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1. Introduction
With the encouragement of the government policies and the development of the national economic, many Chinese enterprises now have begun to pursue new foreign direct investment. This case has described TCL, Lenovo, BENQ’s acquisitions and takeovers in the west and shows the importance of decision making and management skills during this transcultural management process.
2. Response to the questions
Reasons of Chinese investment in the West its problems
The reasons why China has sought to invest in the West can be divided into several aspects. Firstly, domestic market has been saturated; therefore, China had to seek to invest in the West so as to solve the problem of overcapacity. Moreover, China could obtain more market share in the West through global investment while niche market would also be available to China in the West. Furthermore, economies of scale would be formed through the distribution both in domestic and abroad and as a result Chinese companies could reduce operating cost and earn more profits. Fourthly, investing in the West is a wise option to avoid anti-dumping measures. It is the evidence that Schneider Electronics AG of Germany is acquired by TCL in September 2002. Last but not least, through merger and acquisition of a global brand, Chinese companies could be acknowledged by local customers easily and then attract them with the image of original brand. In addition, a Western company is more mature than Chinese one; hence it is a good chance for Chinese companies to learn advanced technologies and skills from Western companies. Overall, the investment in the West could bring about mutual prosperity for both China and West.
When it refers to the problems posed by further investment, cultural difference is a main factor, which then would result in adaptive problems. It is mainly reflected in the operations after merger and acquisition. Take TCL for instance, the integration between TCL and Thomson is painful since the former was characterized by its flexibility while the latter emphasized procedures and systems. To Lenovo, the American style of communication is a major challenge. On the other hand, IBM measures outcomes whereas Lenovo controls both the process and outcomes. As to BenQ, Siemens’ manual reporting system made it hard for BenQ to oversee the business situation in Germany in real time. In addition, human cost is another major concern for both Lenovo and Siemens as the average annual salaries of original companies are at least three times of Chinese ones.