Strategic Asset Seeking. Chinese Business Groups and their Differences Essay

Strategic Asset Seeking. Chinese Business Groups and their Differences in Oversees Expansions - Essay Example Initially, the strategy of FDI targeted the developed countries, but with the improved technology, research, and development there has been impressive expansion of foreign investment in the developing countries, which contributes to the continued integration and growth in the global economy. However, as foreign direct investment increases and promotes the local communities and governments, the investors are driven by a certain motive; either to seek market, resource, efficiency, or for purposes of strategic assets as an opportunity in a foreign nation. Strategic asset seeking FDI aligns itself for reasons of achieving competitive advantage in the long run. According to Wigdor, its main purpose is to acquire resources or skills which the investors are convinced will offer, secure, and enhance the firms and its products competitive advantages.This type of FDI occurs at various locations to grasp the opportunities of the existing expertise and held knowledge to experience the benefits o f the long term strategic objectives. Sauvant argues that it occurs when firms Trans-nationalize, obtaining proprietary assets of a foreign company wholly or partially, which narrows down to strategic alliances, mergers, and acquisitions. It also occurs when access to local distribution systems, recognized brand names, and managerial practice and expertise are improved by means of proximity of operations, or direct purchases.2 Transnational companies have formed alliances with local companies in different industrialized nations and the global south, not only to respond to the changing market conditions, but to also access the intangible assets in the foreign land, while facilitating development. Sometimes the assets are not directly transferrable through the existing market transactions, hence given that they are characterized of being exploited in their host countries, companies that are willing to access the assets can either invest in the host country, where the assets are create d via the acquisition of the core personnel, or joint ventures that provide a better opportunity of technological exchange and collaboration. This is how foreign companies can tap into the resources and use them into their production processes. Chinese Business Groups and their Differences in Oversees Expansions China has a tremendous structure of business organizations and government enterprise relationship. In the context of the Chinese business groups, State owned enterprises seem to have a founded relationship with the major economic and market institutions of China, which enhance their successful operations and market dominance. With the numerous changes in the world and China’s economies, business organizations in China have evolved. Today, its business groups not only consist of SOEs and Private enterprises, but the foreign funded businesses as well. Like their Korean and Japan counterparts, Chinese Business groups employ the network based group structure, expanding in to different areas and industries, while being backed up by the government in various ways, and under strict management of their established financial companies that provide finances to the member firms.3 There are also affiliated companies to the Chinese business groups (qiyejituan), which bear the costs and benefits accrued from the association. With regard to the economic reforms that began in the late 1970s, China’