Extending Retail Services in China Research Paper

Extending Retail Services in China - Research Paper Example Coca-Cola, an American-based soft drink manufacturer has had to adapt to the Chinese environment so as to emerge as a leading soft-drink manufacturer in the country. Thus, this paper gives the history and nature of China and its people and the etiquette of business in the country. It further evaluates the cultural, economic, political and legal environment in the country. Using information from various secondary sources, the paper analyses the experience of Coca-Cola in China, as a case study of the impact of a country’s economic, cultural, political and legal environment on international business. The Political and Legal Environment in China China has been governed by the Chinese Communist Party, CCP for about 63 years since 1949 when it assumed power through a civil war victor. Nonetheless, Ambler, Witzel and Xi (2009) observe that there has been tremendous transformation in the political culture and institutions over this period of time. Even though this party upholds a mon opoly of power and does not tolerate being questioned, Lawrence and Martin (2013) consider the political system as being neither rigidly hierarchal nor monolithic. This form of centralized government is referred to as Maoism by Peteghem and Zhang (2010). The formal political culture of the Chinese upholds collective leadership, the military as a wing of the CCP and strong legislature on paper but weak in practice. In China, politics go hand in hand with commerce and discipline could be executed by the Communist party. The government of China is largely involved in the primary businesses in the country. Devonshire-Ellis (2011) observed that out of the 46 Chinese companies that were listed in the Fortune 500, 40 were state-owned. This author notes that as soon as a business becomes viable, government interest takes over. Apparently, instead of the returns from these businesses ending up in state coffers, they filter down to state officials (Hamilton & Zhang, 2012). Similarly, to succe ed in business, there is need to establish appropriate networks with these officials, referred to as guanxi (Peteghem & Zhang, 2010). This causes difficulties with regards to transparency in China and among the business executives that are engaged in business in the country. This becomes particularly difficult when dealing with the US and EU companies where corruption amounts to a serious crime. China’s legal reform process began in the past about a decade aimed at motivating the opening of its markets having joined the World Trade Organization, WTO. One of the legislative policies of China is to reduce its control over state-owned enterprises (Sweeney, 2010). The authorities of China have the approval process relatively centralized such that it integrates national, regional and local authorities vertically. The law in China distinguishes companies depending on their capital source. Domestic companies typically have less than 20% foreign shareholding while Foreign Investment Enterprises, FIEs could be Foreign Invested Companies Limited by Shares, FICLS, Wholly Foreign-Owned Enterprises, WFOEs or joint ventures. A legal entity would be determined majorly by the kind of investment being undertaken, such as being a direct acquisition or joint venture. Even though the laws of China could allow foreign investors to make a choice from a variety of investment entities, it could occur that the investment destination could be