Electronics industry in Taiwan
The Taiwanese electronics market is a fast growing market and a potential investing sector for firms intending to venture in the country - Electronics industry in Taiwan introduction. The country is rich in terms of production efficiency, resourcefulness and technological advancement making it possess some of the most promising markets in the recent times. This paper analyzes the political and economic situation of Taiwan and in particular the electronics market with the intention of evaluating the major issues that influence or affect the entry modes into the electronics industry in the country. The paper further evaluates the various issues considered when making decisions concerning investing in the Taiwanese electronics industry. The ethical issues considered in making such decisions are also analyzed and the optimum entry modes suggested.
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Taiwan the island
Taiwan also known as Formosa is an island that is located in East Asia and in the southeastern coast of China. The term Taiwan has often been used to refer to the entire territory of the Republic of China both at domestically and internationally levels. This was after ROC lost the recognition for international diplomat as ‘China’ in the 20th Century. The Republic of China has governed Taiwan since 25 October 1945 when it was acquired from Empire of Japan during the World War II. However, during the Chinese Civil War, the Republic of China consequently lost mainland China and from 1950, Taiwan became composed of the territory of the ROC. This is the main reason why ROC is mainly known as “Taiwan” (Clough, 1999).
The rapid growth of economy in the country after the World War II has made it to be among the Four Asian Tigers since it has been transformed to an advanced economy. The IMF categorizes the country as one that has advanced economy while the World Bank recognizes it as high-income economy. The technology industry in the country plays a significant role in the global economy. Though most of the Taiwanese consumer electronics are made in their own factories situated in the mainland China, the Taiwan companies produce a large portion of the global electronics. There has been sound economic management and hard work in Taiwan and this has led to it being transformed to an economic power that takes the lead in producing high-technology goods. In the past the country was known to be an underdeveloped agricultural island. In the 1960s, the country took the lead in exporting labor intensive products and this was facilitated by the foreign investment in the country (Clough, 1999).
The focus shifted to increasing technology-intensive and capital intensive products for developing the service sector and also for exports. Mean while the labor intensive industries in the country were enhanced when the New Taiwan dollar appreciated, the environmental consciousness increased and also the labor costs raised. The country has transited from being a recipient of foreign aid from US to a major foreign investor and an aid donor. Currently, the country is a creditor economy and is among the countries that lead in the foreign exchange reserves. The country has benefited from a sustained economic growth, low inflation and full employment since 2001.however, Taiwan experienced a major recession in 2008 but there were improvements in the subsequent year. The country’s economy has really improved in 2010 and according to the official forecast; the GDP is expected to be approximately 4.72.
Political situation and risks
There exists contrasting issues regarding whether Taiwan, ought to remain under the sovereignty of the Republic of China, become the Republic of Taiwan or else become among the territories that are ruled by the People’s Republic of China. Since 1991, the government of the Republic of China has functioned as a representative democracy for Taiwan along with other states such as Kinmen, Matsu, Kinmen, Fukien, Taiping and Pratas. The government of the ROC has always regarded itself as a sole legitimate government not only to Taiwan but also to its former territories such as Outer Mongolia, mainland China as well as Tuva. This situation has long been ignored since the early 1990s and has been assumed as one that is not challenging and hence the claims held by ROC have never been legally and formally renounced. As a result, different groups have various concepts concerning the present formal political status of Taiwan (Clough, 1999).
Moreover, the situation has been made worse by the fact that there are various efforts portrayed by different groups who wish to handle the controversy particularly through the deliberate ambiguity policy. Most of the current groups have agreed to one political solution; the status quo. The solution lies in letting the status of the country remains the way it is that is as an effective state without the Taiwanese government declaring a formal statement of independence. This is because there is no clear statement on what would be included in the formal declaration of the country’s independence. There could result to some confusing in the process bearing in mind that the People’s Republic of China has never at any time gained control over Taiwan and the Republic of China that today controls Taiwan, regards itself a de jure sovereign state. The status quo is currently accepted by many simply because it does not offer a definition on the future status or legal status of Taiwan, hence allowing each group to offer an interpretation of the situation depending on what seems politically acceptable among its the members. The policy of the status quo has often been criticized because of the different interpretations concerning the meaning of the status quo and this is likely to result to a war through miscalculation (Clough, 1999).
The Taiwanese legal system remains a controversial issue which emanates from the complexity created from the history of the Second World War. The Republic of China, People’s Republic of China and the supporters of Taiwan independence has raised a variety of arguments concerning this issue. The issue has important bearing regarding the political status of Taiwan and also entails many aspects concerning the international law. Generally, the Republic of China exercises the sovereignty over Taiwan (Clough, 1999).
The traditional Chinese culture emphasizes on the importance of human interaction and the essence of the interaction lies within the connections. The connections in Taiwan go beyond the tradition of networking that has been developed in United States. The connections in the country have influenced the political, social and commercial relations. A business person’s connection in Taiwan basically begins with the initial contact. The Taiwan plays a great emphasis on personal relationships and hence anyone wishing to do businesses in the country will be required to create a close personal relationship. Local representation in the Taiwan markets is very vital for success particularly if a firm is contesting for a contrast open to international competitive bidding (Paul, 1993).
In marketing products in Taiwan, it is important for one to establish a healthy relationship with a distributor or local agent. Often, foreign suppliers in Taiwan appoint several agents to represent different products lines for a particular company. Distribution methods in the country vary with individual and product situation and must be twisted to fit specific conditions. When dealing with the Taiwanese, personal contact is not only important because of building a personal relationship but also because such discussions create an opportunity for one to meet new equipment and processes. The best way to improve connection in the Taiwan markets is building an on-island presence. For a company to get a long-term commercial relationship in the country, it is important to open an office on the island. If this is not possible, it is advisable to build a healthy working relationship with a specific agent. In addition, officials from the senior company should make frequent visits to Taiwan to build a good investment. Such actions portray commitment, respect and sincerity for the Taiwanese (Paul, 1993).
The Taiwan firms value the delivery of goods both at prompt and timely manner. The simple opening of personal contact does not offer a substitute for service, quality and price.
In doing business in Taiwan, it is advisable to start with an obvious fact that one will be dealing with a culture that is very special. Hence it will be easy to enter the market if one observes the following
Ø Business Etiquette
The general rules of etiquette in business are observed very much in the Taiwan markets. The Taiwanese likes doing business with individuals they know and hence a human connection may open many doors in Taiwan. One should use the appropriate intermediary during business meetings and if a Taiwanese respects an individual’s intermediary, it is evident that he/she will show some respect.
Ø Always carry business cards
To make a good impression during the first contact, it is advisable for one to carry bilingual business cards printed despite the fact that most Taiwan professionals converse in English. This a way of showing respect to their language and also portraying a dedication to doing business in Taiwan. This is an effort that opens a way for a perfect initial contact and builds the right atmosphere for the first meeting.
Ø Never push a position too hard
Taiwan people are considered to be tough negotiators internationally. For one to be successful in doing business in Taiwan, it is wise to be firm, dignified and patient in the negotiating table. The negotiating style matters a lot and as a result adversarial and argumentative exchange may distaste most Taiwanese. People in Taiwan prefer using the team approach method in handling negotiations so as to make the best decisions. This means that Taiwanese make their decisions collectively and hence may take time before coming into a consensus (Paul, 1993).
Ø Final Hint
There are so many changes that are taking place in the Taiwan market. It is hence important for one to have a precise market research concerning future trends in business in the country as this is considered a prerequisite for business success.
Decisions made when entering the market
It is not easy to establish new operations in Taiwan especially for a company that fails to prepare and anticipate for the challenges as well as risks linked to the entry in this market. As a result;
Ø Individuals needs to be aware of the particular challenges and risks that the industry faces.
Ø It is important to consider the best entry strategy.
Negotiating the electronics industry in Taiwan
The trans-nationalization in the Taiwanese electronics market
Trans-nationalization of the firm has been one of the most dominating models in the manufacturing industries. This has been the model widely adopted by firms in their efforts to penetrate foreign markets. Firms normally target the neighboring countries at first and then extend their markets to longer distances. This has been proved to be the most effective model of entering the Taiwanese electronics market. Firms can first market in the neighboring nations before finally marketing in the Taiwanese market. Trans-nationalization can be attributed t several factors in the Taiwanese market. The first factor is that world wide markets have become easier to access than they initially were (Mirza, 2000).
The lifting of tariff and non-tariff barriers in major European markets has the made the Taiwanese electronics market more accessible. There also has been an emerging trend of considering regional market factors that affect the electronics firms as opposed to national markets and therefore the market is flexible and easier to enter. Any firms entering new markets employ the regional division of labor in order to produce electronics goods in an international production perspective. An example of a firm that has successfully utilized this approach is the Matushita firm which has creatively appropriates the variable factor endowments, competencies and markets in nations like Indonesia, Malaysia and Singapore (Mirza, 2000).
Emerging trends in the Taiwanese electronics market
Another factor that is affecting the trend in the electronics industry in Taiwan in the decreasing significance of manufacturing-bound evolution is the hardware becoming more commodity-like.and production less significant in regard to marketing to the clients. Product technologies in the modern world have developed to levels where it is very easy to produce counterfeit products except in very complex products. This implies that there is an escalating greater value increased from sales and service. Studies in the electronics markets have shown that firms that concentrate on softer dimensions of value like expert marketers, successful brand builders and expert aggregators and augmentators are excelling and also becoming the lead players in many sectors. The situation is not different in the Taiwanese market (Tolentino, 2000).
Any firm intending to enter and succeed in the Taiwanese electronics market should emphasize more on aspect that add value to the products. This is mainly due to the stiff competition in the electronics industry. Developments and advancement in information and technology as well as inter-firm collaboration especially in global supply chains and logistics managements have facilitated this trend in the electronics industry. Firms in the market are outsourcing in some of their non-core operations form others or from third party providers in an attempt to add value to their commodities and gain an advantage over the competitors in the industry (Mirza, 2000).
A firm entering the Taiwanese market should take this into account since it has a great effect in the firm’s logistics management which has a great impact in its competitive abilities within the industry. Many firms in the electronics industry require their main value chain partners including the component manufacturers, logistics partners and service firms to support them in their entry to new markets. This will definitely be the case of any firm venturing the Taiwanese electronics market. It is evidence that firms that have employed transnational operations mainly in their supply chains have excelled in expanding their supplies to foreign markets. This should also be the case with the firms intending to invest in the Taiwanese electronics market. Firms that have adopted this strategy have in most cases been able to control their entry modes and the market selection patterns. They also have least chances of prioritizing market-specific expertise and have a long term perspective of developing within a particular market. Firms entering the Taiwanese electronics industry are likely to benefit from the productive efficiency, resourcefulness and technological advancement of the country. This is because many firms have become subcontractors and component suppliers in the industry (Mirza, 2000).
Ethical issues in Taiwanese electronics industry
One of the ethical issues that is most prevalent in the Taiwanese electronics industry is the production of imitated products. Due to the advancement in technology, it is now possible to produce an imitation of virtually every good save for the very complicated electronics products. This has forced various firms entering the industry to focus more on aspects that add value to their products rather than the production itself. This is because focusing more on the value of the products places the firms at better competing positions. This has greatly influenced the trends in the Taiwanese electronics industry (The Wall Street Journal, 2004).
Another significant ethical issue is relationship-based motivations in the marketing of electronics goods in the industry. Customer followership is an important motivation in many firms in the electronics industry in Taiwan. This is largely due to the heavy presence of major global players in the industry and also due to the strategic need by the firms to maintain contacts with their customers. Customer follow up has ensured that firms maintain their customers which enable them to fully control their share of the market in the industry. New firms entering the Taiwanese electronics market should thus consider this aspect since it has proved to be an effective way of maintaining the customers. Firms in the industry have engaged in operations such as provision of warehousing functions and technical service as means of ensuring that proper customer follow ups are made (The Wall Street Journal, 2004).
Conclusions and recommendation
This paper has evaluated the entry and development mode options, key activities and motivations of the Taiwanese electronics industry and specifically the flat screens/LCDs. There has been increasing significance of inter-firm logistics collaboration, market and knowledge-seeking elements in motivating Taiwanese IT and electronics industry. It is necessary for any new firm entering the Taiwanese flat screen market to follow their main account customers into foreign markets and more significantly to supplement their associates’ business through efficient seeking, value adding processes like enhancing the delivery procedures, design quality, resource management support and research and development (R & D). There is also a challenge to the policy makers and other relevant agencies to make efforts to continually enhance the nation’s attractiveness to investors and particularly in the electronics sector (Mirza, 2000).
Clough, R. (1999). Cooperation or conflict in the Taiwan strait? New York Rowman & Littlefield
Mirza, H. (2000). “The globalisation of business and East Asian developing-country multinationals”, in Neil Hood and Stephen Young, eds., The Globalization of Multinational Enterprise Activity and Economic Development . London: Macmillan
Paul, C. (1993) Doing business in Korea and Taiwan: cultural and marketing hints.2010/ August 5, 2010 http://www.allbusiness.com/business-planning/business-structures-corporations/353454-1.html
The Wall Street Journal (2004). “China overtakes U.S. as magnet for foreign direct investment; survey finds corporations are increasingly attracted to emerging economies”, Wall Street Journal, 28 June, p. A.2
Tolentino, P.E.E. (2000).Technological Innovation and Third World Multinationals (London and New York: Routledge)