause nearly a quarter of all deaths in the countryside.

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3.0
I.

SOLUTION
China is not a free-market economy. It has an authoritarian communist government. While they employ some of the same terms and strategies as fullfledged capitalist markets, political control is everywhere.

3.1 DRAWBACK

II.

Chinese consumers often prefer to deal with local, Chinese-run companies rather than western enterprises. This also extends to favored treatment from political officials, and it can influence bids on projects and other ventures.

III.

Distorted investment priorities, as wealth gets directed into what will earn the largest profit and not into what most people really need (so public health, public education, and even dikes for periodically swollen rivers receive little attention)

IV.

Overproduction of goods, since workers as a class are never paid enough to buy back, in their role as consumers, the ever growing amount of goods that they produce (in the era of automation, computerization and robotization, the gap between what workers produceand can produceand what their low wage allows them to consume has increased enormously)

V.

With such a gap between the rich and the poor, egalitarian social relations become impossible (people with a lot of money begin to think of themselves as a better kind of human being and to view the poor with contempt, while the poor feel a mixture of hatred, envy and queasy respect for the rich).

3.2 BENEFITS I. More developed and balanced industry than many developing countries, a result of Chinas much faster growth rate in manufacturing than Indias since the 1950s. In 1980, when India and China were more or less equal in Gross Domestic Product (GDP) per capita, China already enjoyed a powerful advantage in manufacturing. An Indian economist Pranab Bardhan remarked that compared to India, Chinese were better socialists during the planning era and better capitalists during the reform era II. Chinas very strong and effective state machinery has been an effective tool for mobilizing resources for modernization. Despite the ascendancy of faith in the free market as the only reliable tool of development, the truth is that the modernization of Korea and Taiwan has always been state-led. China only adds one more example, despite the fact that the state since the 1980s accounts for a smaller share of economic activity than during 1949-79. China is able to pour 10 UNIVERSITI MALAYSIA SABAH

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huge sums of state money into developing new industry, new EPZs (Export Processing Zones), great infrastructure etc., with which few developing countries can compete. The same goes for the degree of social control exercised by the Chinese state. III. The sheer size of China - a huge country with a population of 1.3 billion - greatly magnifies the advantages of effective state-led growth and sophisticated manufacturing. It produces the benefit of economy of scale. This advantage helps China to build three basic manufacturing clusters, each with its own specialization. The first is the Pearl River Delta (including Hong Kong as the main channel for export), which specializes in labour intensive manufacturing, production of spare parts and their assembly. The second is the Yangtze River Delta, specializing in capital intensive industries: cars, semiconductors, mobile phones and notebooks, computers. The third cluster is Zhongguan Cun, Bejing, and the Chinese Silicon Valley. 3.2.1 JOB ELIMINATION Protesters claim that globalization is responsible for the elimination of manufacturing job in developed nations. Therefore, if the political risk happened in China, our company dont eliminated job in China because it will give impact to our company such as disturb of company operation. The companies should sending good paying manufacturing jobs to China to developing countries where wage are a fraction of the cost for international companies. Then, company operation can overcome political risk in China. 3.2.2 INTERNATIONAL TRADE vs. FREE TRADE International trade is exchange of goods and services across national borders. International trade is opening doors to new entrepreneurial opportunity across the globe that brings in different varieties of a particular product from different destinations. International trade allows countries to participate in a global economy and encourage Foreign Direct Investment (FDI).According to international trade theory that says protectionist actions restrict imports and harm nations standards of living. However, government can use method of restricts trade by tariffs, quotas and embargo levied by the government of a country that is exporting a product. A restriction on the amount (measured in units or weight) of a good that can enter of leave a country during a certain period of time. This creates scarcity in the market and increased the demand for the domestic product. As with other theories, there are 11 UNIVERSITI MALAYSIA SABAH

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opposite views with international trade and free trade. Free trade refers to selling of product between countries without tariffs or other trade barriers. No restrictions on trade will causes that nothing needs to protect or promote trade and growth because markets forces already existing. Otherwise, protectionism hold that regulation of international trade is important to ensure the markets function properly but this theory argue that free trade increase the standard of livings. As we know China is currently an open economic policy but when our company wants to start a business with China, a lot of things or regulations to be complied with. Therefore when we enter the China Company it will help to build strong relationships with powerful people in China. In marketing our product, people prefer to buy local product compared than foreign country. Hence, we get the advantages which our company is given the flexibility to market our products in various ways.

4.0

RECOMMENDATION

You have seen that foreign companies may face many risks in their new places to market their products and services included our company. If the companies attempt to predict the risks precisely, it is their benefit to adapt with the problem and engage with them. Thus, foreign companies can find the ways to manage the risks so that it not threaten or disrupt their business operations. For our company, we divided the ways into two different durations of strategies which are in short-term strategies and long term strategies.

4.1 SHORT TERM AND LONG TERM 4.1.1 Cultures Short Term Strategies I. Good Personal Relationship As has been clearly demonstrated, the most important part of a business relationship is the building of personal relationships. Personal relationships often entwine with business relationships in China. The Chinese look beyond the contract for sincere commitment as in a good personal relationship. This does not mean that the Chinese will not abide by the signed contract without a good personal relationship. It denotes the general tendency of Chinese people to do 12 UNIVERSITI MALAYSIA SABAH

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business with a long-term orientation. With good personal relationships, you can always rely on your Chinese partner to find a better solution when unexpected circumstances occur. II. Appoint Managers from China Managers in these companies have originated from China. This is to facilitate the delivery of information to the Chinese workers because most of them are not fluent in English. Long Term Strategies I. Provide Training and Open English Classes for Workers Provide training and open English classes for workers. Training provided and the opening of English classes are intended to provide space and learning to the local workers to understand the terms in English. This class can be conducted by a group of experienced teachers to teach English. Companies need to set a particular day to the workers because they generally work for five days a week which on Monday to Friday. Therefore, English classes can be conducted every weekend which is on Saturday and Sunday to make it easier for employees to attend. Company must also provide some room to serve as a classroom. II. Avoiding Ethnocentricity Ethnocentricity is the belief that ones own ethnic group or culture is superior to that of others. Ethnocentricity can seriously undermine international business projects. As suppliers and buyers increasingly treat the world as a single, interconnected marketplace, managers should eliminate the biases inherent in ethnocentric thinking. They should be considering the others cultures in order to make a long term relationship among them. III. Developing Cultural Literacy As globalization continues, people directly involved in international business increasingly benefits from a certain degree of cultural literacy. Cultural literacy improves peoples ability to manage employees, market products and conducts negotiations in others countries.

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4.1.2 Political and Laws Short Term Strategies I. Information Gathering Before an international company starts their business in China, they have to gather information that will help predict and manage political risk. First thing that international companies do to conduct accurate political risk forecasting are get relevant information from current employees who have worked in China that had contact with local politicians and other official. With relevant information, international companies want or dont want market their product. Second, international companies have to know agencies specializing in political risk services such as banks, political consultants, news publications and risk assessment services that estimate risk using a variety of criteria and methods. These agencies offer reports that detail the level and sources of political risk for nations. Through the agencies, international companies know about political risk happened in China. II. Obtain Raw Materials or Sources Locally For our company, we ensure that our company must use the locally available raw materials. On the other hand, they must get the parts from local suppliers only. That means our company cannot get the sources outside of our country. They must find the sources inside our country respectively. As we know, usually, other country use the other country materials when produce a products. By using local materials, it can differentiate our company with other company. Tis is because, we produce our products by using our own local sources and use the parts from local suppliers. III. Employ Local Workers While, by employing local workers also the recommendation that have we suggest for our company in short term. Local workers are important for our company. So, we will hire local people to work in our company. Usually, local workers can give some benefits to the company. That is why, we will ensure that we get the workers that expert in producing product. Besides that, local workers are familiar with their own country.. For example, in China, there are a few people that can speak in English. Usually, foreign workers will use English to communicate with customers. So, it is difficult the customers to understand their 14 UNIVERSITI MALAYSIA SABAH

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language. That why, our company must hired local workers so that easily for them to communicate each other. Long Term Strategies I. Adaption Adaption means incorporating risk into business strategies, often with the help of local officials. Companies should tend to adapt with the politic situations of the local country. Companies also can corporate risk by means of two strategies such as localization where they modify operations, the product mix, or some other business element to suit with the local taste and culture. It is also sensitive to local culture and political issues by localizing certain aspects to suit with regional and national taste. For our company, by helping to develop distribution and communication networks, our company and Chinese gets the benefit where we produce the products that suit with them and as the result they purchase and give us profit. II. Partnership Partnership is also one of the ways to manage the political risks that our company faces in China. By partnering with the local companies in China, the range of loss and profit can be shared mutually. Some form of partnerships such as joint venture, strategic alliances, cross-holdings and also franchising. Besides can share the risks of loss for both companies, they also have the benefits to share the cost of production or their investment projects. We also can attracts more local customers in short period since we combined with their local company whereas their always make local products in first place. Therefore, we are creating the solution in long term strategies for our products.

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4.1.3 Economics Short Term Strategies I. Employment Opportunity Unemployment is a big problem in China. Many people become unemployment because of no job opportunity and also higher population in China. As we all know, graduated student are also unemployment and hard to find suitable job with their degree. Recently, many new industries opened in China intended to reduce unemployment. If our company also opens new industries or new factories, it will help China to reduce unemployment. The job opportunities that our company will offer also to help them to improve their live or their standard of living. From the situation, our product also can be sold among Chinese. II. Collection of Information Gathering information very important for an organization where they want to open a branch in a country far from their country and also have many differences in terms of politic, economy, culture and so on. For our company, to succeed in this business in-depth knowledge of the economy is very important. This is because, if we lack knowledge of the economic consequences in Chinese, our company will be backward and lagging behind. This will cause a lot of losses. In addition, when we know the current issues about the economy in Chinese, the company will be more careful in making investments and be more cautious when there is inflation or deflation in the country. Moreover, our company can also track the progress of economic competitors that compete with our company. Long Terms Strategies I. Adaptations Adaptation was the important thing in a company that who want to invest in another country. This is because, if a company can adjust Chinese's economic situation in the country with their company it is an advantage in the company where the company could in that benefit the they can a lot. For continue the other to example, if are able hand, to we use our we know the Chinese economy attract buyers or consumers so company's products that have country we

been marketed. In

can control our company's economic position so that it is not affected. Besides 16 UNIVERSITI MALAYSIA SABAH

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that, people in Chinese are also clever and understands the economic situation in their own country and from there the company must fully know the consequences of Chinese economy in the country so that companies can find out if there is inflation, deflation, or economic instability so that the company is not affected or not incurrence of losses and is not in deceit by local companies. II. Pattern, Trademark, and Copyright Recently, China is known as risky country in the world with low protection of intangible assets. Our company needs to take appropriate action before our product stolen by Chinese company. To protect our product, we need to know related rights such as creation of right, enforcement of right and monetary exploitation of rights. Our company also should be aware from finding commercial opportunities in China because their issues related to the protection of intellectual property. Since enter the World Trade Organization (WTO), China defend its legal framework and obey with the law regulations related to the WTO in terms of Intellectual Property Right III. Skilled Courses Our company will offer skill courses to Chinese employees. It is because some of the employees from China have no experience in work. Its also will help employees to improved their skills as well as benefit to our company for having good skills. If all the workers join these courses, our company no needs to be worry because the workers will work the right ways. Employees also will gain a lot after they take part in the courses. Its for their own benefits. Employees are able to work better at workplace. These courses also will help them to improve their basic skills. In addition, our company also can stay in good condition if the entire employees are skilled. Our output of product will increase and quality of work among employees also will become better.

4.1.4 Geography Short Term Strategies Environment Campaign Promotion of a healthy environment is very appropriate considering the fact that a healthy and safe environment is both a basic human need and human right. This 17 UNIVERSITI MALAYSIA SABAH

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campaign can be made by the company for weekend. The company also can cooperate with the government to handle the campaign that the company made. By increasing the environmental awareness campaign will help reduce global warming and environmental pollution could further assist the smooth running of the economy in China. It also can give the awareness to employee about the environment pollution nowadays. Long Term Strategies The one-child policy refers to the one-child limitation applying to a minority of families in the population control policy of the People's Republic of China (PRC). The company needs to comply with this policy in doing business in China for the long term is trying to create a product or service that does not conflict with policies in the country. For instance, providing services for a small family business as well as adapting existing culture.

5.0

CONCLUSION

In order to open a new operation in China, there are many aspects that our company should consider. This is because, this process involving two different countries in two different continents which are having obvious differ religions and customs. Despite being worried our products will not be acceptable by people of China, we start to consider hardly in our business process, operation cost, resources, employees, and acceptance of their residence the form of business that we are trying to introduce then. Culture, politics, the growth of China economics, and their geographical location will affect our company in each aspect of growth. Therefore, we come with research on these aspects so that we are knowledgeable enough about China. After we had identified the problems that may exist during we undertake our business operations, we discussed a lot on how we are going to solve them. Neither we ignore and reduce the operation costs in our home country by eliminating jobs nor we neglect the welfare of Chinese, we are going to optimize both profitability and be a good company for them in future. Thus, we can satisfy both parties and people between us.

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6.0

REFERENCES
edition (2008), Pearson Education.

1) Wild, John J., Wild, Kenneth L. and Han, Jerry C.Y., International Business, 4th

2) Wild, John J. and Wild, Kenneth L., International Business, 6th edition (2010), Pearson Education. 3) Sistem Politik China dan Negara Barat Berbeda, retrieved on October 11, 2011 from http://www.merdeka.com/politik/internasional/sistem-politik-china-dan-negara-baratberbeda.html 4) Tips for Entering the Chinese Market, retrieved on November 11, 2011 from http://www.imediaconnection.com/content/9064.asp. 5) Retrieved on 12 November, 2011 from http://www1.american.edu/TED/amway.htm. 6) Retrieved on October 23, 2011 from http://www.travelchinaguide.com/intro/ 7) Retrieved on October 23, 2011 from

http://www.internationalviewpoint.org/spip.php?article1193 8) Chinese culture, retrieved on October 27, 2011 from

http://en.wikipedia.org/wiki/Chinese_culture 9) Retrieved on November 5, 2011 from http://www.ehow.com/facts_4927942_whatdisadvantages-doing-business-china.html

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7.0

APPENDIX

Tips for Entering the Chinese Market With a population of 1.3 billion, China is the biggest country in the world. Its consumer market has the potential to be larger than that of North America and Western Europe combined. China has already surpassed the United States in one sector-- internet use. According to Dr. Charles Zhang, chairman and CEO of Sohu.com, Chinese internet users spend nearly two billion hours online each week, compared to 129 million hours per week for US internet users.

Get a 20 percent discount when you register for ad:tech San Francisco by using this code: ATSFUN. Start by visiting the registration detail page. Next, click on the "Register Now" link. On the registration page, enter the discount code in the "Source Code" box. China is a major global economic force and will grow dramatically in the foreseeable future. Not only does the number of internet users in China increase by 800,000 a week, but a report issued by PricewaterhouseCoopers projected that China's media sector would achieve a 25 percent growth in revenue through 2008 due to an increase in online advertising. The China Internet Network Information Center (CNNIC) estimates that China's internet population grew 18 percent over the past two years to 111 million (since 12/05), while use of broadband in that country is soaring.

It is no surprise that global internet giants -- including eBay Inc., Yahoo! Inc. and Amazon.com Inc. -- have all taken the China plunge in the last two years, setting up domestic alliances in China (Yahoo-Alibaba, eBay and Paradise Electronics Retail Ltd., and Amazon and Joyo.com).

With the Chinese market's explosive emergence as both a buyer and seller of products and services worldwide, U.S. companies should now begin to create a presence on the Chinese language internet. James McGregor's "One Billion Customers" is an unprecedented account of doing business in China. I recently had the pleasure of speaking with McGregor to discuss the current happenings in China's internet scene. 20 UNIVERSITI MALAYSIA SABAH

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Internet

as

social

platform

One of the advantages of the internet in China is the birth of creativity. As traditional media is owned and operated and tightly controlled by the Chinese government, the internet allows more self expression and user involvement. Compared to traditional media in China, the internet is seen as a way to communicate local, ethnic and national cultures to a worldwide audience. This shift validates the internet as a mainstream marketing, advertising and research platform-- a global communications tool. Additionally, with China's one child policy, the internet is seen as a social platform. Children, whose sole objective is to excel in school, are given the opportunity to create and express their true thoughts through the internet. One must only look at the statistics surrounding China's internet cafes to realize the enormous impact the internet has had on the teenage demographic. According to CMMS, approximately 55 percent of China youth aged 18 to 25 visit the urban city internet cafes. According to McGregor, an interesting trend in China's online social networking is the convergence of online with traditional media. Where in the United States we are accustomed to seeing traditional advertising campaigns metamorphosis to online, China encourages user generated online content to be transitioned to radio and TV. As an example, the China equivalent of MySpace, "Wangyou.com," places the winners of online music contests on radio and TV shows. China and foreign internet companies

McGregor cites that Chinese internet companies are weak in integrity, quality and dependability. Click Fraud and disappearing emails are prevalent themes in the Chinese email space. This supports the statistic for a recent article that China is the world's second largest producer of SPAM after the United States (according to the Chinese Ministry of Information). McGregor's advice for anyone wanting to do business in China is to go there yourself and build your own teams. McGregor references Meg Whitman, eBay's CEO, on spending a recent summer in China to get to know the market. According to McGregor, "If China requires that you joint-venture, get a majority stake, control the board and install your own CEO, CFO and HR director. If you don't trust your CFO like your mother, give your mother the job. Never joint-venture with government entities unless you have no choice. Then understand that this partnership is about China obtaining your technology, know-how and capital while maintaining control."

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In addition to the advice above, McGregor offers business people from around the world wishing to penetrate the Chinese market the below words of wisdom:

Fatigue, food and drink are negotiating tools. If your Chinese counterpart wants to finalize a deal after Mao-tai-soaked banquet, it is better to throw up on the contract than sign it.

Foreign business people who come to China often have too much goodwill, too much trust and too little patience. Don't mistake language ability with business or management competence. The savviest and smartest Chinese managers often don't speak English or have a Western university degree.

China is all checks and no balances. Chinese government anti-corruption drives are not cynical exercises. But the effect is minimal because the overall system is almost incompatible with honesty.

China has returned to its traditional symbiotic relationship between the merchants and mandarins. Officials clear the way for business. The business people pave the way for officials to accumulate assets.

If you decide to sell your soul and succumb to China's corruption, get a good price and focus on charity work in your old age. China's modernization is aiming at "rule by law" not the "rule of law," so relationships and personal power reign supreme. Don't rely exclusively on the law in China. You will lose. Use laws and regulations to enhance political and business arguments in favor of your position. Avoid the "slobbering CEO syndrome." Don't fall for China's brilliant use of its huge size and 2,000-year tradition of manipulative political pageantry to intimidate foreigners into accepting unwise deals.

Education is China's greatest strength and greatest weakness. The Chinese are great memorizers, mathematicians and scientists who run tedious routines. But the rote education system leaves many weak on powers of analysis and leadership.

China's rush to get rich is accompanied by deep distrust of the system and anyone outside one's immediate family or circle of close friends. This has created a business environment that is steeped in dishonesty and in dire need of transparency and fair dispute resolution systems.

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China's greatest management challenges are to create organizations that are not dictatorships, to treat others as equals, to accept responsibility and to share information-- all behaviors that have been almost absent.

China is modernizing, not Westernizing. The country's goal is to modernize but retain the Chinese "essence," which it is still struggling to define.

With China's economy growing at nine percent each year, it will most likely be the world's second largest by 2025-- right behind the United States. It's not too early for U.S. firms to market to Chinese companies and consumers via the internet. As we've all seen from the emergence of the English language internet, first-movers have a significant advantage over those that follow. However, do follow James McGregor's advice

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