Chinese Business
the ¡®basis¡¯ for consideration for majority of their projects.
There have been too many examples from other industries that China still has many gaps between the stated plans and the actual ability to manage and control the economy. As such, many legal laws still have some flaws and contracts are often not legally bounded. China is infamously known to be governed by its people instead of its laws and regulations. However, such a political environment has changes dramatically over the years.
Samsung¡¯s active move into the Chinese market started only after Beijing and Seoul established diplomatic relations in 1992. With its recent membership into WTO in December 2000- China economy is more receptive and participative towards foreign investments and its activities. However, this may be a double edged sword as this will benefit Samsung but also at the same time face more competition from other competitors.
Economical
According to McKinsey, 60 million Chinese had per capital purchasing power exceeding US 1,000, an income level above which Chinese could start buying color televisions. By the year 2000, this number of household will increase to 200 million (30-40 cities). However, this proportion is not evenly spread as some cities will be enjoying more material benefits than some. In 1992, the biggest differences are cities of Shanghai and Tianjin, it is unclear if the disparity will be narrowed in the near future.
The possible reasons for the influx of money and increase in their spending power may be due to the unreported income, booming black market in labor, goods, services and foreign exchange. Another possible reason may be due to the Government¡¯s aid in housing subsidies, less money is spent on housing/utilities and more can be portioned to home appliances/equipments.
In 1994, 41% of its 300 million households own color televisions. 220 of the 300 million households belong to the rural regions while 80 million belongs to the urban cities. More rural sales is suggested towards the low 28 percent (television owners) while there is a increasing need for more sophisticated television for the 80 percent rural dwellers who already owned colored televisions.
Social
Culture is part and parcel of the Chinese society and they mainly practice the Confucian culture and are collectivism-oriented and emphasize a lot on social harmony. Chinese people place great importance on personal relationship and trust. Therefore for foreign companies such as Samsung, it is very important for them to build long-term mutual trust relationship with their Chinese counterparts.
Although there is an abundance of workers ready for Samsung¡¯s employment, there is a tendency that the Chinese workforce is not as productive as expected. According to the data provided many foreign companies who enter into a joint venture with socialists firms had found themselves in the position of having to inherit a large number of workers and stuff, of which perhaps only 50 percent were needed to complete the required work.
Technological
The Mechatronics Center is the backbone of the technology component of Samsung Corporation. The center is in charge of providing the core components technology and equipment [next page]