The Internationalization of Chinese Companies - Research Proposal Example

Name: Tutor: Course: Date: University: Introduction Internationalization refers to the process of increasing participation of enterprises in international markets, although there is no agreed definition of internationalization. Human Resource Management Department of Monash University, Melbourne, Australia; School of International Business, Southwestern University of Finance and Economics, Chengdu, China is a very expanding body of studies. It has shed light on the motives, entry strategies and performance of internationalizing Chinese firms across different forms of ownership. The studies often adopt an institutional, cultural or strategic management view in their research though there are limited detailed studies of high-tech firms in highly competitive industries such as a telecom industry. According to [Chi05]Among the developing countries, China is currently the most active internationalizing economy. It is about the ability and determination of Chinese firms to address their international competitive weaknesses, moreover, the strategies they employ to do so. Studying internationalizing Chinese firms, therefore, offers an opportunity to extend existing IB theories. Emerging studies on human resource management of Chinese multinational corporations have observed how human resource practices in the Chinese subsidiaries overseas may differ from those in their parent company in China and those adopted by local firms in the host countries. HR capabilities of Chinese firms are considered underdeveloped and heavily prejudiced by the Chinese cultural traditions since there are few Chinese companies that are seen to be truly internationally competitive. I preferred the telecom industry as it is a knowledge-intensive sector that has not only a relatively high level of global competition hinged on rapid technological innovation but also global integration and resource sharing in for example market, technology, business process, among competitors so that they can remain competitive by complementing each other’s strengths. Motives that drive the internationalization of Chinese telecom firms is one of the research questions that guide this study. According to [Buc], there are four main motives for FDI, which are: efficiency-seeking, resource-seeking, asset seeking and market seeking. Outward direct asset (ODI) from emerging countries is directed towards other developing countries. As internationalizing firms from developing economies become more established in their developing country markets, they increasingly target investment opportunities in more advanced economies. Liabilities of Foreignness are one of the studied in the IB field. It explains that Internationalizing firms are believed to face a number of challenges associated with their foreignness. These challenges include regulations, policies and unfamiliarity with the host country’s culture, language among others In order to reduce liability of foreignness, firms need to implement various practices such as employing local staff, adopting local practices and becoming ‘isomorphic’ with the host country environment to gain legitimacy and increase the MNC’s prospect of long-term survival and business success According to[Wri], studies on LOF have primarily focused on MNCs operating in developed countries. In this, Chinese firm has several significant challenges that may affect their ability to implement their internationalization strategy successfully. These challenges include capital constraints, insufficient technical and management competence and low-quality products. Chinese firm implements the strategy of institutional and political perspectives and linkages to overcome liabilities of foreignness. This issue is of particular importance in other developing countries. Institutional theories of the strategic choice of MNCs in host countries emphasize on the institutional constraints imposed upon firms, particularly those in emerging economies where governments carry on to have significant involvement in business affairs. It is the political perspective, one which is beginning to gain attention in IB studies that ‘regards firms as the International Journal of Human Resource Management 1835 having a potentially proactive role in relation to their environment.’ Strategic HRM, social capital, and competitiveness is the other strategy to overcome liability of foreignness. Scholars on international HRM argue that HRM plays an increasingly important role in supporting MNCs’ business plan and subsidiary performance. According to [Jon14], social capital is ‘the goodwill accessible to the people. Its foundation lies in the structure and content of the actor’s social relations. Its sound effects flow from the information, influence, and solidarity it makes available to the actor Research method The research method adopted in this case study is data collection to achieve an explanatory study. The reason being that case studies allow a deep exploration of how the market and the institutional contexts in which MNCs are embedded inform the way they operate, and permit an exploration of the interaction between actors at a range of levels according to [Coo12] In this particular case study, semi-structured interviews were conducted with a total 33 employees, whereby 21 were at managerial level of Huawei and ZTE. This research carried out between the year 2007 month of December and October2009, 18 informants came from Huawei and 15 from ZTE. Access to the 33 sources was gained through personal contacts. Interviews were carried out individually over the telephone or face to face by the author. Findings and analysis Background of Huawei and its international expansion has the information that, Huawei has developed into a leading supplier of next-generation telecom networks and currently serving nearly three-quarters of the world’s top 50 operators. It has It has operations and representative offices in more than 100 countries and regions around the world which serve more than 1 billion users. Approximately three-quarters of its sales come from the international market. This company invests 10% of its revenue in research and development, in which 48% of its 62,000 employees are deployed. It has over 20,000 patents and has set up at least 12 R&D centers in dissimilar regions of the world to strengthen its position in the region and customize both products and services. Huawei grows into an active firm first in the home market, and then it branches out to other developing countries to avoid competition with the industry’s giants as it builds up its expertise before entering developed economies. Huawei first entered the African market in 1998 and has now representative offices and technical service centers in over 30 countries across the region. By 2007, Huawei employed over 2500 employees in Africa, out of which more than 60% were host country nationals. Huawei’s overseas sales had surpassed that of the domestic market whereby in the year 2006, its sales revenue was US$11 billion. Global business strategy is adopted by Huawei Company to help resolve issues regarding internationalization. Its organizational structure is led by its strategy and marketing department. The vital components of its business plan are innovation, high quality, and low cost and excellent customer service by giving top priority to meeting customers’ requirements to enhance its competitiveness and profitability. Other companies should adopt this to help them face the issue of internationalization. To provide good customer services, Huawei’s customer focus strategy is achieved through active engagement with clients. These include setting up training centers globally to provide training to customers and inviting potential trades and businesses to Huawei’s headquarters for training and inspections Challenges to developing the international market and strategic responses are issues that human resource managers face in the process of internationalization. Other companies need to adopt strategies just like Huawei has taken a number of strategic actions to help them overcome issues regarding internationalization process. These strategies are: Developing and deploying political capital Huawei relies heavily on their political capital not only in developing the firm in China, but more importantly in developing their overseas markets, particularly in developing countries. It is dark tie with the army provides the necessary political patronage and R&D partner that have played a crucial role in Huawei’s rapid expansion, first domestically and then globally. When the Chinese government leaders visit other developing countries, they are often accompanied by the senior management team of Huawei where the company use the opportunity to donate their products to the host countries to develop good will that may lead to significant business opportunities, often with the national government of the host countries. Partnership with local firms and universities is the other matter. Just like any other HRM of a company working towards facing the issue of internationalization, both ZTE and Huawei make effort to develop a partnership. They also develop joint training programs with universities and national telecom companies in developing countries to help them develop an IT skill pool. HRM has it that that these training investments are more intended for gaining local acceptance of the firms than for human capital return. Improving management process Huawei HRM employs prestigious MNCs to improve its internal management system. This enables Huawei to adopt advanced management techniques used by leading MNCs and bring itself closer to the global players’ standards. It also includes adopting management practices that are not commonly used by Chinese enterprises, such as outsourcing. Customer focus and precautions action are critical company ethos have been the primary driving force in the company’s quality management system, which includes a range of international quality insurance accreditations. This is HRM function. Deployment of human capital and social capital. Having HCNs as managers are seen as a more efficient way to communicate with local staff that has evidence from Huawei Company. HRM from Huawei revealed that its long-term staffing intent was localization, with a motto: ‘internationalization through localization’. However, key and high-risk positions, such as finance and purchasing, are likely to be staffed by Chinese in the foreseeable future in order to avoid local collusion. . Cost leadership This plays a significant role in both firms’ business strategy that enables them to win contracts. Companies should target developing countries first to open the market considering that developing countries are poor countries and sensitive to price. Just like Huawei, the company should not aim at making the profit in such poor countries as they should even give their products for free in order to develop their market and build up their confidence. It must be noted that the tax refund policy operated by the Chinese government to support strong Chinese firms to compete internationally has played a crucial role in both firms’ low pricing strategy However, the Chinese government has been facing increasing pressure from its trading partner countries and the WTO to reform its tax refund policy[Ian04]. In conclusion, in order to develop a comprehensive understanding of the internationalization of the firms, there is need to investigate their motives, entry strategy, challenges they encounter and their responses to overcome them, and the likely spillover effects. These aspects of internationalization interact and shape HRM strategy and outcome not just for the firm but also for the host countries. Just like Huawei, companies should collaborate with local institutions and other actors in the host countries to legitimize their presence and embed themselves. In order to adequately face the issue of internationalization, every firm should ensure that, they identify their leadership capital, assess bench strength and skills gap, and regularly recruit, advertise their posts internally, Institute succession planning and most importantly Challenge and retain their talent. Reference lists. Chi05: , (Child, 2005, pp. 381-410.), Buc: , (Buckley, 2007, pp. 499-518.), Wri: , (Wright, 2005, pp. 1-33), Jon14: , (Jones, 2014, pp. 473-485.), Coo12: , (Cooke, 2012, pp. 1832-1852.), Ian04: , (Ianchovichina, 2004, pp. 3-27.), Read More