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Different challenges that multinational companies have to face in chinese market


No doubt, this is the age of globalization and in this era our world became a very small place. This is now the world of awareness and technological revolution and the very revolutionary the use of internet gave boom in the business sector. For global business investment and trade the course of globalization has created extraordinary opportunities since last few years. With many entry strategies like joint venture and auxiliary multinational companies are trying to enlarge their business. In this we will go through the some different challenges that multinational companies have to face in Chinese market. Firstly it will show the localized staffing strategy that foreign multinationals used for human resource management in Chinese market. After will indicate some difficulties attracting and retaining a qualified managerial staff in China for multinational companies operation. Multinational companies suffered some other challenges in china will be discussed.

About 41000 new companies in 2003 in China had been launched by investors from other countries. And at the end of 2003 there were 46000 approved foreign companies in China. However for doing business in China these multinational companies faced some challenges like cultural differences and negotiation problems, which have affected foreign business operation and development.

Human Resource Challenges

In this decade, most popular issue in which businesses has to face is the Human Resource management. The need of highly qualified staff in multinational companies has been increased. Multinational companies choose regularity of human resource management in beginning. which supposed coordinate practice and consistency in strategy can direct to operational value and efficiency. People in different places have their own culture and conception on organization behaviour. For multinational companies this reason of diversity of cross-nation and cross-culture may cause in strategy conflicts for multinational companies at the time of international standardization human resource management (Daft, 2007).

Most of multinational companies began to recruit the people in those countries to control these difficulties and reduce cost. For example, in china has a ¾ population of the world and millions of graduate from this part considered as a large labour market for multinational companies. Many multinational companies entered in Chinese market on the entry of it in WTO and are planning to take staff from the same part while during the course of business in China. However the progress of HRM system has not replied with the rapid growth of economic development in China. It is difficult and different recruiting and keeping qualified managerial staff is a huge challenge in Chinese market found by most of multinational companies.

Culture differences

People from different countries always have different traditions and attitudes towards business. Some other challenges like culture that multinational companies have to face during the course of business in other countries besides of human resource management, For example culture has influenced strongly the international business operation in Chinese market experienced by multinational companies. So first of all the should study of the business culture if they have desire to start business in china.

The differences of social environment

While operating the business in other countries there are lot of things they may be different from the company's local market like culture difference, labour market and the system of employment in targeted country this creates huge challenge for the multinational countries to operate the business in such country. So in this situation, the efficiency of work would be much lower than the company's expecting from the employees.

Short of talent

There is another problem when multinational companies going to start business in the other countries on the time of recruiting of qualified managerial that is shortage of talent due to some reasons, this might be include the unbalance in the choosing of education field. The talent could be defined as the people who are progressing, professional and efficient. For example in the years past china witnessed in every year millions of university graduates but unfortunately it didn't produce more talent to the country as should have been. And this is due to most of students major in arts rather than science Ministry of Education PRC, 2006).

Moreover, we will discuss following with the help of Porter Diamond how do the determinants of national competitive advantage help explain how companies can maintain their economic competitiveness.

Porter's Diamond - Determining Factors of National Advantage

In a global environment corporate strategies have to be seen increasingly. Management has to look at international market environment if organization does not do this. Competitors actions in which sellers, new entrants, buyers of providers of substitute may manipulate the domestic market. This trend reinforced by IT. Model of Michael Porter shows and allow to analyse why some nations are more competitive than others are, same like competitiveness of industries on others. Factors of national advantage in this model had been determined. National base of an organization plays key role to achieve advantage globally it suggests. Necessary factors provided by home base to support organization to build advantage in global competition.

Porter distinguish four determinants in above model.

Factor Conditions

The situation in a country in factors like production, skilled labor, infrastructure, etc.

These factors could be grouped into "labor cost commitment, human resources qualification level, natural resources, vegetation, space etc. infrastructure capital resources knowledge resources". "The factors like quality of research on irregulation of labor markets, liquidity of national stock markets, universities included as well".

These national factors often provide initial advantages, which are afterward built upon. A different set of factor conditions in each country. Industries are therefore according to the best factor conditions in countries. This explains the existence of so-called low-cost-countries low costs of labor, agricultural countries large countries with fertile soil.

These factors are nature-made or inherited "Porter said". They may develop and change. National factors may shape by Political initiatives, technological progress or socio-cultural changes, genetic engineering and cloning that will influence knowledge capital in this field in North America and Europe is a good example in the discussion.

Home Demand Conditions

Shows demand and services produced in a country. Home demand is determined by three characteristics Porter said, their mixture the mix of customers needs and wants, their growth rate and scope, and the mechanisms that broadcast domestic preferences to foreign markets.

On clearance of home demand. National advantage is achievable in an industry or market segment Porter said. On ability of organization home markets have a load than foreign markets.

Related supporting industries

Supporting or related industries can take benefit if one industry gets success in international market. In later stages Competitive supplying industries will highlight innovation and internationalization. Shoe and leather industry in Italy is a good example. Italy is not only successful with shoes and leather, but also with related products.

Firm Strategy, Structure, and Rivalry

This determine the characteristics of national competition how companies are established, organized and managed. Culture play an important role. Factors like management structures, working morale, or interactions between companies are shaped differently. This will give advantages and disadvantages for particular industries. Competitive advantage within a nation helps to give organizations base to get advantage globally Porter said.


To conclude this essay, we can say that multinational companies have to face different challenges when they look a business in other countries markets like china there is we see above in our essay there are multi challenges which companies have to face like culture differences, human resource management and other is government limitations. And hiring of staff seemed to be a huge challenge that faced in china by multinational companies.

Moreover, as above with the help of Porter Diamond model which showed us with the different aspects like "factor conditions, home demand conditions, relative supportive industries, firm strategy structure and rivalry", all of these things explain about national competitive advantage and for the maintaining of economic competitiveness.

References and bibliography


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