Managing Technology in Chinese Context

Abstract

Today, China literally becomes a talking point at all international forums. Besides some other issues involving human rights, Tibet, Taiwan etc. the rapid progress made by the country on the trade and industry front has provided a leading edge to China. China has seen remarkable growth in its economy and the living standards of its citizens since it adopted a more open and liberal stance under the premiership of Chairman Deng Xiao Ping. With a huge consumer base of 1.3 billion consumers and rapidly increasing exports of manufactured goods to nearly all countries of the world, business people from the rest of the world felt obliged to try and seek out new opportunities in the Chinese market in order to maintain a balance in global trade, and seek out more profitable markets. China’s membership of the World Trade Organisation (WTO) made it possible for these business people to operate in China in an era of free trade. Owing to the economies of scale, many MNCs started shifting their manufacturing/ production bases to different areas in China. In today’s era of Information Technology, the world is increasingly becoming networked, technical, and closer to each other.

Over the years IT has led to revolutionizing the way business is conducted, education is imparted, we communicate, we socialize, illness is cured etc. IT has made its mark in almost all spheres of life. IT-enabled services, manufacturing, marketing, communication, E-commerce and M-commerce are the trendy application of this IT era. Now a company or business entity has plenty of avenues to reach the customer. Business on the move is the latest addition. China is an attractive market for Multi-National Enterprises, a cheaper manufacturing hub for production-oriented companies and an upcoming outsourcing destination for IT companies. But at the same time, some hiccups are there in implementing and managing technologies in the country. This study is an effort towards analyzing the development of China as a hub of manufacturing activities and a source of cheaper goods and services. How the perception of the western world has changed over the years towards building stronger ties with China and how the Chinese government has been trying to make the country more business-friendly, are some of the issues which are studied in this paper.

Introduction

China has made rapid advancements during the last 20-25 years period, with increased emphasis on liberalisation policies. Li-Hua and Khalil (2006) point out that the Chinese economy has been a blend of market economy and command economy. The Chinese government has defined such an economy as a “socialist market economy with Chinese characteristics”. Therefore under such precautionary measures, the MNCs are not able to find out the ability to do much manoeuvring in implementing a range of strategies. Managing the technology is one such field that requires enough breathing space as it happens to be a capital intensive initiative. Management of Technology (MOT) is stated to be the hidden competitive advantage bridging “the knowledge and practice gap” between science, engineering and business management (Li-Hua and Khalil, 2006).

Background to the Study

According to a recent report published in Economist (2008a), ‘within a few months, China is to overtake America as the country with the world’s largest number of internet users. Despite the high growth rates, this is being considered a remarkable achievement on the part of China. China is a nation full of potential consumers, which is an attraction for companies in the western world. What deters these companies to pursue a vigorous path to mark their presence in China is – some of the protective policies and not so friendly attitude of the Chinese government. In today’s unipolar world while America happens to be the superpower in terms of advanced technology, higher levels of per capita income, present in many countries around the world etc. Trade is a sensitive issue, which involves not only the legal and technological issues, but most of it depends upon the political equations. The fact, that the three Presidential candidates in the USA are not ready to talk on trade issues, while openly coming out with their views on many other issues, is an indication of the sensitive nature of trade relations between nations (Economist, 2008).

Technology transfer is generally considered a high-commitment, high-risk and high-potential investment and it requires a lot of trust-building mechanisms to effectively manage the technology. Transfer of technology doesn’t guarantee immediate success and requires more investment and R&D input from the concerned parties. How the technology implementation is managed, depends upon the management team and the logistic support provided by the legal system of the land. Examples like the troublesome integration of TCL Group, a leading Chinese electronics company, and France’s Thomson TV forces the MNCs to take a hard look at the ground reality, before venturing the whole hog into China (Rugman & Li, 2007). The US government, for example, identifies three key areas of global trade and technology transfer. These include Sales and contracts with foreign buyers imposing conditions leading to technology transfer, joint ventures with foreign partners involving technology sharing and next-generation development, and foreign investments in US industry that create technology transfer opportunities that may raise either economic or national security concerns. In the US government view, China scores poorly in at least two areas¹.

Aims and Objectives of the study

Technology, the key ingredient in today’s IT era requires good leadership to carry forward the plans, strategists for smooth implementation, support from the political spectrum of the country without undue interference in the functioning and availability of a knowledge base to contribute towards R&D activities. China has been a source of attraction for multinational companies on account of the availability of cheaper labour force, proximity to the vast market base of the South Asian region, opening up of its economy and doors for foreign investments. The use of advanced technology has become central to Chinese society’s lifestyle, functioning of the government, industrial activities, finance and business. But there are a few hiccups experienced by the MNCs, which has the potential to slow down the rate of investments in China from abroad. This study is therefore being carried out with an aim of taking a realistic look at the ground situation and analyzing the issues and difficulties in the process of technology management. In general, the study is being undertaken to focus on the following objectives;

1. Analyze the role of technology in controlling a firm. For the sake of this study, we will be analysing the mobile communication industry in China.
2. Studying the role of technology in bringing about a change. This will involve analyzing how the Chinese telecommunication sector has benefited from globalization.
3. Determine the expectations of technology and the extent of penetration the telecom revolution has been able to achieve in a global context as well as in the Chinese telecom scenario.
4. How successfully the telecom industry has been able to integrate technology in the Chinese context.
5. To identify how the telecom industry has been able to identify the appropriate technology and efforts being made to further develop the technological edge in the country. To this end, an effort will be made to solicit responses from some concerned people in the industry and subsequently the behavioural patterns of the respondents will be analysed on how they respond to the introduction and management of technology. Use of technology acceptance model (TAM) will also be made to assess the behavioural patterns.
6. Determine the factors assisting the surge in economic indicators and how different stakeholders have benefited from this scenario

The study will not only enrich my knowledge base as a student but will also help in carrying ahead the thread for other researchers in near future.

Research Methodology

As with any research project, determining the best methodology to gather data when conducting research is of paramount importance. Inevitably, any discussion of the methodology involves a debate over the pros and cons of quantitative analysis versus qualitative analysis. Both types of analysis require data and facts and figures, which can be gathered either through primary sources or secondary sources. Since the nature of this study involves a broader analysis, therefore we’ll have to take the help of secondary sources in good measure, for gathering most of the information. Some of the primary sources will be the interviews and opinions that we seek to solicit from the technology management people and general users of communication devices.

The aim of this project is to research, examine, report and assess the impact of a transition towards a technology-intensive and industrialised China with promising investment opportunities in a wide range of sectors. The telecommunication sector provides a networked community embedded in m-commerce and related applications Therefore an effort will be made to study the path taken by the technology to arrive at this position and how it has impacted the effectiveness of providing service to the consumer. Using reliable secondary sources of data would yield the required information to make the comparisons and further investigate the trend. Moreover, the use of secondary research allows for the analysis of a broad range of topics that can be thoroughly investigated and has proven to be credible.

According to Haley (2003), many researchers have opted to conduct secondary research as opposed to primary research, because of limited opportunities for conducting primary research and the costs of qualitative work that goes into conducting such research. Therefore, in order to maximize the use of available data, we’ll critically analyze the secondary data. The advent of software’s to aid the coding, retrieval and analysis of qualitative data is another development that greatly influences the decision in favour of secondary data. In these respects, the impetus behind the approach is similar to the one which informed the secondary analysis of quantitative data (Procter as cited in Heaton, 1998). The research used in this discussion comes from several sources including books, government documents, reputed websites and scholarly journals. The research also relies upon documentary evidence. Some of the main steps involved in this project are;

• We’ll study the transition of China from a closed economy to an inviting economy and how this has helped the Chinese community.
• Analyze some of the issues which have cropped up in managing technology in the country, which have the potential of slowing down the pace of investments in the country. How seriously and sincerely the Chinese government intends to allay such apprehensions will go a long way in deciding about the future course of action for China.
• Carry out a comprehensive look at the consumers in China and how their living standards, individualism etc. are affected after the initiatives taken by the government.

Literature Review

China on way to Prosperity

China is a country with a population of 1.3 billion people, which is roughly about 21% of the world’s population. Since the beginning of the far-reaching economic reforms of 1978, China’s economy has been growing at a breakneck pace of 9.5 per cent a year². If it were now to grow at 8 per cent per year, doubling every nine years, income per person in 2031 for China’s projected population of 1.45 billion would reach $38,000. (At a more conservative 6 per cent annual growth rate, the economy would double every 12 years, overtaking the current U.S. income per person in 2040). Hoguet, (2004) also figures out that the Chinese economy has shown a growth rate of 9.3% per annum, with a per capita income that is growing at about 10% per annum. Today China is gradually yet firmly integrating into the global economy. With more impetus to market-oriented policies, the economy is changing from a centrally planned system to a more market-oriented one in which the private sector is playing a big role. But the internal conflictions appear more prominent with large economic disparities between urban and rural areas and serious income inequality amongst the masses (CountryWatch, 2007).

For long China remained a subject of curiosity for the world, with promises of economic reforms from the government-backed with equal force from the anti liberalization voices from the country’s prominent communist leadership. On the one hand, there was the antipathy towards the US and its policies, while on the other hand the example of the disintegration of a formidable communist nation like the USSR further widened the dilemma of Chinese policy makers. Gradually globalization took firm roots in the country and now China is allowing MNCs even in sensitive areas like telecommunication, insurance and banking. In fact, in the last couple of years, the Chinese economy has been able to register double-digit growth rates, which promises a bright future for the consumer market. China was the front runner in the Asian subcontinent as far as preparing the ground for 3G technologies is concerned. It started allocating spectrum for 3G technologies and putting up infrastructure for 3G services at the beginning of the 21^st century itself (ITU, 2002).

The neighbouring country India is giving intense competition to China as far as the spread of IT is concerned, but with liberalization and globalization taking firm shape in the country, we are bound to see a strong China in terms of telecom services. The forthcoming Olympics in 2008 might provide an opportunity for Chinese rulers for coming out with some radical policy announcements. China has already taken on the Western telecommunication standards, by coming out with its own version of CDMA standards, called TD-SCDMA. China has announced to establish its own 3G standards, which will be used for Universal Mobile Telecommunications System (UMTS) networks in the country (Kowalke, 2006). Approved by ITU in May 2000, the TD-SCDMA provides a window of opportunity to China (ITU, 2002). It is no doubt a radical step and goes with the Chinese reputation of taking on the world, and amounts to making the Chinese telecom market somewhat more complex. In fact, after the Chinese declaration of the newer standards for the country in January 2006 research reports indicate that GSM, the global standards prevalent in other countries, will still continue to be the dominant technology in China at least over the next five to eight years (ABI, 2006). But there are equally encouraging reports as far as the growth of TD-SCDMA patrons is concerned. Reports indicate that the total market size for this type of access network has touched a market of RMB 7.2 billion (US$945 million) in the second quarter of 2007.

Role of Technology

For a company to acquire a competitive advantage over its rivals some of the strategies that can be used are; marketing efforts, brand building, value creation, innovation, operational efficiencies etc. But more important is to sustain the advantage. Technology has a crucial role in value configuration, as it helps in taking care of the day’s advancements. The value configuration describes how value is created in a company for its customers, how the most important business processes function to create value for customers and the way a particular company/ organization conducts its business. Some of the value addition gradually takes the form of threshold competencies for the organisation, and the consumer starts expecting these value additions from the company. Optimum value configuration is achieved by the company with active support from;

• Infrastructure: Company’s infrastructure decides the number of customers it can cater at a given time and the kind of workload it can take on.
• Human resources: It is said that the strength of a chain is as good as the weakest link. Therefore every element in a value chain has a crucial role to play. To come out with a value product the human resources need to be made quality and value-conscious.
• Technology development and procurement: Today technology plays an important role in almost every part of the business process. Be it the e-procurement, IT-enabled services, e-business etc. technology has a say everywhere. Therefore a company will have to be technology savvy for being valued as a quality conscious company. A technology-intensive sector like telecommunication.

With an FDI of over $50 billion a year, China has become a dominant player in the global arena. Initially Chinese export of cheaper goods to other countries became its identity as a source of cheaper labour and goods, but the growing economy, improvement in the business environment and educational system has started establishing the country as a hub of knowledge workers as well (Crocitto et al., 2005). After the establishment of the WTO regime in China, even foreign MNCs have started utilising the cheaper manufacturing bases of China. For example, GM, Coca-Cola, Intel, Sony, Kodak, Dell etc are some of the reputed companies having set up their manufacturing facilities in China. It is worthwhile here to mention that many of these companies are technology-intensive, require effective coordination and management at the local as well as at the international level.

With efforts by the Chinese government to improve the number of good English speakers in the country, the efforts of establishing it as a responsible knowledge base are bound to translate into a successful change in the reputation of China. In a study conducted by Carraher et al (2006), a comparison was made between entrepreneurial service performance and technology management skills of Chinese and Japanese people. Though Japan has established itself as technology savvy and disciplined nation long back, and China is gradually learning the techniques, yet the study found out that ‘the average performance score for Chinese employees was 3.45 (on a five-point scale) for service-oriented performance and 3.48 for technically oriented performance. Scores for Japanese employees were slightly higher, producing means of 3.70 for service-oriented performance and 3.58 for technically oriented performance. If the study is an indication, then China appears all set to establish itself as a responsible nation even in managing the technology as well.

Porter (1988) described ‘technological strategy’ as ‘a vehicle for pursuing generic competitive strategies aiming at fundamentally different types of competitive advantages” in trying to establish a conceptual link between technological change and the choice of competitive strategy by the individual firm’. There are some successful examples of China where the domestic companies were able to have a smooth transition from abroad as far as technological tie-up was concerned. The development of the Maglev Railway in Shanghai with the cooperation between China and Germany is one such example (Li-Hua, 2007). In 2003, the magnetic train in Shanghai, built with German technology, created the fastest speed (500 kilometres per hour) on the first magnetic railway in the world.

Garcı´a-Muina (2008) states that effectively sustaining a technology-based competitive advantage can be defined as maintenance of a privileged position as a leader, once other agents have given up in their attempts to reach it. But the speed with which advancements are taking place in technology, no company or no country can feel secure if continuous follow up actions are not there in line with evolving technologies and market demands. Li-Hua (2007) figures out that the technology strategy of China has played a significant role in developing the technical capability and economy of the country. But there are some instances that have raised some doubts on the ability of the Chinese establishment to effectively managing the technology and some critics argue that China’s technology strategy has failed in securing core technology. The domestic car industry is one such example that has not been able to benefit from the technology transfers while cars made and run in China happen to be foreign brands (Li-Hua, 2007).

China’s standing in the Region

Politics and businesses operate in a unique blend of networking of stakes. While politics need businesses to finance their requirements for money, corporate houses require politicians for furthering their business interests. This is no trade secret and is practised across the world with different sets of understandings and deals. In a nutshell, the scenario could be summed up by quoting a statement of a prominent American politician, who once declared³ that “money is the mother’s milk of politics.” Political leaders are required to make laws for governing the state, keeping the interests of the common people in mind. They are supposed to uphold the ethics and principles of good governance. In principle, the politicians, being public figures, are supposed to lead exemplary lives, without being influenced by any vested interests. The corporate houses to are required to operate their businesses in such a way that no harm is done to society, to the environment and to the polity of the nation/s.

With the emergence of globalisation, while the governments have started functioning like corporate houses, the concepts like ‘corporate governance’ have also emerged amongst the business community for managing the businesses more effectively. Chinese political establishment appears to have handled the economic scene much more effectively than those of some of its neighbours like India. A study carried out by Nicholas R. Lardy (2003), a senior fellow at Institute for International Economics (Washington DC) contrasted the economic conditions of India and China and found that China’s trade performance had been distinctly superior to India. While India’s share in the global economy was 0.7 per cent in 2000 after the economic reforms of 1991, the Chinese share stood at more than three times that of 1953 and six times that of India (Lardy, 2003). This speaks volumes about the kind of potential China has shown to the world. On the front of mobile commerce as well, China took a lead with the China Merchants Bank launched the internet payment system in 1997. The average consumer seems to have supported the move because thereafter, the Chinese mainland saw widespread moves towards internet banking and telephone banking system (Laforet, 2005).

Having inspired the marketers, with a vision of a billion people consuming international brands downtown, China is now recognized as a capable global competitor in its own right. The international community is curious to know more about China so that it can be a part of a huge market-driven economy. Asia is a happening place as far as the spread of globalization is concerned. It’s a huge market with countries like China, India, Malaysia, Thailand etc. In fact, the Asia Pacific region comprises 46 countries, but the number of big economies is less. China has a big role in this region on account of its sheer size. There’s some element of apprehension amongst the communist leadership though, about the imperialistic tendencies of all things American. History is replete with examples of the way western imperialism spread over many parts of the world in the garb of trade, but such apprehensions are gradually giving way to confidence-building measures as well. In fact, the development of indigenous telecom standards for mobile communication by China also has its roots in challenging the American domination in the telecom market.

ITU, the international body of telecom professionals, responsible for policy pronouncements for the telecom industry, has come out with the Digital Opportunity Index (DOI) which measures the ICT readiness of different countries. As per the DOI released in 2006, South Korea and Japan top the global list, while China ranks⁴ at 74^th place, closely followed by India at 75^th place. In fact, what is most significant about this index is that many East Asian countries prominently figure with the Europeans amongst the top 10. The Asian economies can therefore have a dominant share in the telecom sector if the compatibility issues are resolved amicably by the regional players. South Korea has the distinction of having almost all of its internet users hooked on to the broadband network, which makes the mobile commerce applications more dependable and fast. Similarly, Japan, another close competitor of China is reported to be the only country where consumers are more likely to access the net through a mobile connection, thus proving to be a better bargain for mobile commerce applications.

China is yet to come up to such standards, but the kind of willpower that the country’s political establishment has been able to display during the last couple of decades gives scope for a lot of optimism for the mobile commerce market. The Beijing Olympics 2008 might just prove to be a historic take-off point towards a high-speed growth in this direction. According to Datamonitor (2006), the global mobile phones market saw a growth of 15.6% in 2005, to reach a value of $81.2 billion. And if this trend continues it is projected that by 2010, the market could have a value of $131.2 billion i.e. an increase of 61.6% since 2005. A major portion of this increase will remain confined to the South Asian region, dominated by China. During the early years of liberalization, China’s fastest-growing sectors were textiles, apparel, footwear, and toys. During the period between 1980 and 1998, this sector saw a growth of more than tenfold from $4.3 billion to $53.5 billion (Lardy, 2003). But in recent years China has become tech-savvy with items like consumer electronics, computers and other information technology products high on priority.

Conclusion

From the previous discussion, it may be concluded that the Chinese economy is indeed fast becoming market-friendly. Technology forms the core component of a market-friendly economy because timely upgrades and value additions to existing products and services are possible only when the concerned companies keep investing in technology. Despite some hiccups and issues in technology management, China is on its way to be known as a responsible tech-savvy nation, as the Chinese authorities are trying their level best to take up a leadership position even in the technology field as well. The Chinese market continues to present a wide range of opportunities for a very large variety of goods and services that can be sourced from around the world.

As of now, China has been able to register its presence in global markets by way of cheaper goods but this trend may not continue forever, because global companies too would want to take on these cheaper products by shifting their manufacturing bases to different regions in China. This will necessitate that China prepares itself for a technology leadership together with presenting its market potential to the world. The telecom field is one of the finest examples requiring advanced technology and mobile telephony and mobile commerce are the burgeoning fields during these times. China is the existing market having the biggest share of mobile users and what is very interesting is that there are equal numbers waiting to get connected to the wireless. That sums up the kind of potential the Chinese market has in store for the telecom players. Though at present the telecom scene is dominated by the Chinese Mobile companies, telecom giants from other countries particularly Europe and America are waiting for an opportune moment to make their mark in the country. Under such circumstances, China can ill afford to be known as a bad manager of technology, so the country is bound to sew the loose ends as soon as possible.

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Footnotes

1. Web.
2. Economic Survey of China 2005, Web.
3. Web.
4. Web.