Companies in developing countries are changing the idea of business internationalization. Scientific and technological enterprises of countries such as China, India, Russia, Brazil, Mexico, South Africa represent a new type of company in the international market.
Keywords: development, China, investment, trade, international trade.
The beginning of the 21st century is associated with the rapid growth of the Chinese economy. With the introduction of new thinking and the development of the principle of «socialism with Chinese characteristics». The Chinese economy is showing a phenomenal rate of economic growth. Starting from various forms of export, expanding the country's infrastructure to gradual market liberalization. The country is striving for economic dominance, domestic companies are expanding their global presence [1].
Over the past two decades, a large number of foreign investments have come from Chinese multinational companies (MNCs), making the country a significant global investor. China is pursuing a «go out» strategy. According to the main directions of the country's development, Chinese enterprises enter the markets of Latin America and Africa in search of resources. China invests in developed countries in order to enter new markets and increase the competitiveness of Chinese products in the world, create domestic brands known throughout the world. Thus, the three largest Chinese oil companies (Sinopec, China National Petroleum Corporation and China National Offshore Oil Corporation) are engaged in investment projects in 14 countries around the world. Most of the investments are directed to Europe. [1]
The competitive strategy for Chinese retailers is to cross national borders. In connection with the institutionalization of international economic relations, the reduction of barriers to trade and financial flows, the expansion of transport and communication infrastructure, companies are striving for the growth of international activities.
The process of Chinese business competition occurs in several stages, each of which is associated with a certain method and strategy.
At the first stage of development, the process of trading the company's products is internationalized. International operations consist of exporting, re-exporting goods and services or establishing trade missions. [2]
Export is the simplest and most common exit method. There is indirect and direct export, as well as active and passive. Occasional export, or passive export, is distinguished by the frequency of transactions, i.e. the firm enters the market from time to time, in accordance with the objectives of the organization or when receiving an order from a foreign client. With active export, the company expands the sales of its products in a particular market. The company manufactures products in the domestic market, but adapts to the needs of the foreign market. Such a strategy involves some changes in the policy, tasks, structure of the organization. When exporting products independently, the company faces additional costs and risks, which can be offset by savings on intermediary fees. An advantageous difference is the possibility of control over the exported products by the manufacturing company.
The enterprise may use the services of foreign distributors or agents endowed with exclusive or limited rights to represent the manufacturer in a particular market.
The second stage is the internationalization of the production process. [3]
– creation of various forms of alliances, international cooperation for the purpose of technology transfer (licensing, franchising, sale of know-how, etc.).
The enterprise can buy foreign licenses. The licensor provides the licensee for a fee to use trade secrets, trademark, patent. Thus, the exporting manufacturer gains access to the external market, optimizing risks. Another way is contract manufacturing, where the production of goods is entrusted to a local company. However, the company is deprived of the opportunity to exercise constant control over the production process. At the same time, this type of licensing allows you to quickly enter a foreign market, reduces risks and facilitates the possible creation of a joint or own enterprise in a foreign market.
Franchising is a common form of licensing that sells a trademark and a well-established production network.
– partial or complete relocation of production, use of distribution channels in a foreign market (joint production, joint research activities, etc.).
– creation of a joint venture (JV) and a marketing system abroad.
Establishing a joint venture is another way to enter a foreign market. The creation of a joint venture may be a necessary condition for entering a foreign market due to government policy, or a source of financial, material, and managerial resources. [4]
The last step is the internationalization of the enterprise. Internationalization is achieved through foreign direct investment (creation of foreign branches, representative offices, construction of a new enterprise, mergers and acquisitions).
Direct investment, a form of entering the foreign market through the creation of an assembly or manufacturing enterprise abroad. A company's direct investment may be the result of low cost of raw materials, labor, government incentives in the foreign market. Formation of a positive image of the company, by creating jobs, is also a strategic move of the manufacturing company. Through direct investment, an enterprise can tailor its products to the needs of a given market, maintaining good relationships with government agencies, consumers, suppliers and distributors. The company has the ability to control investments, production and marketing policies in accordance with long-term goals. However, the enterprise is not insured in any way against the deterioration of market conditions in the foreign market, changes in the exchange rate, expropriation of property in cases of political upheavals in the country.
China's telecommunications market is one of the largest in the world. Prior to the country's accession to the World Trade Organization (WTO) in 2001, there were many legal restrictions in the telecommunications industry that prevented foreign investment. With the liberalization of the country's economy in the industry in the early 1990s, a series of reforms are envisaged aimed at increasing competition and facilitating the penetration of modern technologies. Although it is impossible for investors to establish companies with 100 % foreign capital, they can form a joint venture with local companies, where the share of foreign capital reaches 50 %.
With liberalization, many companies — giants of the world telecommunications market — penetrate into the country's industry. Almost all manufacturers — leaders in the telecommunications market are starting to open production and research centers in China. Canadian company Nortel (Nortel), Swedish — Ericsson, German — Siemens, American — Motorola, Japanese manufacturers of telecommunications equipment — NEC (NEC), Fujitsu (Fujitsu), Hitachi (Hitachi), Korean — Samsung and LGI (LG). The growth in the number of large foreign enterprises in the industry market increases competition and increases barriers to entry of domestic companies.
Without entering into competition, the Chinese company Huawei concentrates its activities in markets less attractive to large companies. Operating in small towns as well as rural areas, Huawei captures an increasing share of the domestic market and achieves economies of scale. Gradually increasing production, strengthening the brand, the company begins to move to the markets of cities. [5]
To compete effectively, Huawei tailors its products to the needs of a particular consumer group. This strategy helps the company to withstand the competition of Western enterprises: the American developer of network equipment (CISCO), and the manufacturer of telecommunications equipment primarily for Internet providers (JUNIPER). Huawei's unique product features, technological know-how, and high-speed and cheaper 3G services to subscribers help the company secure a $200 million contract with a Danish mobile operator (Telfort). This is the first large-scale project in Europe.
To achieve world-class technological development and implementation of modern management systems, Huawei opens its research centers in Silicon Valley (USA), Stockholm (Sweden). Using global experience, research and development and developed infrastructure, Huawei reaches a new level of production development.
In 2011, Huawei and Optus, Australia's second largest telecommunications company, open an innovation center in Sydney, Australia to develop new wireless and mobile communications for overseas sales. In the same year, the company conducts a large-scale commercialization of the UMTS system for the introduction of 3G and HSPA to provide wireless broadband radio communications and high-speed mobile Internet access in North America, collaborating with Canadian telecommunications companies (BellCanada and TELUS).
Huawei is one of the first to provide a mobile data network (LongTermEvolution (LTE) standards), which improves the speed and efficiency of data transmission at high traffic, for the leading cellular company in Sweden and Finland (TeliaSoner). [6]
In conclusion, would like to outline ways for further research. In the future, it may be possible to consider applying competitive intelligence methods to competitiveness analysis in other industries to compile a comparative analysis of competitive intelligence tools.
The starting point for the formation of an enterprise strategy is, first of all, the awareness of its management of the impossibility of maintaining and strengthening the position of the company, based on traditional policies. In addition to the potential of the organization, the development of a strategy is influenced by a number of factors, among which the most important are the mission and goals of the organization; market conditions: competitive advantages; organizational culture; products; competence of top management and the level of its claims.
The enterprise development strategy is developed in the course of the implementation of the strategic planning process carried out at the enterprise, the result of which is a preliminary development project for the future. It, as a rule, includes the choice of specific areas of the market, the activities of which the company should be focused on; determining the source and type of resources used; compiling a list of technologies planned for use; the choice of methods, industries and directions of future activity, as well as the type of product produced. Together, this constitutes the strategy of the organization. [7]
The development of a competitive strategy for a retail company involves the knowledge and use of the basic principles of planning and management. Various authors describing the basic principles of strategic planning agree that the choice of the mission and goals of the organization is a responsible decision in strategic planning. The mission and goals serve as guidelines for all subsequent stages of planning and, at the same time, impose certain restrictions on the direction of the organization's activities when analyzing development alternatives.
References:
- Johanson, J., Vahlne, J-E. (2020). “Commitment and Opportunity Development in the Internationalization Process: A Note on the Uppsala Internationalization Process Model”, Management International Review, 46 (2), pp. 165–178.
- Johanson, J., Vahlne, J-E. (2020). “Commitment and Opportunity Development in the Internationalization Process: A Note on the Uppsala Internationalization Process Model”, Management International Review, 46 (2).
- Karlsen, S. M. F. (2021), The Born Global Redefined. On the Determinants of SMEs Pace of Internationalization, Dissertation to BI Norwegian School of Management.
- Karlsen, S. M. F. (2019), The Born Global Redefined. On the Determinants of SMEs Pace of Internationalization, Dissertation to BI Norwegian School of Management, p. 46–57.
- Kenneth Rapoza, China Companies Inching Into Europe, Forbes 6.10.2019
- Kevin Fitchard, Huawei knocks off Ericsson as world’s biggest telecoma. vendor, Jul.24 2021.
- Krugman P. Competitiveness: a Dangerous obsession. // In: Competitiveness. An International Economics Reader. N.Y.: Foreign Affairs, 1994, Р.2.
