Stage in research: proposal defended, data collection almost done, with some data analysis
Background 3-7
Background 3-7
Research Questions 8-9
Research Method 10
Case Companies 11-15
Case Analysis and Findings 16-17
Next-step 18
China FDI outflow: in 2005, it reached US$ 6.9 billion, compared with US$ 5.5 billion in 2004, US$ 3.0 billion in 2003.
China FDI outflow: in 2005, it reached US$ 6.9 billion, compared with US$ 5.5 billion in 2004, US$ 3.0 billion in 2003.
China outward FDI stock: by 2005, it has increased to US$ 52 billion - 0.46% of the worldwide outward FDI stock; 4.3% of that from developing economies; ranks 5th in developing economies, just behind Hong Kong, Singapore, Brazil, Taiwan Province of China.
Chinese investors:
Ownership: from 2003 to 2004, state-owned enterprises (43%35%), limited liability companies (22%30%), private enterprises (10%12%).
Industry distribution: 59% of the firms from manufacturing industry; 11% from trading industry
China FDI outflow: in 2004 (5.5 b)
China FDI outflow: in 2004 (5.5 b)
National Champions (natural resource industry & mfg industry)
National Champions (natural resource industry & mfg industry)
Small to Medium sized Enterprises (SMEs)
Small to Medium sized Enterprises (SMEs)
Mainly distributed in Yangtze River Delta (YRD) and Pearl River Delta (PRD)
International activity is primarily engaged in providing contractual manufacturing service (act as OEM or ODM) to oversea branded manufacturers, retailers or branded marketers, via traders or oversea buyers.
Challenges include:
Low value-added part – very low profit
Highly depend on traders and oversea buyers; no direct access to retailers, branded manufacturers or branded marketers – no oversea distribution network
Highly depend on oversea orders – will face huge problem once oversea orders are transferred to lower cost countries, such as India, Vietnam, etc.
Therefore:
High value-added part: OEM ODM
Most qualified, unchangeable OEM/ODM candidate: quality; capacity; mfg efficiency; dependability; flexibility; etc.
R&D capability; oversea distribution network; brand; HR Internationalization: M&A
China outward FDI is increasing rapidly and China is gradually becoming an important investor.
China outward FDI is increasing rapidly and China is gradually becoming an important investor.
90% of China outward FDI flows to developing countries; investment to “Triad” – US, Europe, Japan – is growing fast.
In 2004, more than half (59%) of the investment is from manufacturing firms, but only 13.8% flows to manufacturing function Most Chinese manufacturing firms are on an early stage of internationalization, i.e. oversea agents, sales subsidiaries, trading companies (trading functions) are the preferable choices. However, Chinese firms’ mfg internationalization has become an inneglectable phenomenon.
Both mfg national champions and SMEs are considering pursuing mfg internationalization, through different paths to achieve their own aims.
Research Focus: Chinese (except Hong Kong, Macau and Taiwan) manufacturing firms, which serve oversea markets and own at least one oversea manufacturing plant.
1, Why do Chinese manufacturing firms put manufacturing function overseas?
1, Why do Chinese manufacturing firms put manufacturing function overseas?
What kind of ownership advantages do Chinese mfg firms hold in pursuing production in developing economies?
What kind of ownership advantages do Chinese mfg firms hold in upgrade investment (to “Triad” and industrialized economies)
What kind of location advantages drive Chinese mfg firms do international production?
Other drivers? (e.g. M&A opportunities)
2, How to define the paths of Chinese firms’ manufacturing internationalization?
3, How do Chinese manufacturing firms manage international manufacturing network?
Multiple-case study:
Multiple-case study:
In headquarter (finished): interview with oversea business unit manager, product division operations manager, oversea marketing and sales unit manager; observation on production line; archive collection
In oversea factory (ongoing): interview with operations manager, global logistics promotion division manager; observation on production line
Aug 1, 2004, TCL acquired Thomson’s color television business unit, co-founded TCL Multimedia Technology Holdings Limited (TCL38%-Thomson30%). All business is operated under TTE Corporation.
Aug 1, 2004, TCL acquired Thomson’s color television business unit, co-founded TCL Multimedia Technology Holdings Limited (TCL38%-Thomson30%). All business is operated under TTE Corporation.
Since then, TTE has become the largest TV producer in the world, with global market share 9.15% and sales volume 23 million units in 2005.
(1) Marketing and Sales: 5 regional business centers (RBC) are established to manage marketing and sales functions in a global presence.
(2) Manufacturing internationalization (124)
(2) Manufacturing internationalization (124)
CRT TV plants: 6 in China (Inner Mongolia, Xinxiang, Wuxi, Nanchang, Chengdu and Huizhou), 1 in Thailand, 1 in Vietnam, 1 in Poland and 1 in Mexico, with production capacity 18 million.
FP TV plants: Huizhou, Wuxi, Thailand, Mexico, Poland, with production capacity 10 million.
P.S.: Plants in Thailand, Mexico and Poland are acquired from Thomson.
Top 3 TV producer in China. Annual sales in 2005 was US$ 4.2 billion, with 10% from international market. In 2006, acquired Kelon, and entered white good industry.
Top 3 TV producer in China. Annual sales in 2005 was US$ 4.2 billion, with 10% from international market. In 2006, acquired Kelon, and entered white good industry.
Manufacturing internationalization (123)
In 2005, annual sales reached US$ 12 billion. 2nd largest refrigerator producer in the world (6% global market). Top 1 white good producer in China (over 30% market share in Chinese refrigerator and washing machine market).
In 2005, annual sales reached US$ 12 billion. 2nd largest refrigerator producer in the world (6% global market). Top 1 white good producer in China (over 30% market share in Chinese refrigerator and washing machine market).
Intra-industry analysis:
Intra-industry analysis:
TV industry: to evade anti-dumping duty (44.6% to CRT TV)
7 Chinese domestic TV giants (>70% market share)- Haier, HiSense, Konka, Changhong, Skyworth, TCL, Xiamen Overseas – have all established oversea factories (and all of them own mfg plant in Europe) to avoid anti-dumping duty. E.g.: Konka in Hungary, Mexico, Indonesia and Thailand; Changhong’s FP factory in Czech Republic; Haier’s TV plant in Slovakia; HiSense’s CRT factory in South Africa and FP plants in France and Hungary; TCL in Thailand, Vietnam, Mexico and Poland; etc.
Most factories are for final assembly: 1, to make use of China low labor cost; 2, import of components and SKD parts from China will not be charged anti-dumping tariff; 3, to FP TV, the import tax rate of components and SKD parts is 1%, much lower than whole TV set import tax (14%)
All set up factory in East Europe to serve European market
Concentrate on European FP TV market
White goods industry: as final product import tax rate to Europe and US is low, only Haier pursues mfg internationalization, from corporate strategy (brand promotion, distribution network build-up, R&D capability increase, etc.) perspective.
Ownership advantages includes high manufacturing efficiency, quality control, innovation in production techniques and processes, etc. which can be transferred to oversea plants, both in developing economies and in developed economies.
Location advantages: government support or assignment to SOE; In many sectors, Chinese market has been overcapacity, and become a global competition environment; customers have more loyalty to brand with global presence; etc.
New business model - low value-added mfg part is gradually given up by MNCs - offer Chinese mfg firms M&A opportunities
To set up or acquire mfg plants in developed economies (Triad), the dominating reasons are to evade trade barriers and to acquire strategic asset (such as brand, distribution network, R&D capability, managerial capability, human resource, access to capital, etc.)
In “Triad”, OEM or own brand in niche market; in emerging markets, own brand
Most case firms’ mfg internationalization is in stage 3, which means oversea plants are subsidiaries of product division in headquarter: final assembly; little cooperation with other oversea plants, local resources, local subsidiaries, etc. Only TCL and Haier are managing international mfg network, in stage 4.
Fieldwork in Case 4’s US factory and Case 5’s US headquarter (Aug16-Aug23)
Fieldwork in Case 4’s US factory and Case 5’s US headquarter (Aug16-Aug23)
Interview in Case 1’s European headquarter (October)
