Contemporary Business Expansion to China : five case studies to explore the strategies, challenges and government roles

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6/23/2017

Contemporary Business Expansion to China

Five case studies to explore the strategies, challenges and government roles

Author: Fiona Gao, 11112131

Supervisor: Dr. Tsvi Vinig, University of Amsterdam

Program: Master of Business Administration, Entrepreneurship and Innovation track Course: Entrepreneurship and innovation thesis proposal

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Statement of originality

This document is written by Student Fiona Gao who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

Numerous researches have explored the topic of business expansion, and discovered many different strategies used and challenges faced by European companies expanding their business to China. However, the rapid changing of the Chinese economy, its technologies, government working style, regulations, rules and culture are drastically influencing European companies’ strategies and the challenges they face to enter the Chinese market. Thus, this exploratory study set out to investigate what are the new strategies and challenges for European companies to expand their business to China. By combining an exploratory qualitative research with a quantitative data validation method, the wholly foreign-owned enterprise is found to be the most popular method chosen by European companies to establish their business in China. Six main challenges that European companies face to enter the market are identified. They are the experience of setting up the Chinese office alone, documentation of registering the office, cross culture related matters, the local Chinese employees, the local Chinese’s working mentality and the communication. Most European companies viewed the Chinese government as offering a supportive role in helping them establish a WFOE in China. These findings have implications for European companies who want to select a suitable method to enter the Chinese market in the future, as well as be aware of the challenges that might be faced when establishing a business in China.

Keywords:

Foreign direct investment (FDI), Multinational enterprise (MNE), Free trade zone (FTZ), Joint venture (JV), Representative office (RO), Wholly foreign-owned enterprises (WFOE)

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1. Introduction

In 1978, China opened its door to welcome all investors from foreign countries (Cheng, Suwina, Lin & Simmons, 2017). Since then, it has successfully attracted and achieved a spectacular success in foreign direct investment. Economic zones have been established with special laws for foreigners and their investments, which offer preferential treatment to joint ventures (Coughlin & Segev, 2000). In the first several years after 1979, the foreign direct investment inflow into China was growing slowly and steady. However, it achieved extraordinary growth after 1990, as shown in the chart below (Table 1). In 1997, around $ 45 billion of foreign direct investment came into China (Coughlin & Segev, 2000). Up to 2012, the foreign direct investment has almost achieved $120 billion.

Table 1: Annual FDI inflows to China, 1982-2012 (USD million)

Source: MOFCOM website: www.fdi.gov.cn

A free trade zone (FTZ) was firstly launched as a pilot program in Shanghai on the 29th of September 2013 (Li, Liu & Liang, 2014). It was established by the State Council under the general scheme of China as an attempt to set up a business-friendly environment governed by law, international practices, and market, but mainly to serve as a testing place for new policies, when it is run successfully and positive for the Chinese economy, it will be implemented throughout China (Wang J. , 2013). From then, in 2015, China decided to launch three new FTZs, in Tianjin, Fujian, and Guangdong. The FTZs

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are intended to boost the economy, develop trade, and facilitate investment in those regions (Centre, 2015).

To most foreign investors, China offers many advantages, including opportunities to exploit cheap labor and low-cost manufacturing, along with access to a growing consumer market with increasing purchasing power. Those factors motivate foreign companies to enter the Chinese market and expand their businesses in this country. There are various forms in which businesses can be set up, depending on characteristics of the firm, such as size, age, culture, and financial factors like capital, assets, and business strategies. The most popular forms for establishing a business in China, according to research, are joint venture, cooperation, and wholly foreign-owned enterprise (Young, Huang & McDermott, 1996) (Centre, 2015). However, not all companies have successfully settled the businesses in China. There are plenty of challenges: for instance, differences in culture and business mentality, as well as rules and regulations that obstructing their efforts to operate in China. In the next chapter, an extensive review of literature is present regarding the European business expansion into China, focusing on their strategies, challenges and the role of local governments.

1.1 Research Question

The research question is “What are the contemporary strategies and challenges of European companies to expand their business to China?” This paper intends to discover the contemporary strategies used by European companies who enter the Chinese market in the past 10 years, as well as the challenges the European companies faced while entering the market and operating the business in China. By answering the research question, a conceptual model will be presented in the end regarding the impact of each challenge on Chinese entities. From a practical perspective, this research will provide new insights to the managers who are responsible of expanding their business to China. The managers can not only evaluate which strategy is the most suitable one to be used by the companies, but also learn the challenges might be faced in China. Being aware of those, companies can minimize the negative impact on entering or operating the business in the Chinese market.

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P a g e 7 | 144 1.2 Thesis Structure

With the next chapter of this research, multiple researchers’ arguments are compared and discussed as part of an extensive literature review. The topic is tightly related to European companies’ strategies, challenges and the role governments played in their business expansions from Europe to China. This review identifies a lack of data relating to contemporary strategies and challenges of the past years, as well as a need for further insights into this topic. This study is therefore carried out as an exploratory qualitative research using case studies, conducted through interviewing managers who helped build up one or multiple Chinese offices. Subsequently, an extensive analysis of the data is given, leading to a set of results for each case. As a method for further validation of these results, a questionnaire has been used and its results are provided after the result chapter. Afterwards, a conceptual model is built based on the case studies and the validation results, which further identifies the most popular method to set up a Chinese entity, along with the impact each challenge provides. In the end, the limitations of this research, suggestions for future research and the implications for management practice are provided.

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2. Literature Review

2.1 Strategies

Foreign direct investment (FDI) is a key element of the globalization, it is a driver of employment, technological progress, productivity improvements and ultimately, the acceleration and sustenance of long-term economic growth (Anyanwu, 2017). It plays the critical roles of filling the development finance, foreign exchange, investment and tax revenue gaps in developing countries (Quazi, 2014). Developing country governments have increasingly sought to attract foreign direct investments (FDI), as they have come to regard FDI as an important engine of economic growth (Buthe, Tim & Milner, 2014). For instance, Turkey has sought EU membership in part of attracting greater foreign direct investment and the Chinese pursuit of WTO membership was reportedly motivated by a desire to attract further FDI.

Particularly, foreign direct investment (FDI) in China can be categorized into three major types: 1) joint ventures, which involves sharing of the capital investment between a foreign firm and a local partner; 2) cooperative enterprises; and 3) wholly foreign-owned enterprises (Chao & Eden, 1996) (Beamish, 1993). Similar, according to the report from the EU SME Centre that the foreign investment in China can be categorized as: 1) representative office (RO), 2) wholly foreign-owned enterprise (WFOE), and 3) equity joint ventures and cooperative joint ventures (Centre, 2015). In the following chapters, those three main investment strategies joint venture, representative office, wholly foreign-owned enterprise and their criticism will be discussed.

2.1.1 Joint Venture

Many definitions have been given in previous researches regarding joint ventures. In a joint venture (JV), at least two companies pool their resources to create a new, separate, and legal organization. This is a popular way to form a business, based on the earlier research (Anderson, 1990) (Kogut, 1988). A Chinese joint venture is a legal entity set up by Chinese and foreign partners holding joint operations and ownership of a limited liability entity, who have agreed on management and the division of risks (Centre, 2015). Regardless of the legal structure used for the JV, the most important document will be the JV agreement that sets out all of the partners’ rights and obligations (Luo,

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Transactional characteristics, institutional environment and joint venture contracts, 2005). The objectives of the JV, the initial contributions of the partners, the day-to-day operations, and the right to the profits of the JV are all set out in this document. The Chinese authorities encourage foreign investors to use this form of company to obtain exposure to advanced technology and new management skills. In return, foreign investors can enjoy low labor costs, low production costs and a potentially large Chinese market share.

From empirical evidence, scholars found that the majority had set up joint ventures with foreign and overseas Chinese investors within China in early research (Young, Huang & McDermott, 1996). Sometimes, it is the only way to register in China if a certain business activity is still controlled by the government; for example, restaurants and bars, building and construction, cosmetics, etc. (Prange, 2016). Based on Chinese law enacted in 1980, there are two forms of joint venture, namely the equity joint venture (EJV) and the contractual joint venture (CJV) (Jian, 2000).

Equity joint ventures have shown explosive growth (Luo & Park, 2004). In this structure, foreign and Chinese companies collaborate on projects within China with limited liability, and the foreign and Chinese partners contribute to the equity in the venture in accordance with their shareholdings. The requirement for the foreign investor is that the contribution from the foreign side is at least 25% of the equity in the company. For the Chinese part of joint venture, there is no minimum capital requirement (Centre, 2015). Unlike an EJV, in a contractual joint venture the parties involved may operate as separate legal entities and bear liabilities independently rather than as a single entity (Beamish, 1993). A cooperative venture may also be registered as a limited liability entity, resembling an equity joint venture in operation, structure, and status as a Chinese legal entity. There is no minimum foreign contribution required to initiate a cooperative venture, allowing a foreign company to take part in an enterprise in which they prefer to remain a minor shareholder (Gelatt, 1988). Furthermore, both partners in the joint venture provide funds, assets, and technology directly in line with the articles of the joint venture, including the level of management.

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Therefore, the key difference between an EJV and a CJV is that there are no capital minimums placed on the foreign partner for a CJV, enabling that company to take a minority shareholding in the venture. There are also three other major differences between EJV and CJV: profit distribution, liability, and exit (Centre, 2015). Regarding the profit distribution, in a CJV the parties’ profits may be split disproportionately to their equity percentage. An EJV normally splits profits in proportion to the equity investment as their registered capital. There is also a difference in liability. In a CJV, unlimited liability applies to the partners, while in an EJV, partners have limited liability and can agree on the management and division of risks. Last but not least, it is easier to withdraw investment from a CJV than from an EJV. The foreign party of a CJV is permitted to withdraw its investment amount at will, as long as the fixed assets of the joint venture pass without compensation to the Chinese side at the end of the term (Centre, 2015).

2.1.1.1 Criticism of Joint Venture

Many researchers favor joint venture because it allows companies to gain access to new markets and distribution networks, along with new or greater resources. The benefits can also include the knowledge of local conditions with an advanced technical and management expertise (Tsang E. W., 2016). Also, in certain industries, a joint venture may be the only way to register in China and controlled by the government for example restaurants, bars, building and construction, car production and cosmetics (Vettoretti, 2017).

However, based on the research from William H. Davidson, establishing a joint venture in China can be hazardous. According to his research on a list of growing U.S.-Chinese joint ventures, success and failure factors were discovered. Joint ventures in China face greater than average hazards with management differences, significant political issues, operational matters, logistics, and financial barriers (Davidson, 1987). From his research, a joint venture is the most difficult option because it is highly dependent on qualitative variables; for instance, individual personalities, organizational cultures, administrative styles, and management philosophies. Furthermore, the flexible nature of joint ventures makes them popular in volatile emerging markets. Their temporary nature can be appealing to companies operating in risky waters. Moreover, in

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the research of joint venture hazards, another researcher Zhang stated that the foreign investor is subject to both political and contractual hazards (Zhang Y. , 2016). In regard to political hazards, foreign investors with larger foreign share ratios might be exposed to harm from the Chinese government, which tends to seize more from foreign investors. In this case, tight cooperation with the local partner is a key, since that partner could potentially bargain with the local government for a lower cost. The contractual hazard is the contract enforcement power of local government. Based on transaction cost economics, a foreign investor who makes a relation-specific investment will face the risk of being held up by its partners. Therefore, it will be highly dependent on the maturity of the legal system when contracts are inherently incomplete and cannot be perfectly verified and enforced by the court (Zhang Y. , 2016). Overall, although many benefits like gain access to the local market, comparable easier to build network and get resources, which can gain from forming a joint venture with domestic partners, plenty of hazards should also be considered when setting up the business in China.

2.1.2 Representative Office

In order to conduct business in China, it is not always necessary to set up a company in that country. A representative office (RO) is an attractive way for foreign investors to get a feel for the Chinese market since it is the easiest type of foreign investment structure to set up and has no registered capital requirements (Vettoretti, 2017). As some business models require only a presence in China and for such purposes, a representative office can be applied. An RO is not a legal entity but rather a liaison office in China for the company’s headquarters in the home country. It shall not engage in profit-making activities and, under no circumstances (Centre, 2015). It would not directly engage in any business for profit; represents any form other than its headquarters, that is, the foreign enterprise; collects money or issue invoices within China for services or products; buy property or import production equipment (Vettoretti, 2017).

Consequently, the activities of an RO are limited to market research, exhibition or promotional activities, liaison activities related to the sale of products, provision of services, procurements, and investments in China of the foreign enterprise. That foreign enterprise is required to appoint a chief representative who may, within the scope of the

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power of attorney executed by the foreign enterprise, represent the foreign enterprise in execution of application documents for registration of the representative office.

Moreover, ROs are required to submit an annual report between March 1 and June 30 every year providing information on the legal status and standing information of the foreign enterprise, ongoing business activities of the RO, and the payment balance as audited by their account agencies. The registration authorities will issue fines if the RO fails to provide such reports on time or if it provides false information (Ku, 2013).

2.1.2.1 Criticism of Representative Office

There are pros and cons of establishing a representative office in China. The advantages are that ROs are one of the quickest and easiest methods of establishing a presence in China, it doesn’t have restrictions on the type of business and there is no minimum capital requirement for it (Centre, 2015). Unlike more robust vehicles such as WFOE, an RO has no legal personality either, meaning it does not possess the capacity for civil rights and conduct (Vettoretti, 2017).

While an RO is relatively easy to establish and maintain, they are fairly limited in terms of operational scope, for example, an RO is taxed even though it cannot generate profits. It taxed as a permanent establishment in China, which usually amounts to a liability of approximately 11-12 percent of the total expenses of the RO (Vettoretti, 2017). From 2010 on, companies that intend to register a RO must be at least two years old. According to the revised “Administrative Regulation on the Registration of Permanent Representative Organizations of Foreign Enterprises,” which came into effect in July 2013, as long as the foreign parent company legally exists, the registration certificate for an RO is valid (China, 2011). However, they cannot easily be transformed into a WFOE in future and it must undergo annual inspection by the Chinese government. Regarding the staff members, a maximum of four foreign staff is required and limited (Centre, 2015) (Vettoretti, 2017).

2.1.3 Wholly Foreign-owned Enterprises

“Wholly foreign-owned enterprise (WFOE) is a limited liability company owned by foreign nationals (companies or individuals) and capitalized solely by one or more foreign

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investor” (Vettoretti, 2017). WFOEs offer new hope for a more effective way to work in China. According to WFOE regulations, “foreign investors are permitted to set up a 100% foreign-owned enterprise in industries that are conducive to the development of China’s economic benefits, and not prohibited or restricted by the Chinese government” (Centre, 2015). Therefore, a WFOE can make profits and issue local invoices to its suppliers. The liabilities of shareholders to a WFOE are limited by the assets they bring to the business. Unlike an RO, a WFOE can also employ local staff directly, without any obligation to employ the services of an employment agency (Fang & Tang, 1988).

WFOEs have traditionally been viewed by the Chinese government as offering little in the way of technology transfer or other benefits to the Chinese economy (Vanhonacker & Pan, 1997). However, the attractiveness of this entry mode to the government has gradually increased because it will help China’s economic growth, generate foreign exchange earnings, and reduce the unemployment rate, especially in the period of tight domestic credit (Luo, Entering China Today, 2000).

2.1.3.1 Criticism of WFOE

With a greater freedom in business activities than ROs, a WFOE can gain 100% ownership and management control. Within the constraints of the Chinese system, WFOEs allow managers to expand as quickly as they want and where they want, without the burden of an uncooperative partner. At the same time, WFOEs allow foreign investors to set up and protect their own processes and procedures, which leads to more careful strategic and operational oversight (Luo, Entering China Today, 2000). Although a WFOE can be more quickly established than a joint venture, it still faces a lengthier establishment process than representative offices do. Apart from that disadvantage, a limited registered capital is required, especially for selected industries. As WFOEs operate without the control of a Chinese partner, investment approval authorities often hold them to higher standards, including stricter foreign exchange balance requirements. They are often on the radar of the Chinese government, if they are profitable, which will be encouraged by local government to find a domestic partner in order to share the profits (Luo, Entering China Today, 2000).

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2.1.4 From JV to WFOE

A joint venture, in which two or more companies pool their resources to create a new organization, was a trendy way to form a business in the early years around 1990. (Anderson, 1990) (Kogut, 1988). From empirical evidence, scholars also found that the majority had set up joint ventures with foreign and overseas Chinese investors within China in the early age in 1996 (Young, Huang & McDermott, 1996). Research specifically of Canadian companies doing business in China tested a hypothesis that “companies that use any type of investment entry strategies, including either wholly owned or joint venture, will have higher performance in China than companies that do not.” A survey of 138 participants resulted in marginal support for the idea that the investment strategy (wholly owned or joint venture) predictor variable was positively related to both sales performance and overall performance (Abramson & Ai, 1999). Therefore, joint ventures and wholly foreign-owned enterprises were both popular in the early age to set up an enterprise in China.

However, research by Chao & Yu in 1996 illustrates the proposition that “Wholly foreign-owned enterprises coupled with a positive export requirement are better than joint ventures for a small open economy under pre-existing tariff protection” (Chao & Yu, 1996). Starting from then, more and more research regarding the foreign investors in China has examined wholly owned enterprises. Based on the chart below (Table 2), until 1996 joint ventures were still the most popular entry vehicles. However, since 1997, WFOEs surpassed JVs and the number of such projects has continued to increase. As a result, WFOEs have surpassed JVs. By 1999, more than half of all foreign investments in China were WFOEs.

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Table 2: Contractual FDI in China: EJVs vs. WFOEs

(Cooperation, 2017) In 2001, Deng illustrated three main reasons for companies to switch from JV to WFOE. They are 1) the disappointing performance of too many JVs; 2) the inherent advantages of WFOEs; and 3) changes in government regulations and a less uncertain environment (Deng, WFOEs: The most popular entry mode into China, 2001). More specifically, the trouble of forming a joint venture can be categorized as sharing control, potentially divergent goals, problematic partners, and leakage of proprietary technology. At the same time, the advantages of WFOEs are robust. First of all, WFOEs take less time to establish and are not required to have a board of directors. WFOEs have the highest level of control and strategic and operational flexibility, along with a low risk of dissemination. While JVs fail to achieve their potential, frustrating the efforts of many firms to capitalize on alliance strategies, WFOEs deliver a higher level of control and their flexibility favors the choice of forming the enterprise in China. Furthermore, newly built WFOEs are particularly popular in economic and technological development zones in almost every major city in China, where preferred taxation and other politics are more attractive. Based on the report of Vanhonacker in 1997 (Vanhonacker & Pan, 1997), 94 percent of the more than 100 business projects approved so far are WFOEs. The environment and support by Chinese government make WFOEs even more successful in China.

Research in 2009 went beyond the choice of entry mode to investigate the conversion of JVs into WOFEs in the People’s Republic of China. Examples of firms that have changed include large multinational enterprises (MNEs) such as Mitsubishi,

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Siemens, and Nestle, as well as many small and medium-sized firms (Buckley, 2007). Based on Puck’s research on 27 companies that changed their ownership mode into WFOE, the conclusions state that the increase of local knowledge by the foreign JV partner and the reduction in the level of perceived external uncertainty are both positively associated with the likelihood of a conversion of a JV into a WFOE. Overall, more companies favored WFOE over JV and changed their business mode to get more benefits.

2.2 Challenges

2.2.1 Relationship-based Society Challenges

As one popular saying in China, “Who you know is more important than what you know”. “Who you know” refers to personal connections with the appropriate authorities or individuals. These connections are known in Chinese as “Guanxi” (Yeung & Tung, 1996). “Guanxi” is a general term for social networking, it refers to the establishment of a connection between people. “Guanxi” is becoming increasing important in Chinese society since many Chinese people have established “Guanxi” and use it to carry out business in a number of ways. Many scholars have noted that “Guanxi” relationships is a key business practice that distinguishes business in China from America or Europe (Abramson & Ai, 1999) (Davies, Leung, Luk & Wong, 1995) (Tsang E. W., 1998) (Lee, Dong-Jin, Pae & Wong, 2001). In the research of Abramson & Ai, a hypothesis of “companies having “Guanxi” relationship (shared goals and trust) with the Chinese (local partners, subsidiary managers, distributors or customers) will have higher performance in China than companies using transactional relationship (unshared goals)”, which has been tested and strongly supported by a quantitative survey of 138 Canadian companies doing business in China (Abramson & Ai, 1999).

However, “Guanxi” is not easy to obtain. For foreigners, it is even harder to understand the importance of “Guanxi” and build a strong network in Chinese business environment. The evidence further suggested that doing business in China can be more difficult than is anticipated by many foreign businessmen, for example many frontline practitioners have complained that creating joint ventures in China is more complex and time-consuming than it is necessary (Davies, Leung, Luk & Wong, 1995). Foreign

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companies are often dismayed by the lengthy negotiation process and in particular by bureaucratic delays, the difficulty of identifying the real decision maker in Chinese business dealing and by the number of negotiation contacts that are required. However, those problems can be solved by “Guanxi”. An empirical research has been conducted to identify the benefits of “Guanxi”, which the results show that networks have long been the dominant form in China. Smooth collection of payment was seen as the most highly rated benefit accruing to the establishment of “Guanxi”, followed by information on import regulations and restrictions, and on government policies. In general, benefits concerning the smooth running of routine and frequent transactions. Without “Guanxi”, one simply cannot get anything done (Davies, Leung, Luk & Wong, 1995).

Not only Davies and his colleagues notified the governmental benefits of “Guanxi”, many other scholars have conducted researches on the topic of relationship-based governance system. Relationship-based governance system has been defined when laws are biased and the government cannot enforce public rules impartially. People therefore need to reply on private information, personal networks and relationships instead of laws and regulations. It can lack of public trust and transparency (Pearce, 2001) (Li, 2005). Unlike the rule-based society of western countries, Chinese business environment can be a big challenge for western companies while entering or operating in the Chinese market. Thus, “Guanxi” is the key in relationship-based society but as well a challenge for westerns to conduct business in China.

2.2.2 Cross-culture Challenges

Culture has been defined in many ways. It is a collective phenomenon but can also be connected to different collectives. Hofstede’s culture dimensions have been applied to understand the culture differences among countries and regions. China and European countries have differences on mainly five dimensions based on Hofstede’s model, named power distance, individualism, uncertainty avoidance, masculinity and long term versus short term orientation (Hofstede, 1993). In China, a high power-distance indicated by strong hierarchy, status appeals and referent power. Also, China is the country with a high score of uncertainty-avoidance, which means it tends to be more risk-averse, avoid ambiguous situations, and value security than adventure or risk. Furthermore, in

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collectivist societies like China, the emphasis is on following group norms, group achievement, and strong group-ties (Singh, Zhao & Hu, 2005). These factors all potentially influence the success of business expansion for European companies in China.

More specifically, many intercultural researches show how national culture influences management and business strategies and the tactics to balance standardization and adaptation to the new culture (Hayton, James & Cacciotti, 2013) (Ferri, Elisabeth & Urbano, 2015). According to Hofstede’s dimensions, a western businessman comes from a culture with low power distance, implying that people from this culture expect minimal inequalities between individuals. Conversely, Chinese employees expect employers to be authoritative and to make clear demands. Employers who lack these characteristics may seem weak, incompetent and devoid of a clear vision for the company. Being aware of this culture difference, a western manager can deal with the situation by delegating responsibility to a local manager and organizing weekly meetings where employees report on their work and achievements. Since the Chinese come from a strong collectivism and medium feminine society in which harmony and personal relationship are emphasized, they will try to use indirect ways to avoid direct and open conflict (Pan, Fan & Zhang, 2004). Thus, they prefer to resolve conflict through negotiation and compromise. Another example can be seen in an international business article is that western manager in general prefers participative management, direct communication through meetings and low control. These points may get conflicted in China but it varies based on the company culture. Thus, the western manager must transform the local environment. One way to improve collaboration within the company can be impose strict deadlines due to a lack of control reduces employees’ motivation and efficiency.

Globalization challenges our understanding of culture and identity different ways of communication. Unlike individualist countries in the west, China is a strong collective society based country, the local communication tends to be harmony and soft. Thus, Chinese try to use indirect ways to avoid direct conflict discussion. When they face conflict, a prefer way to handle it is to use authority to suppress the conflict or settle things

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privately. Negotiation and compromise are the ways often used in solving conflict issues (Pan, Fan & Zhang, 2004). Language can be another challenge for foreign managers while communicating with the local employees. Hence, offering English course to employees is another important action. In addition to improving English-speaking skills, English course enhance communication between the managers, employees and with the local clients (Apetrei, Kureshi & Horodnic, 2015).

2.2.3 Human Resource Challenges

Employees’ satisfaction at work has long been a concern for researchers in social science and management. It refers to employees’ attitudes or opinions toward the job itself or the relevant environment and to their overall emotional response to their job roles (Diener, 2000). Due to the culture differences, it is important for western manager to be aware of the difference of job satisfaction between western employees and eastern employees. For Chinese employees, organizational justice and job security are both positively linked with the job satisfaction according to the research of Ouyang (Ouyang, Sang, Li & Peng, 2015). Organizational justice helps to reduce employees’ uncertainty about the continuity of their employment by enhancing their perception of predictability and controllability in their future as employees. For the foreign managers who is aware of these, the job security can also be improved to reinforce the psychological contract between employees and the organization since only when feeling secure do employees work hard and thus improve their job performance (Ouyang, Sang, Li & Peng, 2015).

Employed compensation and benefits system is another factor that challenge the foreign mangers in China. As a research conducted in China in 2004, the finding surprisingly shows that the dominant reason for local Chinese qualified staff to leave their company is to find a better paid job (Leininger, 2004). Unlike many multinational companies, the salary of employees is only dependent on the performance, which means no or very minimal compensation and benefits for employees. In the opposite, Chinese staff could get a variety of compensation and benefits in domestic companies for example a system called “five different insurance and one fund”. It includes media insurance, unemployment insurance, working-related injury insurance, bearing insurance, endowment insurance and a house fund (Wu, 2009). Employees are motivated and

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treasured their stable incomes and social welfare, which increase the job satisfaction and company loyalty. Many foreign multinational companies have realized this issue and invest more in Chinese market, they established rewards system but still have some obstacles to overcome.

Weldon and Vanhonacker conducted a research to provide suggestions for managers to operate a foreign-invested enterprise in China. In their researches, mangers face four main challenges regarding local employees while operating a business in China. First, selecting local people who have the potential to succeed can be a challenge. It is sometimes difficult to find and hire the right person who is proactive, creative, has the same working mentality as western people do. In his research, special empirical evidence shows that Chinese employees try to avoid the problems and conflicts during work, which lead to even more unsolved issues. Secondly, providing the training and learning experiences they need for development could be a challenge, Chinese raises many questions regarding how well the practices and training program can transfer to the Chinese context. Therefore, a slightly different training program with focuses on proactivity, creativity and business mentality can be added into the training program. The third challenge can be retaining the best employees. Foreign companies often find it difficult to provide the shortage of qualified people, because of that they easily lose the well-trained people after investing time and money to high-potential employees. Last but not least, managing day to day work relationships can be a challenge, it involves values, norms, social interaction, communication styles, approaches to conflict management (Weldon & Vanhonacker, 1999).

2.2.4 Other Challenges

Apart from those challenges, in the case studies of Xue and his colleagues, some failure examples of implementing business in China together with the core factors were investigated. By exploring eight software companies, the following obstacles are the challenges of implementing their business in China. The eight obstacles are language, report and table format, business process reengineering, economic reform impact, cost-control system, human resources problem, price issues and connection with service companies. (Xue, Liang, Boulton & Snyder, 2005). Although some of the obstacles are

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industrial specific, others are more general and can be applied to other industries, e.g. language, human resources problems, price issues and connection with local service. Some research further stated that the foreign companies can face the infringement of the intellectual property issues. Multinational companies are suffering to protect their IP rights in China (Bosshart, Luedi & Wang, 2010).

To sum up, there are many difficult challenges that western managers could potential face while setting up an office or operating the business in China. It can be culture differences, government limitations, human resource management barriers, communications, or the relationship-based society environments. However, if the manager is aware of these potential issues in advance and implement a suitable solution, the impact of these issues will be much less. On the other hands, the company can also establish an internal training course or programs to educate the employees to improve their abilities and skills. By trying from two sides, the negative impact can be minimal. 2.3 Role of Chinese Government

“China’s central government has been the primary driving force of economic reform” (Child & Tse, 2001). Since 1980, China opens its door to foreign investors, the regional governments started to offer a wide variety of programs to encourage foreign investors to do business in China. Through many years, the changing characters of Chinese government not only plays an important role in business to create a national market and reform of stated owned enterprises (SEOs), but also supports the foreign investment by offering generous incentive packages to attract foreign investors in high-technology industries, which mentioned by multiple scholars in their researches (Buckley, Wang & Clegg, 2007) (Wang C. , 2003) (Chen, 1996). More specifically, those beneficial incentives are to reduce the land use fees for foreign business, make exemption of enterprise income tax, to provide profit remittance taxes and other fiscal incentives. (Chen, 1996). Furthermore, some scholars argue that Chinese government has long favored international joint ventures, over wholly owned foreign operations. This preference is an outcome of the government’s desire to maximize the direct and indirect benefits of foreign firms’ presence. Foreign investors have been encouraged to participate in the restructuring process of SOEs, and to transfer modern technology and

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management skills directly to the joint venture, and indirectly to parent and related Chinese firms (Buckley, Wang & Clegg, 2007).

From the research of Davidson, Chinese government was significantly influenced the time in establishing a joint venture in China based on two basic variables (Davidson, 1987). Frist variable is the Chinese partner. If the Chinese partner is in the list of growing industries, the negotiation process will be impressively simplified. In his research, two-thirds of companies were formed with national corporation therefore the arrangements are much easy. For instance, the global pharmaceutical corporations GlaxoSmithKline and Novartis, they chose partners for their joint ventures in the vaccine market in China. Lucky, through their partner Shenzhen Neptunus Interlong Bio-Technique Company and Zhejiang Tianyuan Bio-Pharmaceutical, both joint ventures helped them to access the government vaccine-procurement programs (Bosshart, Luedi & Wang, 2010). The second variable is the location of the joint venture. Big cities like Beijing, Shanghai, Guangzhou are strong attractive but already many foreign companies existed. Joint ventures located in a secondary area will specially draw attention from the local mayor and government representatives. Local personal contact therefore can help to speed up and make all process easier according to Davidson’s research (Davidson, 1987).

On the other hand, government plays an outstanding and profound role in Chinese business. Under the condition of central planning economy before 1980s, the government is taking charge of Chinese economy and business operations; the vestige still exist 20 years later, business procedures and behaviors are restricted by government laws and regulations (Gao, 2006). In such a case, it is admittedly that to build a good and close “Guanxi” in China especially with Chinese government is necessary for foreign multinational companies. Furthermore, acquiring the permission of government would facilitate the business process and management. Thereby, if the foreign multinational companies expected to succeed their business in China, they firstly should learn “Guanxi” and use it to keep a good relationship with Chinese government.

The Ministry of Industry and Commerce (MOFCOM) also tried to help foreign investors, thus they set up a mechanism of “application by a single form and acceptance by a single department” for all the administrative issues, including the approval record of

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foreign-funded projects or the establishment of enterprises (Centre, 2015). Normally, foreign investments are categorized into encouraged, restricted and prohibited investments by governments and are given differentiated treatment accordingly. However, in the FTZ, the government decided to adopt a so-called “negative list” (Palmioli, Giovanni & Heal, 2014). The negative list contains special administrative measures considered inconsistent with the principle of national treatment for example to prohibited in the research, breeding and cultivation of rare and unique precious varieties of seeds;

Unlike the western countries, China is a relationship-based society country instead of a rule-based. In a relationship-based society, people trust personal networks and relationships over rules and regulations. However, research has been done by Old Dominion University that in a poor governance environment like China (e.g., weak laws and rampant corruption), investors choose direct investment over indirect investment because of the protection by private means, including relying on insider information and private measurements. A case study was specific conducted in China, it indicates that although China lacks a good governance environment, it does attract a large amount of foreign direction investment (Li, 2005).

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2.4 Research Gap and Valuation

First, numerous researches mentioned above regarding the European business expansion to China were conducted between year 1990 and year 2005. Only few researches were carried out in this topic for the past 10 years. Another gap can be observed about the sheer number of potential Chinese companies for European companies to do business with. China is an enormous country that has been growing for the past decades in terms of their enterprises and entrepreneurs. Many articles write about the high number of growing startups in China (Zhang L. , 2015)(company, 2016) (C.Custer, 2016). Especially new startups have a high potential to be merged, acquired or joint-ventured with the European companies who want to enter the Chinese market. Thirdly, the studies have been mainly focused on macro level considerations regarding the inwards and outwards foreign direct investment (Young, Huang & McDermott, 1996) and it is further argued by Ulgado and his colleagues that the researches in micro-level studied in organizational, operational and managerial activities should be further investigated (Ulgado, Chwo-Ming & Negandhi, 1994). Thus, there are not many recent researches which have great contribution in investigating the newly entered European enterprises, especially in the focus of studying their contemporary strategies and challenges.

Based on the three main reasons above, this research attempts to fill in the research gap and focuses on business expansion from Europe to China. A research of “What are the contemporary strategies and challenges of European companies to expand their business to China?” is therefore conducted.

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3. Data Collection and Analysis Method

This paper researches the contemporary strategies and challenges of European companies to expand their business from Europe to China. By answering this research question, a qualitative multiple case study combined with a quantitative validation method are used. According to Eisenhardst, case studies can provide crucial exploratory information and evidence for the further development of theory (Eisenhardt, 1989). Based on Yin, there are several variations of case studies as research methods (Yin, 2009). Within this study, the focus is on discovering and explaining the strategies and challenges of European companies to establish the business in China, in other words to find out the most popular method used to enter the Chinese market and the difficulties corresponds to them.

3.1 Data Collection

Participates were identified using purposive (Stone, 1978) and referral (Welch, 1975) sampling methods. 5 case studies were conducted from different companies which are in various industries in order to explore the strategies and challenges. It means that the sample also had characteristics of maximum variety sampling (Saunders & Lewis, 2012). In the multiple case study research, different data collection techniques are being used. In order to provide reliable and valid results, research firstly utilized a qualitative and exploratory approach to gain a thorough understanding of strategies and challenges used by companies to expand their business to China.

Data was collected from 5 European companies which have established the office in China. The in-depth interviews are held with top-level management of the companies who were involved to set up the Chinese entity. The interviews (Appendix I Semi-structured Interview Guideline and Appendix II Interview Protocol) are semi-Semi-structured in the following key subjects and probing to certain responses. This method was chosen for its richness in data, its flexibility and its ability to fulfill the research propose of identifying the advantages and disadvantages of their strategies, challenges and Chinese government role in involving the foreign business.

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Table 3: An overview of case study companies

Company name Interviewee name Position Type of business Employees in China Build year

Bonnard Lawson Choy Yiu Chan Senior lawyer Law firm 11 employees 2006 Mains

International

Simon de Raadt General Manager

Trading company 10 employees 2008

Livecome Thomas Knoops CEO Technology

service

10 employees 2011

The George Siebe

Gerbranda

Director Marketing agency 15 employees 2014

LITAO Consultancy

Group

Lina Bartuseviciute

Founder Consultancy 10 employees 2014

3.2 Data Analysis

The software program Nvivo was used to code and analyze the data. These 5 cases were coded individually in the beginning. During the analysis process, each individual transcribed interview was coded following the Gioia methodology (Gioia, Corley & Hamilton, 2013). In the 1st_{-order analysis, coding started with 5 cases separately, which} tries to adhere faithfully to informant terms. By doing so, 50 of 1st_{-order categories came} up with from the 5 cases. As the research progress, the 2nd_{-order analysis is to distinguish} the similarities and differences among all interview data, which helped combine the similar information into the same categories.

In summary, there are 3 categories in strategies inducted from 5 interviews, which 1 of the companies used representative office method to set up the entity in China. Although the company would like to choose the WFOE method, the law industry is highly regulated in China. The only allowed method to form a foreign law firm company is to open a representative office. Other 4 companies were all used WFOE method to set up the office although 1 of them mentioned the joint venture and other 2 mentioned

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representative office method in interviews, WFOE is still the best-chosen strategy to enter the Chinese market based on the interview results. Regarding the challenges those 5 European companies faced while entering the Chinese market, 15 categories of challenges were inducted by those 5 interviewees, but 6 of them are highly validated since more than 3 interviewees mentioned and described them as challenges. 3 categories to view Chinese government roles are discussed to see whether the Chinese government are being supportive, neutral or difficult in building an office in China.

Table 4: An overview of Nvivo Analysis

Categories Nodes Sources References

Strategies JV 1 1

RO 3 6

WFOE 5 10

Challenges Experiences with setting up an office in CN 4 12

Experience with communication 4 10

Experience with cross-culture related aspects

3 9

Experience with Chinese documentation 4 5 Experience with local Chinese employees 3 10 Experience with local Chinese employee’s

working mentality 5 27 Chinese Government Role Supportive 2 Neutral 3 Difficult 0 3.3 Validation Method

There are varies validation methods based on the research of Horn (Horn & Werner, 1997), which can be divided into three main categories. They are time-point method, time-interval method and trend checking. In this research, time-point cross validation is used to test the results.

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A quantitative validation with a designed questionnaire (Appendix III Questionnaire) are handed out to 25 European companies, who operate business in China. Based on the results from interviews, a questionnaire specifically looks for the validation of the most preferred method of European companies to enter the Chinese market. As 4 interviewed companies chose WFOE to set up the entity in China, the validation is desired to confirm the majority companies prefer to use WFOE as the strategy to enter the Chinese market. Furthermore, the identified 6 main challenges based on the interviewed companies are designed to rate by those 25 European companies to further evaluate the impact of each challenge. The scores are between 1 and 5, which ranked from “not challenging” to “very challenging”. In total, there are 12 qualified responds. The analyses of those 12 responds data together with the validation results are explained in detail in the chapter 5.

4. Results

4.1 Case 1: Bonnard Lawson: Swiss Law Firm

Bonnard Lawson is an international law firm with headquarters in Lausanne, Switzerland (Lawson, 2017). The interviewee named Choy Yiu Chan, who is a senior lawyer in Bonnard Lawson. Bonnard Lawson has offices globally in Geneva, Dubai, Hong Kong, Paris and Luxembourg. The lawyers in the law firm provide classical legal assistance as all lawyers do. Bonnard’s Shanghai office was built in 2006 and Choy joined the company in 2009. Currently, there are 11 lawyers working in Shanghai office, which 4 of them are foreigners and 7 of them are Chinese. Back to 2006, Bonnard Lawson’s partner got a fantastic opportunity from a Chinese client who has many real estates in Shanghai. Since Bonnard was as well interested in the Chinese market, an opportunity was well taken from that friend in real estate industry. Furthermore, Bonnard was planning to open an office in Dubai, it was one of the requirement to have offices in three separate locations aboard to be able to set up an office in Dubai. It enhanced the need for opening an office in China, which the given opportunity from the Chinese client helped. Initially, a Swiss lawyer was hired to be present in the Shanghai office, but it was not successful to continue work in Shanghai, many other people join the company in the meanwhile (Chan, 2017).

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P a g e 29 | 144 4.1.1 Strategy

A foreign law firm is highly restricted to establish the entity in China, the only allowed method is to set up a representative office (Wu & Strange, 2000). Based on the interview information, it is confirmed that RO is the only strategy for a foreign law firm to operate in China. Although an alternative can be an option for Bonnard Lawson, which is a consultancy WFOE, but a consultancy WFOE cannot be equalized as a law firm according to the rules and regulations of the business format. By setting up a law firm, much higher requirements than setting up a consultancy WFOE is required. In return with all the extra effort, a more difficult license can be gained as well. Registering a law firm, which takes much longer time than registering any other company. It normally takes one or two years to register a law firm as it requires a special license and need to be agreed by the Ministry of Justice. However, Bonnard was not pressed by time to set the Shanghai office up, which gave them a plenty of time to arrange documents and other substances (Chan, 2017).

4.1.2 Challenges

Unlike the Chinese counterparts to expand overseas, international law firms in China face enormous difficulties establishing and expanding their presence in the Chinese legal market (Cohen, 2011). The biggest disadvantage of operating in China for Bonnard lawyers is that the firm cannot advise clients on Chinese law. It is restricted by Chinese government that law firms are only allowed to give advice about the law of the country where they are from, so Swiss law in this case (Cohen, 2011). Based on Choy’s opinion, it is unfair and unequal. Apart from this benefit, domestic law firms can get many other aids like tax benefits.

Another challenge which recently became difficult is to get working residence permit for foreign employees (Government, 2017). Chinese government relabels foreigners from the country where they are from in law industry. Since Bonnard is a Swiss law firm, the firm must employ Swiss lawyers or Chinese lawyers through a staff agency. Based on the rules, the firm therefore cannot employ the lawyers from other countries for example America or France.

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Working with local Chinese, working mentality is the biggest challenge for Choy. Chinese people grow up in a hard and competitive environment, it shapes them to be hard-working employees. The advantages of hiring the local Chinese are that Chinese are not afraid of deadlines and not lethargic. The Chinese law education is great as well and have the values on the right place. There is not much miscommunication about what is right and what is wrong and how law should play in a role in society. However, it is still different between Western and Eastern on working mentalities. An example was given that for a foreign lawyer, it’s out of the question on most of the developed western countries that they are against death penalty, which Chinese colleagues are used to the rule of death penalty. Furthermore, Chinese colleagues are too much caught up in details and the way to formulate things are quite cliché. Unlike the European people, Chinese cannot talk straightforward. Instead, many long sentences are used to describe things, which can be seen in the name of the law for instance.

Hiring female employees in China can also be a challenge. In China, female workers are more ambitious, in many cases they are better than males and know what they want. However, ladies in China are sometimes immature especially it is a problem when a consultant role needs to be played. It is hard for some female workers in China to act professionally, independently, express their own opinions and take risks according to Choy’s experience (Chan, 2017).

4.1.3 Chinese Government Role

Chinese government set many restrictions to foreign law firms, it was largely limited to permit foreign law firms to open more than one representative office in China (Cohen, 2011). Furthermore, such offices continued to be restricted in the type of services they could provide, that foreign law firms are only allowed to give advice about the law of their home country (Cohen, 2011). In this case, Bonnard Lawson is originally a Swiss law firm which the lawyers can only advice about Swiss law and this rule applies for all foreign law firms in China. All American law firms and all English law firms can only advise on their country’s laws as well. This rule not only effects on getting clients in China as well as effects the hiring process. Bonnard is not allowed to employ Chinese lawyers directly, but through a staff agency. Furthermore, Chinese government is also protecting domestic law

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firms, in which domestic law firms have many advantages like tax benefits for example. In Choy’s opinion, it is quite unequal and unfair for foreign law firms.

Moreover, any law firms need to gain a special license from the Ministry of Justice (P.R.C, 2017), which is restricted as well. Chinese governments don’t approve too many law firms in the same region, and it should be restricted in a country level. Therefore, if there are already one or two foreign law firms in a certain region, government most likely delays the application without any official reason. In the meanwhile, the application will be put in the closet and no process anymore.

China has a relationship-based society, “Guanxi” relationship with various levels of the Chinese bureaucracy are important for both Chinese and foreign business people operating in China (Michailova & Worm, 2003). One example was given by Choy, the Ministry of Justice noticed that in Bonnard’s letterhead, it was mentioned Shanghai office without a completed official registration. The application of registering an office in Shanghai was immediately got rejected because government was offended by this behavior. Luckily, one of founding partners from Bonnard had a great “Guanxi” relationship with a Chinese lawyer who has a great “Guanxi” with Ministry of Justice. By using this personal relationship, the problem could be solved without any consequence. Furthermore, documentation could be a challenge. When submitting all the applications to start to register an office, everything must be perfectly right before Chinese government accept the documents, same as the identical signatures.

Towards Chinese government, it is a neutral role Chinese governments are playing. From a state-level, Chinese government encourages companies and tries to make things easier, it can be seen by the changed legislations. There is no minimum capital for registering a WFOE anymore and procedure is simplified time by time. However, from an execution level, it’s still an individual officer who deals with the application, which doesn’t go into policy or desire of a state-level. The local government’s focuses on doing their job well, so every single application needs to meet the standard regulations (Chan, 2017).

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4.2 Case 2: Mains International: Dutch Trading Company

Mains International is a trading company focuses on three main businesses. First, the company helps European retail companies source in China, the more specific responsibilities are to find a factory, look for products, control the quality of goods and get goods on boats to ship to Europe. It is an export-from-China oriented business. However, only doing export from China to Europe was harder since the material prices went up, labor prices went up and the exchange rates were changing rapidly. Simon and his team therefore developed another branch of business to import (International, 2017). The interviewee is Simon de Raadt, who is the general manager of Mains International in China since 2011. He is responsible for all activates in China. The Shanghai office is the headquarters of Chinese business, which was established in 2008 officially, then there was a branch office in Shenzhen afterwards. Currently, 7 employees are based in Shanghai and 3 people in Shenzhen. From Simon’s opinion, it is impossible to have a business in China without local employees. It can create trust as well as reliability if the company hires local Chinese (Raadt, 2017).

4.2.1 Strategy

Back to 2007, Mains international investigated in what strategy should be used to enter the Chinese market. A legal advisor was employed to set up the entity and to find out the best business structure. Eventually, WFOE is the best strategy. The reasons for not choosing RO or JV were most of the import and export business require a license and an independent entity is preferred to do the business of import and export (Yadong, 2000). WFOE therefore matches all the requirement for a trading company and being flexible on managing the business without a share (Deng, WFOEs: The most popular entry mode into China, 2001). Depends on the company license and the way company wants to develop, the registering time can take up to 3 months. To be able to physically operate the office in China, pay employees and open a bank account with the company license, it can in total take approximately 9 months. Financially, it is not a big investment. However, a registered capital was required (Virginia, 2001). When this registered capital is large enough, company can apply for a credit card. Although for a low-risk reason, many

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companies prefer to register a low capital in bank, there are more benefits to have a high registered capital for a long-term investment (Raadt, 2017).

4.2.2 Challenges

The biggest challenge Simon faced is the cross-cultural difference, especially on the lack of understanding from both sides between 3 founders in The Netherlands and the whole team in China. Simon’s responsibility is to cross the message for activities in China and explain the needs from the other side and vice versa. Since 3 founders are not regularly operate in China, the lack of understanding of the situation in China is the biggest hurdle for Simon. As mentioned earlier, the local representatives are crucial, business cannot be done by only foreigners. Clients or customers would not approach foreigners easily, since there is still a boundary between Chinese and foreigners. A first point of contact is a key to make the clients open and share the crucial information.

Working mentality is another challenge for Mains international. As Simon heard before he came to China that “don’t delegate but instruct”. It’s very hard to delegate and get the right result, it is necessary to instruct and explain everything to the Chinese team. The difficulty Simon faced is that he cannot let every detail goes and need instruct every step to the Chinese team (Ying, 2000). The willingness is there for the Chinese, the way to communicate the message is very detailed. When everything gets stuck, Simon has to be the one to make decision since Chinese would not expect themselves to make decisions. In Mains’ Chinese team, everyone is able to make decisions, but it still need managers to figure out the process once things get stuck. In Europe, things work differently, most of the time employees write down the advice and propose the direction to go as a suggestion to their managers. Although the process of getting things done are the same, ideas are as well from employees, it is just not delivered as the same as in Europe. Communication was hard in the beginning since there were only 2 Chinese in the office. Two of them were more comfortable to speak with each other in their own language. Simon tried to change it and succeed in developing the skill of employees’ English (Raadt, 2017).

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4.2.3 Chinese Government

The government influences foreign companies mostly on an industry level instead of a company level. The companies in China do have to file many documents with stamps and chops. However, government cannot stop anyone to do business. Every established business needs a lengthy and a massive filing process. From an e-commerce perspective, the government has a significant impact on the industry regulations, which also changed Mains International’s business model several times. Therefore, it is the biggest hurdle for Mains to be able to adapt accordingly and find a way to keep making money. Negotiating with Chinese government is very hard as well as building up a good relationship. In China, if the company is not big enough to operate on the government’s radar, all actions mean to nothing to the government. The rules and regulations should be strictly followed, which further showed that China is a relationship-based country.

Another interesting regulation is that if a company is registered in a district in Shanghai, the main contact person from the government will be the tax office to file business tax and income tax in the district. The regulation has limited the company to only set up the entity in one region, for example if a company has been set up in XuHui district, it cannot be moved to another district without closing the company and re-opening a new one in the new district (WFOE, 2016). Furthermore, the bank will be frozen for 6 to 9 months. Thus, open an office in a free trade zone becomes to a trend for international companies. In a free trade zone, companies have more flexibilities in regards of having two addresses for the operational office and registered office.

Government is heavily involved in setting up an office or change the office address, for instance the company has to visit 6 or 7 different offices to collect stamps for the process. In those processes, government is not being helpful since many miscommunication and misunderstanding of documents happened, which led the process to start over again. Companies need to figure out the process alone instead of relying on government’s help. Furthermore, the necessary of the chops, stamps and put them on every document is strange to Simon. Not only for Mains international, the Dutch customers of Mains also need to make chops and stamps for approving all documents in China. Signature is worthless, stamp is everything. To understand the value of the little

Contemporary Business Expansion to China : five case studies to explore the strategies, challenges and government roles

6/23/2017