Strategic Implementation are the activities carried out in order to achieve set goals of an organization. Collaborating with other institutions to form alliances is common in achieving economic objectives. Business alliances are important for the formulation and maintenance of the economy (Zhang & Roelfsema, 2013). These alliances could be between organizations or states. For instance, The People’s Republic of China got into an International Joint Venture (IJV) with the United State. IJV is a partnership between two or more countries that want to explore international trade without taking full responsibility of cross- border business transactions.This has seen immense business growth in China.Factors are considered before getting into such partnerships, social, cultural and political. With culture being the common bargaining factor, countries had to integrate their culture to achieve these set objectives.
The People’s Republic of China hold on strong to their business culture known as guanxi. Guanxi in the Chinese settings refers to the relationships individuals cultivate with in order to maintain social and economic order. This culture narrows down to exchanging favors which are expected to be done regularly and willingly, therefore, it is important to understand this concept. Of all the Chinese cultural concepts that have been investigated for their significance in business relationships, guanxi is probably the most known aspect (Zhang & Roelfsema, 2013).
Customer orientation has a stronger positive effect on differentiation capability when foreign parent social control is high, and such an effect becomes non significant when there is a low level of foreign parent social control. With a technology orientation, IJVs can leverage the superior technologies from their parents and introduce tech-savvy offerings with advanced features to local markets, distinguishing them from the competition. With a customer orientation, IJVs can monitor customer preferences closely and constantly and then introduce offerings that uniquely fit local customer tastes in a timely manner.
Technology-oriented IJVs should cultivate a co-operative culture that embraces the supervision of foreign parents with high equity or operational control. Both control modes could enable IJVs to allocate adequate attention to learning and applying new technologies transferred from their foreign parents, facilitating the building of IJV differentiation capability (Tsang, 2016). Customer-oriented IJVs may find it difficult to devote intensive attention to customer-oriented practices when foreign parents exert tight operational control. One option would be to negotiate with their foreign parents for less operational control and more autonomy. Without such attempts, customer orientation is not helpful for these IJVs to develop their differentiation capability. In addition, IJV managers should be aware that customer orientation is ineffective when foreign parent social control is low (Xiaoyun, Alex Xin & Kevin Zheng, 2014). If IJVs seldom communicate with their foreign parents, customer orientation is ineffective to differentiation capability building.
The roles of strategic orientations in differentiation capability building may change over time, especially in fast-changing emerging markets. In addition, a firm may vacillate between technology orientation and customer orientation at different times (Xiaoyun, Alex Xin & Kevin Zheng, 2014). Thus, a longitudinal study is necessary to examine the dynamics of strategic orientations and generate more insights into their roles in emerging economies (Tsang, 2016). Although communication is a critical component of social control, further research should investigate other components of social control, such as socialization and coordination.
Customer orientation has a strong and positive effect on differentiation capability under loose operational control from foreign parents; such an effect becomes non significant when foreign parents increase their operational control. Because foreign parents are less familiar with the local market, their strong operational control may conflict with and constrain IJVs’ customer-oriented practices, which would discount or even offset the benefits of customer orientation. Moreover, customer orientation has a stronger positive effect on differentiation capability when foreign parent social control is high, and such an effect becomes non-significant when there is a low level of foreign parent social control.
Both technology and customer orientations are significant drivers of differentiation capability for IJVs, despite the severe challenges and obstacles they face in emerging markets. One insight is that because foreign partners often possess superior technological know-how, technology-oriented IJVs tend to focus on acquiring advanced know-how from their foreign parents; in contrast, because local partners are more familiar with host market conditions, customer-oriented IJVs often focus on gaining insights from local markets and local parents. The interaction between customer orientation and social control is positive and significant as it reveals that customer orientation has a positive effect on differentiation capability at high levels of social control but a non-significant impact at low levels of social control.
When public goods are critical for the joint production, foreign profits are fenced by limited local public services. In this case, local content requirements could effectively keep foreign investors from opportunistic behavior, which in turn stimulate local public investment, increase the total revenues and therefore the profits for both local and foreign producers (Xiaoyun, Alex Xin & Kevin Zheng, 2014). Local governments are more interested in such transfers than in profits of local firms, for promoting domestic production in high value added sectors. Regarding property right protection as one necessary dimension of public goods, we conclude from our theoretical framework that pushing foreign investors to transfer more technology leaves more rents to their local partners and therefore encourages the local government to enhance local institutional quality in protecting property rights. Public agencies and officials need to improve infrastructure, abstain from corruption and police contract adherence. Often, however, private parties complain about insufficient public services.
Tsang, E. (2016). How Existing Organizational Practices Affect The Transfer Of Practices To International Joint Ventures. Management International Review (MIR), 56(4), 565-595. Doi:10.1007/S11575-015-0261-8
Xiaoyun, C., Alex Xin, C., & Kevin Zheng, Z. (2014). Strategic Orientation, Foreign Parent Control, And Differentiation Capability Building Of International Joint Ventures In An Emerging Market. Journal Of International Marketing, 22(3), 30-49.
Zhang, Y., & Roelfsema, H. (2013). Dual And Common Agency Issues In International Joint Ventures: Evidence From China. Singapore Economic Review, 58(3), -1. Doi:10.1142/S0217590813500203