Impact of International Joint Ventures on Organizations in China

This essay discusses the impact of international joint ventures on organizations in China, focusing on the issues faced due to cultural differences and the development of competitive advantage. It also explores the importance of cultural dimensions and the legal culture in China for international corporations.

Running head: GLOBAL BUSINESS MANAGEMENT
GLOBAL BUSINESS MANAGEMENT
Name of the Student
Name of the University
Author Note

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Introduction
As discussed by Alon et al. (2016), international Joint Ventures or IJVs are mainly
developed when two organizations are able to develop a partnership based on their operations
in two or more than two countries. The company mainly aims at exploring the international
trade based activities that have an impact on the cross border based business transactions. The
options based on the proper development of the joint ventures are mainly related to the
minimisation of risks and the acquisition of business operations as well (Beugelsdijk et al.,
2018). The development of international business operations is based on the effective
performance of due diligence on foreign countries. The risks that are a part of the operations
of different international organizations are minimised in an effective manner with the help of
cross-border based business transactions. The IJVs are able to provide major levels of support
to the companies based on the proper development of strategic alliances that can help in the
development of a sustainable competitive advantage (Clampit et al., 2015).
The essay will be based on the development of international joint ventures and their
impact on the ways by which the organizations are able to develop their positions in the
industry. The issues that are faced by the organizations based on cultural differences that
exist between the two countries will be discussed in the essay in detail (Connelly et al.,
2018). The analysis will be based on the issues that have taken place in the organizations that
operate in China and the other countries. The development of competitive advantage by the
organizations in the industry is considered to be an important part of the process of
international joint ventures that have been developed by the international organizations in
different parts of the world (Cuervo-Cazurra, 2016).
Importance of the issues

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As discussed by Dai and Nahata (2016), the development of joint venture mainly
implies that the firms need to cooperate with the partners who different cultural backgrounds.
The organizations that enter different countries with the help of international joint ventures
have different advantages in comparison to the wholly owned subsidiaries in different parts
of the world. The IJV mainly allows the organizations to share the different risks and costs
based on foreign entry and also to use the knowledge that has been gained by the knowledge
of the local partners (Del Giudice et al., 2017).
As argued by Deresky (2017), the local needs and tastes of the consumers and the
business practices. The IJVs on the other hand are also able to entail the levels of risks based
on the potential problems based on proper levels of cooperation with the partners. The
national culture is able to affect the ways by which different organizations are able to operate
and maintain the levels of profitability as well. Different ambiguities have been developed in
relationships due to the high levels of cultural differences (Gnyawali et al., 2016). Some of
the differences that exist in the cultural backgrounds can have an impact on the ways by
which the organizations are able to develop their positions in the industry. The national
culture on the other hand can be quite disruptive for the maintenance of the operations of
international joint ventures (Hitt, Li & Xu, 2016). The study based on the differences that
exist between the national cultures is based on the proper implementation of Hofstede’s
model. The research based on five dimensions of Hofstede’s model has been based on the
analysis that had been carried out between the years 1967 and 1978 (Jones, Harrison & Felps,
2018).
The survey was mainly based on the ways by which foreign subsidiaries that have
been developed by IBM. The national cultural differences had mainly taken place in different
countries based on the five major dimensions that have been developed by Hofstede. The
different aspects of Hofstede’s cultural dimensions mainly include, power distance,

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uncertainty avoidance, masculinity and individualism (Koch et al., 2016). The dimensions are
able to provide a major explanation based on the ways by which different aspects of the
national culture are able to affect the levels of operations of the international organizations.
The researches that have been made based on the analysis of international business operations
have a major impact om the international business operations (Le Nguyen, Larimo & Ali,
2016).
As discussed by Leonidou et al. (2017), the concept of cultural dimensions is able to
affect the analysis that is based on the proper operations of international organizations in
different parts of the world. The survival of the business in the international locations are
totally based on the effective levels of cooperation of the organizations that has been
developed in different parts of the world (Li et al., 2016). The two aspects based on the power
distance and the individualism are related to the issues of internal integration and ways by
which the relationships with the personnel that have been developed. The US multinational
organizations have not been able transfer the cultural values based on the power distance and
the levels of individualism in different countries (Mamic, 2017).
Literature review
As discussed by Mata and Portugal (2015), the reforms had taken in the People’s
Republic of China or PRC economy from the year 1979. The growth that has been
experienced in the economy of the country is considered to be the direct result of opening of
different Chinese economies to the foreign investors. The joint ventures in China have been
able to gain about two-thirds of the 300000 foreign investment based projects that have been
approved in an effective manner by the Chinese authorities (Reilly & Williams, 2016). China
is a major country that has been able to attract the foreign investments from different parts of

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the world. The development of China was pushed in a huge manner even during the recession
period that had taken place in the year 2008 (Shu, Jin & Zhou, 2017).
As argued by Skarmeas, Zeriti and Baltas (2016), the major reason that is provided by
the organizations to enter China is based on the ways by which they can gain access to the
huge labour market in the country. The cultural values that have been developed by the
country are able to play a major role in the ways by which different activities have been
performed. The active ventures are able to provide major levels of support based on the
development of the operations of the global organizations (Tidd & Bessant, 2018). The
market of China can be mainly divided into three different parts that include, private
corporation, collective corporations and the state-owned corporations. The companies have to
implement different types of regulations in order to maintain the levels of operations in an
effective manner (Tsang, 2016). The privately owned enterprises or POEs are considered to
be the small organizations that are a part of the service sector. The state owned enterprises on
the other hand low cost based finances and the implementation of new technologies as well
(Yan & Luo, 2016).
As discussed by Mata and Portugal (2015), the levels of control are able to affect the
enterprises in an effective manner. The overall record based on the reforms had started taking
place in the year 1979. The real annual GDP of the country had been able to depict high
levels of growth every year. The home market of China has depicted strong levels of growth
in different segments based on the operations that are maintained by them. Different
industries are able to play a major role in the ways by which the Chinese market is able to
depict high levels of growth (Tidd & Bessant, 2018). The decline in levels of demands had
started in the year 1997 due to the Asian financial crisis. Massive levels of infrastructure
investments have been made by the country due to the vast expansion levels of different
industries that include, highway, telecom and the water management based systems as well

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(Shu, Jin & Zhou, 2017). The development of the mid-sized Chinese organizations and the
ways by which they are able to take part in the international joint ventures have been able to
play a major role in the economic growth. The joint ventures that have been developed
between the German organizations and Chinese multinational organizations have been able to
play a major role in the growth of the country (Le Nguyen, Larimo & Ali, 2016).
As discussed by Dai and Nahata (2016), the culture that has been developed in the
country is considered to be an important part of the operations global organizations.
Confucianism is considered to be an important part of the culture that is followed in China.
The Chinese communities that are a part of Southeast Asia and other parts of China are based
on the cultures of Korea and Vietnam. The national language of China is Mandarin. The
importance and spread of the various dialects are based on the different cultures that are
followed in the country (Le Nguyen, Larimo & Ali, 2016). The writing in Chinese language
is sometimes described as non-phonetic and ideographic. The critical meaning of the Chinese
language is able to play a major role in the ways by which the organizations can maintain
their culture in China. The religion that is followed in the China is Buddhism (Hitt, Li & Xu,
2016). This is considered to be an important part of the culture that is followed in the country.
Chinese school of thought is considered to be highly important for the ways by which
international organizations can maintain their position in the industry. The value that are
followed in the country are able to play a major role in the proper development of operations
(Jones, Harrison & Felps, 2018). The policy shifts that have recently taken place in the
country based in implementation of values are mainly based on three major reasons,
 The development of values is mainly based on the proper formation of a state
doctrine that is considered to be the base of different decisions that are made
by the organizations.

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 The values are able to represent a part of the official language that is followed
by the employees on an independent basis. The behaviour of individuals is
influenced in a huge manner due to the usage of this language (Hitt, Li & Xu,
2016).
 The contrast that is depicted in the socialist countries have an impact on the
organizations that have their base in Eastern Europe. The organizations are
able to maintain their operations in an effective manner with the support that is
provided by the values that are embedded within the culture of the country
(Del Giudice et al., 2017).
As discussed by Alon et al. (2016), the legal culture that is formed by the organization
is considered to be an important factor that is able to affect the international corporations that
enter the country. The laws based on civil rights are able to the fulfil the requirements of the
foreign investors have been developed by the country in an effective manner. The law based
on Equity Joint Ventures had been implemented in the year 1979. Another major specialty of
the Chinese legislative framework is based on the ways by which different acts have been
implemented by the government in order to facilitate the entry of international organizations
(Le Nguyen, Larimo & Ali, 2016). The security that is required by the company is mainly
based on the proper development of legal framework in the country. The major aim of the
government is to develop a normative legal framework like that which is followed in Europe.
The parallel intern regulations based on Chinese bureaucracy have an impact on the
operations of the international organizations (Skarmeas, Zeriti & Baltas, 2016). The contracts
and laws that have been developed by the government of the country has been able to major
levels of support to maintain the levels of diversity and the intercultural issues that have been
faced by the organizations. The socialist economy that has been developed in China is mainly
influenced by the thoughts of different individuals like, that Of Marxism-Leninism, Of the

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communist party, Of the state planning and Of the equal distribution of levels of income (Le
Nguyen, Larimo & Ali, 2016).
The development of local partners is considered to be quite critical for the newly
emerging countries or economies. The major problems can take place due to the
implementation of structural reforms in an effective manner. The government has also
blocked the adjustments in the structure that has been formed in the market. The
multinational corporations that operate in the country are affected in a huge manner by the
government contracts that have been developed (Dai & Nahata, 2016). The development of
partnerships in China is mainly based on the formation of IJVs that can help in the proper
reduction of costs. The selection based criteria and the importance of different criteria is able
to affect the operations of the multinational organizations (Skarmeas, Zeriti & Baltas, 2016).
Analysis
As discussed by Tidd & Bessant, (2018), the population levels of China have been
able to affect the ways by which the international organizations can reduce the levels of costs
based on their operations. The growth of population each year has been able to play a major
role in the development of the labour market in the country (Skarmeas, Zeriti & Baltas,
2016). The major concern that is currently being faced by China is based on the ways by
which an effective quality of life can be provided to the people in the country. The efforts
related to the reduction of population growth can play a major role in the future growth of the
economy of China. The ethical factors that are a part of the culture of the organization have
an impact on the culture that is developed in the country (Shu, Jin & Zhou, 2017).
The development of Chinese values is considered to be highly complex in nature.
Although high levels of diversity have been developed in the country, some of the major
characteristics have been implemented for the operations of different organizations. The

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collectivist characteristics are an important part of the society of the country. The
organizations that are a part of the country have been influenced in a huge manner by the
cultural values that are developed in China (Jones, Harrison & Felps, 2018).
As discussed by Mata and Portugal (2015), the Chinese organizations have started
facing major levels of cultural shocks ion different foreign markets. The slower growth of
economy in the last few years and the rise in labour based costs have proved to be major
issues that have an impact on the organizations. The Chinese companies in this case have
started facing issues based on the trade unions that have been developed in various
organizations (Le Nguyen, Larimo & Ali, 2016). The successful business operations have
been affected in a huge manner by the political connections. The Chinese entrepreneurs have
faced major levels of issues based on the mistakes that had been made by them and had
proved to be costly for the company. The outward investments that have taken place in China
are considered to be higher in comparison to the inward foreign investments that have been
made by the international organizations (Leonidou et al., 2017).
The US based organizations that have entered China have faced major levels of issues
based on the culture that is followed. The Chinese organizations that are a part of the industry
have faced major levels of issues based on the damage claims that have been made. For
example, a state-owned organization in Texas named Aviation Industry Corporation of China
has been sued by an organization named Tang Energy for cheating on the deals that have
been developed (Le Nguyen, Larimo & Ali, 2016). The cultural values of Chinese people
have been able to play a major role in the ways by which the organizations have been able to
maintain their operations. The US based organizations have thereby faced major levels of
issues based on levels of ways by which Chinese people behave. Apple is another example of
a major US based organization that has faced cultural shock based on the cultural aspects.

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The cultural values that are followed by the employees in China have a major impact on the
operations of Apple in the technology industry (Mata & Portugal, 2015).
Concluding recommendations
The essay can be concluded by stating that the cultural values that have been
developed in China are able to affect the ways by which the international organizations are
able to maintain their operations. On the other hand, the Chinese organizations have also
faced major levels of issues based on the ways by which different activities can be performed
based on the proper improvement of the levels of operations in the country. The cultural
values are considered to be important aspects based on the ways by which the organizations
are able to develop the levels of revenues in an efficient manner.

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