Strategic Management of the China Venture (review)

Reviews 539 Paul Steidlmeier. Strategie Management ofthe China Venture. Westport, Connecticut: Quorum Books, 1995. xi, 240, pp. isbn 0-56720-001-x. As the largest developing country and now fastest-growing economy in the world, China continues to attract a large amount offoreign direct investment (FDI) and has currentiy become the second largest FDI recipient in the world, surpassed only by die United States. The Chinese market, however, although extremely promising, can present daunting challenges to the unwary investor. Success in China requires an understanding ofthe unique environment and the adoption of a realistic investment strategy. In Strategic Management ofthe China Venture, Paul Steidlmeier, building upon a strategic-management framework, explores the criteria for a successful China venture by transnational investors. It clarifies what is different about managing in China in a thorough discussion ofthe Chinese sources and in a creative integration ofthe technical and institutional aspects ofstrategic management. The author suggests that the Chinese investment environment is not simply a "given" to be reacted to; rather, it is highly open to experiment, ready to be shaped and influenced . In an attempt to manage successfully the various aspects ofa Chinaventure, transnational investors should attach utmost importance to creative approaches that require a strategic interaction between technical and institutional factors. With this creative aim in mind, the author focuses on an analysis of the Chinese operating environment and presents strategies for dealing with the array of management factors that emerge, ranging from quality issues in local sourcing to the role ofculture in shaping a business agreement. More specifically, four points are covered: (1) what is different about managing in China, (2) the elements of a framework for the analysis of the business environment in the Chinese context, (3) effective ways ofmanaging the various functional areas, and (4) what has been learned about the art ofnegotiation and the integration ofboth the technical and cultural aspects of a business deal. It is clear that an understanding ofthese issues, often faced by transnational firms, are crucial to the success ofa venture. In contrast to other studies offoreign business management in China, where most researchers take the perspective offoreign business experts or use the actual experiences ofindividual foreign companies, this book examines the subject from a Chinese angle and uses Chinese sources. Throughout, attention is devoted to two aspects of strategic management: one is the management of the technical environ-© 1997 by University ment, focusing on inputs and outputs, cost management, and price efficiency; the ofHawai'i Pressother is the management of the institutional environment, with an emphasis on corporate culture, so far as the business enterprise itselfgoes, as well as on the larger social institutional issues that can have so much influence on an investment in China. 540 China Review International: Vol. 4, No. 2, Fall 1997 The Chinese investment environment is dynamic and uncertain. Steidlmeier maintains that if there is one quality that foreign companies should have, it is the ability to fit into and adapt to the wider sociohistorical process of China's modernization . In concrete terms, this means that any choice of organizational structure must incorporate flexibility and the ability to change as circumstances change. After all, it is precisely this exploratory dynamic that is incorporated into the basic policy called the "socialist market economy." Chinese workers have a reputation for being hardworking and highly motivated . If not captives of the iron rice bowl, they are receptive to economic incentives , insofar as these are open to experiment. Confucian wisdom significandy shapes Chinese management, and traditional culture may have two side effects on human resource management: it can be a pitfall, but it can also work to a company's advantage in recruiting employees who will be loyal over the long term. Strategic Management ofthe China Venture correctly states that foreign business management in China should not only align with traditional culture but foster an integration between the local cultural dynamics and modern management techniques such as just-in-time inventory, quality control, customer satisfaction, process reengineering, and so forth. Indeed, such Chinese cultural dynamics as guanxi and mianzi can be powerful tools for human resource administration. Ifnot properly understood, however, they can lead to labor and management mayhem. In general, a...