Finnish Company's Challenges and Solutions in Governing the Local Relations in China
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Helsinki University of Technology |
Diplomityö
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Date
2008
Department
Major/Subject
Yritysstrategia ja kansainvälinen liiketoiminta
Mcode
TU-91
Degree programme
Language
en
Pages
117
Series
Abstract
More and more Finnish started their operation in China in the form of joint venture or exclusively owned company after the Chinese government started the economic reform since the late 1970s. The institutional changes lead to privatization of enterprises and FDI increase. China's changing institutions and unique culture present their challenges for the Finnish companies. This study is written for CEMAT (The Center for Markets in Transition), Helsinki School of Economics. It discusses the challenges the Finnish companies face when they manage the social relations in China and the possible solution. The research question of the study is "What challenges and solutions exist for Finnish companies in China regarding the governance of local relations in the changing business environment?" Answering the question would help Finnish companies understand China's institutional environment, identify the common problems and take actions to solve the problems. The objectives of the study are:. 1. To review the literature regarding the social governance of the local relations and develop the framework for the study. 2. To review the recent business research about China's business environment to identify the challenging areas regarding the governance of the social relations in China for the western companies. 3. Based on the interview results to find out and present the main challenges the case Finnish companies face when they handle the local relations in China. 4. Based on the interview results to find out how the case Finnish companies solve the challenges. The study framework is developed on the institutional theory, governance approach and culture perspective. After reviewing the literature about business environment in China, the author identifies possible challenging areas regarding Finnish companies' relations with the public sector, the employees, and other companies in China including customers, subcontractors and competitors. The empirical results confirm most of the challenging areas found in the literature. Regarding the state relations, challenges arise mostly in bureaucracy, unclear and changing law and regulations, and difficulties of developing governmental relations. Challenges in employee relations occur in the area of finding and keeping employees, increasing cost and different working practices. With enterprise relations, challenges are exhibited in the areas of role of contract, building trust, IPR protection, public relations and communications. To overcome the challenges, Finnish companies need to recognize the changing formal institutions-fast changing law and regulations-led by the Chinese government, evaluate the implication of the changes and take actions. Using local trustworthy employees with both cultural backgrounds would benefit to develop relations with the government officials and other companies, and communicating with the local employees. Choosing the form of exclusive ownership, Finnish companies would have control over their business. Enhancing brand image would improve the product competitiveness and employee loyalty.Description
Supervisor
Keil, ThomasThesis advisor
Teerikangas, SatuKeywords
Chin, reform, institution, enterprise, employee, state, governance