Globalization of Chinese Multinational Corporations: The Roles of Language and Cultural Development

1. Globalization of Chinese Multinational Corporations:The Roles of Language and Cultural Development Yong Cao, Ph.D. Edward Forrest, Ph.D. University of Alaska Anchorage

2. China’s NonBond Investment ($ billions)Increasing trend in foreign direct investment and firm acquisition Sources: Ministry of Commerce of People’s Republic of China, 2008 Statistical Bulletin of China’s Outward Foreign Direct Investment, hzs2.mofcom.gov.cn/accessory/200909/1253869308655.pdf “China’s Overseas Investment up 6.5pc,” The Daily Star, January 17, 2010, at http://www.thedailystar.net/newDesign/newsdetails. php?nid=122171 (February 21, 2010);

3. Large scale in Africa, South Africa, West Asia and other emerging markets Relatively small scale in the United States

4. Table 1. Important Cases of Chinese Multinational Corporations in Overseas Investments and Operations

5. Additional Cases • China Mobile attempted to purchase Millicom, failed at the last stage in 2006 due to price disagreements and concerns of job insecurity of management. • Huawei’s failed bid for British telecom equipment maker Marconi. • Wanxiang Group, purchased Chicago-based Universal Automotive Industry, but UAI went bankrupt in 2005. • Ssangyong Motor had a legal battle with Shanghai Automotive Industry Corporation after it was purchased in January 2005.

6. Additional Cases (continued) • TCL acquired RCA in the late 1990s and German Schneider and French Thomson in 2003. After the purchase, the firm suffered huge losses - 90 million euros in 2005 and 230 million euros in 2006, TCL also formed a joint venture with Alcatel to manufacture mobile phones inMay 2002, but decided to liquidate it in nine months. • Lenovo acquired IBM's PC division for US$1.25 billion deal in December 2004. The merger brought some difficulty for the firm due to increasing difficulty in its operations (Kim 2009).

7. Failed Reason • Failed acquisition in USA, Europe, if it is successful in acquisition, but failed in operation in these geographic region. • The objections of from the key stakeholders, such as law makers, local community, consumers, management team and other interest groups. • Lack of experience to handle the cases due to language and culture barriers • Being a foreignness for the Chinese firms is hard to win the support from the stakeholders due to their limited visibility at the global level (Anwar, 2009; Tariq & Anwar, 2009). • Limited understanding local cultures, national markets, and regulatory procedures • Lack knowledge and operation skills in overseas, particularly in the United States. • Lack of social capital to work with the local government and the legislature. • Lack of lobbying experience and networks (Crooks, 2009), which is critical to communicate with various stakeholders who participate in the market. • Incompatibility between Chinese business culture and the western business culture: the current networking and guanxi related networks carry limited clout outside of China because of cultural barriers, negative publicity, and regulatory hurdles (Chua, Morris & Ingram, 2009).

8. Table 2. The Roles of Language for Chinese MNCs in Global Market: as a promotion as well as defensive tool

9. Table 2. The Roles of Language for Chinese MNCs in Global Market

10. Table 2. The Roles of Language for Chinese MNCs in Global Market

11. Table 2. The Roles of Language for Chinese MNCs in Global Market

12. Table 2. The Roles of Language for Chinese MNCs in Global Market

13. Table 2. Summary of the Language Roles for Chinese MNCs in Global Market

14. Chinese Language Vs. English • Usage around the world • Limited usage of the Chinese language vs. wide usage of the English language in global business setting • Usage for business agreement • Two copies, one is in English, the other one is in Chinese. Which one has more relative power in explaining the difference? • Usage when conflicts arise, the agreement in Chinese in disadvantage • International arbitration • Global court • WTO

15. Table 3. The Roles of Culture for Chinese MNCs in Global Market

16. Table 3. The Roles of Culture for Chinese MNCs in Global Market

17. Table 3. The Roles of Culture for Chinese MNCs in Global Market

18. Table 3. The Roles of Culture for Chinese MNCs in Global Market

19. Table 3. The Roles of Culture for Chinese MNCs in Global Market

20. Table 4. The Usage of Language and Culture for Different Geographic Regions in Global Market

21. Conclusion • Learning curve for Chinese MNCs • Cultural issues • Legal resistance

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