Strategic Management
Strategic Management
ChinaThe traditional concept is that ownership = control. In China, however, this takes a very different meaning. It also provides the right to influence, which extends to institutional bodies such as governmental departments, local ministries looking to strengthen their standing. There are broadly 3 categories of ownership in China, which are State Owned Enterprises – These were conceived as a way to compete with the established businesses in the West. (Nolan 2002). This implies that the State are the chief holders of the local companies, acquired directly and indirectly. These companies require a high level of capital investment and demand increased levels of labour. They are characterised by poor efficiency ratings, but have recently undergone a shift in strategy, with more emphasis being placed on fulfilment of objectives. These, being state-owned and employing a huge number of people, enjoy a special standing among the interests of the government. This is seen as important as it represents China’s growing ambition to be a global force, benefitting both the locals by providing jobs and ensuring good support for the Communist government. Subsidies, tax benefits and export furtherance are some of the benefits granted to the apparent ‘National Champions’ of the country. Relative ease of obtaining finance, and a significant influence from the state, undermines the strength of corporate governance, and therefore little focus is placed on maximising shareholder return or ensuring employee welfare. Shareholders find it difficult to obtain any sort of compensation or justice, through regular channels or via market forces. It is an open secret that ALL the employees are placed under the All-China Federation of Trade Unions (ACTFU), therefore making them property of the state in a way, interest of management is therefore generally favoured over employee interest. In such a system, it is often noticed that informal relationships are the major drivers to promotions within the organization.

Family-Businesses –  Accounting for nearly 75% of China’s firms, these businesses represent the core component and driver for the tremendous economic growth experienced by China. Control, is concentrated at the top by a few individuals or related family members. The majority of these companies are manufacturers supplying world-class in demand products to big companies all over the world. Technology sharing and secondary design matters are generally dealt in collaboration. In these companies, the shareholders are seen as separate from the owners, and therefore the primary focus is to maximise the “OWNERS WEALTH”. The disadvantage to these enterprises are that they don’t enjoy a great connection with the political domain, and therefore find it difficult to obtain Control is usually closely held by the owners or trusted family members. Their main business strategy are to produce quality components at low cost for companies around the world (Redding and Witt, 2009) leaving external design, technology to theirs network partners globally. These enterprises main objective remains to create wealth for their owners before the interest of their shareholders. Due to the weak institutional trust in China, private enterprises which are not well connected  politically have difficulties gaining finance from banks and usually resort to savings, loans from family and friends, and shadow financing such as loan sharks, unofficial benchmark rate for such loans, known as the Wenzhou rate, is usually a multiple of the official lending rate (Witt and Redding, 2013b). The third configuration is the hybrid firms which as the name implies are partly private with the government holding a considerable share. They are also known as Local Corporates which suggest a kind of alliance between local government and local entrepreneurs or even foreign investors who have the technological know-how and market access. Japan   State ownership of enterprises is extremely rare in Japan (Nakamura and Fruin, 2012). Shareholdings in Japan are usually held by two types of investors. The first type is institutional shareholders such as trust banks and insurance companies. The second type is relational investors such as the firms lead bank, affiliated firms and key suppliers. They hold shares mainly as a symbol of that relationship (Westney, 1996). Neither type of investor actively monitors the  performance of the group. Firm control therefore falls into four types of business groups. The first type of business group to appear were family owned and controlled businesses called Zaibatsu, although they started in related businesses, Japanese governments decision to sell off SOEs in the 1880s gave these family businesses to buy and therefore transform into inter-industry groups which were central to the growth of the Japanese economy until the end of World War II. As business groups began to rely more on public capital markets for both equity and debt. Public share offerings diluted family ownership and engineering trained graduates were employed to run these large scale businesses. Shinko zaibatsu or new zaibatsu were formed and they differed from the earlier sort by their less concentrated ownership structures and a deeper separation of ownership and control, together with the emergence of a professional management class. After Japan lost World War II, the Allied forces begun to dismantle the Zaibatsu system by confiscating the owners wealth, limiting cross shareholdings within groups, reduce concentrated economic power and democratize the economy. The results were the kigyo shudan or kigyo gurupu (enterprise groups). A more prominent and much studied business group were formed post war where the outputs of one firm were usually the input of another. This group are called keiretsu in Japanese. In such groups, ownership is not the basis of group formation unlike Zaibatsu. However, control by the lead firm is still strong due to the lead firm control over flows of products, financial resources, information and technology, and people across formal company boundaries (Westney, 1996).

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Established Businesses And Family-Businesses. (June 30, 2021). Retrieved from https://www.freeessays.education/established-businesses-and-family-businesses-essay/