List of Considerations
The establishment of a foreign office is a complex and sophisticated issue that might demand consideration of critical factors that will impact its functioning. First of all, top management should consider the existing legal and regulatory barriers to further evolution as they might be narrowing opportunities for future growth. The laws peculiar to the targeted location should be studied to understand all the prospects for the development and outline the strategy of the cooperation with the local authorities (Griffin & Pustay, 2014). These regulations can also impact taxation and development policy, which are the fundamental elements of any foreign office functioning.
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Second, the peculiarities of local culture should be taken into account. In accordance with the modern approach to management, the creation of a beneficial atmosphere is central to the success of any business venture (Kotler & Armstrong, 2015). For this reason, the improved knowledge of people’s peculiarities might help to attain better performance levels of locals hired as employees (Hill & Hutt, 2016). Additionally, accepting the fact that a foreign office will provide its services for the residents of the area, their needs should be taken into account because of these people’s potential to become clients. It will help to understand the existing requirements better and achieve higher satisfaction levels.
Finally, the existing restrictions or sanctions should be evaluated. The fact is that the Chinese government regulates all foreign investments in the country. For this reason, to go globally, the U.S. company should investigate the 2015 Catalogue of Sectors for Guidance of Foreign Investment to ensure that the planned operations are encouraged, and there will be no barriers to further growth (Gad, 2019). These aspects are essential for the final success and effective work of the foreign office.
A joint venture can be determined as a sort of business alliance in which the main parties come to a conclusion to pool their resources to accomplish a specific task or achieve a certain goal. Regarding the planned expansion and the opening of a foreign office, it becomes the most advantageous strategy if compare with using local distributors. First of all, members of this agreement collaborate for a particular purpose, while partnership presupposes that the whole business should be run together (Kotler & Armstrong, 2015). It becomes an inappropriate option for the company because of its own interests and the existence of target markets in the USA.
Moreover, each party of the joint venture agreement preserves its right to ownership of its property. It means a significant reduction of risks and possible problems associated with the failure and the need for the redistribution of utilized resources or some compensations. Additionally, both parties will share existing risks and costs to become more effective and achieve the planned goals (Kotler & Armstrong, 2015). It transforms into a serious advantage promoting the success of a joint venture and contributing to the generation of stable revenue.
Finally, the increased flexibility of this sort of alliance can become another positive factor preconditioning its choice. There can be a limited lifespan of the joint venture needed only to accomplish a certain task (opening a foreign office) and attract attention to the main activities of the company. Under these conditions, the given type of deal becomes preferable considering the peculiarities of the existing purposes and all risks that can emerge because of this very process. It provides the needed level of safety and flexibility important for running the business globally and achieving success.
Regarding the main objectives, the following business plan can be offered.
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- To open the U.S.-based software development company’s foreign office in China via joint venture;
- To provide high-quality services to clients in China;
- To achieve success during the first two years;
- To generate a competitive advantage to overcome rivalry.
The mission is to provide outstanding and effective software solutions to local people. This goal can be achieved by guaranteeing the maintenance and support to clients along with the provision of only innovative solutions to help clients to attain high-performance levels and benefit from using the company’s services. The well-being of customers will be cultivated by a respectful attitude and reliable products.
Strategy and keys to success:
- Engagement in cooperation via joint venture agreement;
- Creation of the positive image of the company;
- Cooperation with the local authorities;
- Provision of outstanding services that were previously not available to clients;
- Appropriate growth in the next two years;
- Creation of the basis for further expansion;
- Choice of effective locations to ensure the increased demand for the provided products;
- Investigation of the target market with the primary aim to provide the most demanded solutions.
Considering the nature of the company and its main goals, a specific business goals timeline can be offered:
|1-3 months||Establishment of the foreign office. Organizational activities. Engagement in a joint venture agreement|
|3-9 months||Promotion of company’s services and active customer’s attraction|
|9-12 months||Stable functioning, compensation of all spending demanded to open a new office. Extension of the client base. Increase in the number of sales.|
|12-15 month||Generation of competitive advantage. Stable client base. Opportunities for further expansion|
|15-18 month||Achievement of optimal performance levels considering the current level of rivalry and demand for the provided services and products.|
|18-24 moth||Popularization of the brand, search for new partners to stimulate future development. Stable and high incomes.|
Profit Opportunities and Risks
At the moment, the Chinese market offers multiple profit opportunities to potential investors or companies that want to open new business ventures here. First of all, the emergence of a giant middle class in the recent few decades means multiple opportunities for companies as these people can be seen as potential clients who will be provided with various products and services. Additionally, there is also an elite, or the representatives of the wealthy class, who might be interested in exclusive and expensive offerings (Monk, 2018). Finally, the high speed of the Chinese economy’s growth will mean that its market will continue to evolve and attract investors, which is critical for success. These factors precondition the existence of multiple opportunities in the next two years in terms of the company’s development.
However, there are also certain risks that should be considered. There is strict control of particular spheres by the government. It means that the introduction of sanctions or penalties in the next two years might precondition the decreased opportunities to generate profit and empower the company’s positions. Additionally, there are some tensions with the U.S. government that might also stipulate the appearance of additional sanctions or regulations that will have a negative effect on the overall economic situation and opportunities to earn revenue (Monk, 2018). For this reason, there are both risks and opportunities that come from the peculiarities of the local market and should be considered by the company running globally.
Gad, S. (2019). Investing in China. Investopedia. Web.
Griffin, R., & Pustay, M. (2014). International business: A managerial perspective (8th ed.) New York, NY: Pearson.
Hill, C., & Hutt, T. (2016). International business: Competing in the global marketplace (11th ed.). New York, NY: McGraw-Hill Education
Kotler, P., & Armstrong, G. (2015). Principles of marketing (16th ed.). New York, NY: Pearson.
Monk, E. (2018). China: Big opportunities, big risks. Fidelity International. Web.