There are many forms of international operation, including sales of goods and service provision, brand authorization, foreign investment, foreign cooperative management, etc., and in the 17th issue, we will tell you about the more common foreign investment.
From the perspective of share holding and control, foreign investment can be roughly divided into wholly-owned holding and joint venture.
When an enterprise wants to start an international strategic layout, should it choose a wholly-owned or a joint venture?What are the advantages and disadvantages of both?Let's take a look at how other companies choose.
The first example is about TCL. Vietnam is the first stop for TCL to take the international stage. TCL has established TCL (Vietnam)** in Vietnam to build a factory in Vietnam, and has chosen to use a wholly-owned holding model to have a domestic team go to Vietnam to understand the opportunities and challenges of the local market and operation.
In the early development process, TCL did face many challenges, in the local market dominated by Japanese and Korean brands, the quality of Chinese products was not trusted by the locals, resulting in the Vietnamese company has been in a loss-making state for the first two years, and later through the adjustment of business strategies, improve the service experience and other measures to achieve a turnaround.
From the case of TCL, we can find that:Due to the fact that they are facing a completely new market and do not have any partnersDespite the preliminary research and preparation, TCL is also facing a long period of adjustment, during which a large amount of capital investment is required, which not all enterprises can afford. Building factories, leasing warehouses, hiring labor, marketing, etc., all require financial support for early construction. In addition, due to the lack of the blessing of local collaborators,In the process of operation, it may be difficult for enterprises to obtain the support of local policies and various business resources, and may face problems such as low market trust and cultural differences, which often lead to difficulties in turning losses into profits, so they cause great financial pressure
But wholly-owned holding also has its advantages, that is, in terms of control, the headquarters can fully control the operating decisions of the subsidiary, and 100% of the profits belong to the parent company;At the same time, the concentration of control can also avoid conflicts of interests and goals of all shareholders.
So what if you choose a joint venture?Let's take the case of Tencent Group to illustrate.
In 2021, Tencent Group acquired part of the shares of Kadokawa in Japan, and the two parties established a joint venture business alliance. Kadokawa is a well-known Japanese publishing giant, with industry-recognized strength, experience and influence in animation, game and IP operations. Tencent Group's strategic decision to invest in Kadokawa this time can reduce capital investment in international operations, Kadokawa has IP operation capabilities, and Tencent can adapt IP into games, and the two can use their existing advantages to achieve the effect of 1+1 2.
In addition, for enterprises that need to operate locally, there are local enterprise joint ventures, which are easier to obtain local resources, market reputation and other support, which is conducive to quickly opening up the local market.
But joint ventures also have their inevitable disadvantages, such as: ifThe objectives of the parties to the joint venture are different, and there may be differences on the distribution of product profitsFor example, Tencent is only the third largest shareholder of Kadokawa and does not have 100% of the right to speakAt the same time, due to the cultural differences between the parties to the joint venture, internal management problems such as slow decision-making may occur on major matters that require decision-making by all parties at the shareholders' meeting.
In summary, no matter which OFDI method is chosen, it is necessary to comprehensively evaluate the cost and benefits of the project, analyze local resources and policies, gain an in-depth understanding of the local market, and make comprehensive calculations such as investment cost calculation, tax burden cost calculation, and return on investment analysis before making a decision.
Borrowing overseas shares can avoid taxes, is it an IQ tax?丨Issue 16.
Red-chip structure - a detailed explanation of the classic structure of overseas listing丨Issue 15.
The offshore exemption for Hong Kong companies will result in hidden income丨Why do many sellers want to open a Hong Kong company in the 14th issue?丨Issue 13.
The vernacular explains through China's first major tax - value-added tax丨12 periods
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