This is a reflection of the Harvard Business Review of Thomas M. Hout and Pankaj Ghemawat “China vs. the world”, HBR December 2010, page 94-103. Thomas M. Hout is a professor at the University of Hong Kong's School of Business since 2002. He teaches Strategy, Operations and Information, Business Strategies for China and India and fast companies (IMBA program in Shanghai). Pankaj Ghemawat is the Anselmo Rubiralta Professor of Global Strategy at IESE (spanish: Instituto de Estudios Superiores de la Empresa) Business School. In 1991, he became the youngest person in the Harvard Business school's history to be appointed a full professor. Ghemawat was also the youngest "guru" included in the guide to the greatest management thinkers of all time published in 2008 by The Economist.
Introduction China is one of the worlds fastest growing countries, around 9% per year, since 2008. To be part of this fast growing market multinationals settle down in China. Disenchantment came through China, because U.S. and Western Europe took the greatest profits.
To prevent this in the future, the Chinese government came with several policies. Firstly, the state will be buyer and seller in certain key industries. Secondly, they want to consolidate several manufactures into a few national champions or behemoths. And then they are going to force the MNE's to form joint ventures with national behemoths to transfer the latest technologies to the Chinese government. Lastly, the government gives hefty tax discounts to domestic companies and state-owned banks give loans below the market rates and sometimes the government reimburses interest payments. In addition, the Chinese entrepreneurs get land below market price or even for free. Main goal of China is to catch up with the U.S. by 2020.
The Chinese government has been implanting policies to give China the chance to overtake the west on the technology market. The authors suggest that they might be actually working.
Arguments : - share technology with state-owned companies (joint ventures). Companies know that their Chinese partners will become their competition outside China high taxes for multinational firms china has already changed from a low- and middle-tech manufacturing economy to an high-tech economy The conclusion of the authors is that the multinationals should protect their intellectual property better, so that China won´t take all of it. Multinational should divide their knowledge between different partners and let employees in the home-country do the sensitive work, but also work on a stronger relationship with China.Then why still sharing?
The strong points : the description of the relationship between the US and China, why they both need each other he motivated China´s choice for these policies arguments have good support, not that they just make a statement without explaining how they come to it.
weakest points : not a entirely renewing article not much attention for US's point of view, could be a more what we have learned from the article: we knew the main points, like that china is very hard on multinational firms, but we didn't know the details which are very clear described in the article what managers could learn from the article: maintain own technologies and probably keep the most important R&D in your own country firstly maintain a good relationship to china before entering the Chinese market how it is related to the course:
China has one of the biggest economical systems in the world very international expanding possible questions if China has all these policies and makes it very hard for Multinational firms exist in China independently, without any Chinese partners, then why aren´t these firms going to Taiwan or India? In the article is said that the US got more than they bargained for. Do you think that this is because they underestimated China? And if that's case, how could this happen?
--------------------------------- [ 1 ]. http://www.fbe.hku.hk/~hout/profile.htm [ 2 ]. http://www.sauder.ubc.ca/imba [ 3 ]. http://www.iese.edu/en/home.asp [ 4 ]. http://ghemawat.com/home.aspx