The Challenge for Multinational Corporations in China: Think Local, Act Global – A Summary
When multinational companies (MNCs) started to get entrance into the Chinese market, they were received with open arms. This includes them enjoying government privileges other local companies were not entitled to. The Chinese consumers also preferred goods from the MNCs, and not their local companies. This however, took a twist when in the year 2000, when the per capita GDP rose in the country to $1,000. The perception of the Chinese toward the MNCs changed further when China became a member of the World Trade Organization in 2001. Their earlier privileges were withdrawn, as even the Chinese started to embrace their local companies. Conditions ever since have become tight for the MNCs, as they are now expected to strictly adhere to the Chinese standards in their businesses.
Although the MNCs have positively contributed to the Chinese economy, much of their challenge lies in adapting to the local Chinese expectations in their business practice. For instance, being aware of the kind of advertisements to use, which will not be considered offensive by the local Chinese people. Most MNCs have difficulty understanding the expectations the Chinese have of them, since the Chinese are sensitive people, with respect to moral integrity and social prestige.
For the MNCs to survive in China, they must “think local and act global,” meaning they should conduct their business according to the local Chinese culture and norms, while maintaining international business standards. The MNCs must follow the Chinese laws, while respecting and not breaking the rules. In addition, Chinese observers hate it when MNCs buy local companies, only to destroy them. They view this as a liquidation tactic. Using China as a lab by MNCs is highly detested. More technology is tested in China considering that it is cheap, yet very few is transferred there. The Chinese view this as being used for MNCs selfish gains. If an MNC observes these, among other issues, it is likely to survive in China.
The MNCs in China therefore, have to adapt to the Chinese behavioural standard, even as it changes each year. This requires an MNC in China to have qualified managers that can balance between thinking local and acting global, for the good of the company. Conditions in China are tough, therefore, all MNCs have no choice but to adhere to the behavioural standard and perform their part as the Chinese expects them.
Park, Seung Ho and Vanhonacker, Wilfried. “The Challenge for Multinational Corporations in
China: Think Local, Act Global.” MITSloan Management Review, 48.4 (2007): 1-11.
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