How does political, economic and social transformation in China challenge the market for MNCS, and to what extent does this affect the strategic focus of MNCS

Kristina Wendt

Student thesis: Master thesis

Abstract

In recent years, China has experienced extraordinary growth and political, economic and social transformation. Simultaneously, for the past three decades, MNCs have poured into the country, looking for a market with great opportunities to sell and/or produce their products and services. Yet, many companies shy away from doing business in nations like China or decide to divest. None of these exits was by accident, but rather a result of the interaction between firm-specific and market-based factors. This thesis sets out to investigate China’s effect on MNCs, guided by the research question: How does political, economic and social transformation in China challenge the market for MNCs, and to what extent does this affect the strategic focus of MNCs? While most of the existing literature has focused almost exclusively on firms that have successfully entered the Chinese market, this thesis instead seeks to investigate a wider array of dimensions and indicators concerning MNC strategies in China and discusses the interconnectedness and implications of these factors. It is clear that a growing number of firms have experienced failure and subsequently switched strategies or withdrawn from the market. It will be argued that MNC entry and exit to China is due to a large extent to the political environment. However, there are reasons to believe that cultural barriers, imbalance between autonomy and control in leadership as well as insufficient observance of consumer preferences on the part of MNCs have also played a significant role in driving MNCs out of the country. Strategic implications suggest that a ‘think local, but act global’ approach on the part of MNCs is needed. Employing local and global management and adapting to local needs as well as entering via a joint venture are strategic changes that could be implemented. If MNCs aimed for successful adaption to China’s environment, a smooth settle rather than harmful or continuous challenges could be achieved.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages79