The Chinese firms have been internationalizing because of the motives both at the firm level and the national level. At the national level, the government’s intent to become the economic superpower and to utilize the foreign exchange reserves drove the Chinese firms to seek overseas opportunities. At the firm level, the Chinese firms were motivated to internationalize in order to acquire resources from the western countries in the form of knowledge, products, technology and strategic position to secure raw materials. However, they ventured into foreign markets without preparing themselves for the challenges that lie ahead.
The first and foremost challenge is the Country-of-origin (COO) perception which lends a negative brand image in the minds of the consumers. Other challenges faced by Chinese firms include system inefficiency, technical challenges and capital constraints. Because of the cultural heritage there is excessive government intervention and bureaucracy. The Chinese managers have limited understanding of the local tastes, habits and preferences. They lack in service efficiency and they are conservative in spending on advertising and promotional activities.
An evaluation of the theories and the strategy adopted by Haier can help the Chinese companies achieve competitive advantage. Findings reveal that the Chinese companies have to recognize that competitive advantage should be initially built on a smaller scale as small companies are better positioned to understand and satisfy customer needs. ...Show more