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. They can overcome the negative impact of COO by building a global brand through imagery, logos, slogans and other branding elements. Developing own brand is essential for emerging MNCs as they can face extinction against global companies if they enter the foreign market as the OEM. Targeting the lowest price position can ruin the brand image. Focusing on CSR activities to enhance the brand image can bring them at par with global brands. Incremental and sequential growth should be the strategy to enter foreign markets. Once established in the target market, the Chinese firms can then enter through mergers and acquisitions. The Chinese companies should not focus on ownership as a pre-condition. Entering through alliances and joint ventures, help in controlling costs and enhancing learning opportunities. Overall, the study concludes that Haier pursued a different strategy for internationalization which other Chinese firms can emulate. Effective leadership, combined with global strategy of incremental growth, branding and innovation with investments in technology and developing core competencies can help the Chinese firms overcome the negative impact of the COO and compete against the global companies. The study concluded by suggesting other areas of research on the subject. Table of Contents Chapter I Introduction 1.1 Background 1 1.2 History of competition 3 1.3 Competitive advantage 3 1.4 The Chinese economy and the MNCs 4 1.5 Rationale for the study 5 1.6 Research aims and