Inspiration That Shanghai Companies’ Overseas Strategy Has From The Success Of Japanese General Trading Companies’ Investment In Shanghai

In recent years, large-scale of overseas investment from China has beentaken as signs of “the rise of China”. With increasing economic size andgrowing need for resource and technology, and the need to balance betweenhome and overseas market, Chinese companies have entered a new stage ofglobal strategic allocation from traditional export to overseas listing and FDIinvestment, even to overseas acquisition. However, recent years witnessed morefailures than success in Chinese companies’overseas acquisition. For example,Lenovo merged IBM’s PC business but failed to capture its core technology.CNOOC tried to buy Unocal but voted down by the Congress. Chinalco soughtto a stake in Rio Tinto but quit finally. Lessons learned from history could guide us in the future. In the70s lastcentury, Japan was troubled by the economic slowdown and a forcedtransformation. But its unique business model, general trading company (GTC),seized the opportunity of yen’s revaluation and Japanese economictransformation. By changing the concentration from export to overseasinvestment, Japan established a network of investment projects which coveredthe whole world and involve varied industries and resources. Since2005, GTC’soverseas investment income has become the biggest source of Japan’s currentaccount. GTC’s overseas investment interest accounted for30%of Japanesecompanies, becoming an important power that has built up the competitivenessof Japan for the last30years.So this paper chooses Japanese GTC with similar historical background assubject of analysis, and makes comparison between the overseas investmentstrategy of two countries’company:1. Elaborate the importance of Chinese companies’overseas strategyfor investment and analyze the status quo, characteristics and limits ofChinese companies’overseas investment strategy, and Shanghai companiesin particular.The second chapter analyzes4features of overseas investment by Chinesecompanies. First, the volume is growing rapidly but stock keeps low; secondly,investment areas are mainly about Chinese residential community and tax harvens; third, investment industries focus in business service, finance andmining, with low-end chain as majority; fourthly, acquisition becomes the chiefway to invest, but many failed. On the other hand, the paper sums up thecharacteristics of Shanghai companies’overseas investment: first is thedependence on central government’s approval; second is leading the nation inlocal service platform and support; third is dependence on Shanghai’s industryand comparative advantages; fourth is the investment mainly comes fromprivate companies. Based on the above analysis, several shortages of ouroverseas investment are summarized: first, the “going global” strategies lack ofmatching services, restricts companies’overseas investment and development;secondly, companies are utilitarian but short of long-term strategy; thirdly,investment structure is not complete and the ability to fight risk is weak;fourthly, the localization is at low level and the non-market risk from the hostcountry is underestimated; fifth, the implementation of overseas investmentstrategy is tough task and the road is long, and the companies are in need ofglobal and complex talents.2. Summarize the development stages and strategic models of JapaneseGTC, analyze the success of Mitsubishi Corp, and sum up the successingexperience of Japanese GTC in Shanghai.The Third chapter analyzes the development of Japanese GTC: started with“Found the nation on trade”(1950～1970), experienced frequent problems and downgoing benefits when Japanese economy declined(1970～mid1980),completed the tough transformation from trade-oriented toinvestment-oriented(1985～end of20thcentury), and finally achieved a strongsupport to long-term sluggish economy of Japan(21stcentury to now).Further analyze its strategic model and successful cases, and come up with5keys to success: first is the financial breakthrough of GTC; second is thepreferrential policies the government makes for GTC; third is GTC’s integrationof trade, curculation, investment, consultancy and intermediary; fourth is thefocus on investment function and risk control; fifth is to act according to thesituation and transform from fioreign-invested company to local company.3. Utilize the international direct investment theory and SWOTframework, compare the motives and strategic choices of GTC and Chinesecompanies, and come up with the strategic suggestions to Shanghaicompanies’ overseas strategy.With international direct investment theory, the fourth chapter firstanalyzes the motives of GTC’s overseas investment, and makes SWOT analysison their overseas strategy. Based on the above, GTC’s overseas strategy couldbe summarized that the general direction is to the high value added anddiversification; second, the theoretical foundation of Shanghai companies’overseas investment is established; last, makes SWOT analysis on Shanghai companies’ overseas strategy and finally comes up with the strategicsuggestions.4. Apply the above study to Shanghai companies’ overseas investment,and come up with countermeasures and suggestions from both governmentand company level.The fifth chapter comes up with suggestions and responses from bothgovernment and company perspectives to Shanghai companies overseasinvestment. On government level, China should establish and complete theinsurance system by perfection the related laws and regulations, bringingindustry associations into full play and help companies to tackle down politicalrisk with official negotiation. On company level, chinese companies should aimat developing their core competitiveness, start with long-term economic interest,and make clear strategy for overseas operation; develope advanced technologyand implement brand strategy; achieve multiple ways for cooperativeinvestment and push forward integrated overseas development; improve theadvantages of overseas projects step by step; strengthen and complete the rishevaluation system for overseas investment; carry out local strategy and improvesocial responsibility; bring up and in global experts to enhance the intelligencesystem.To sum up, this paper chooses Japanese GTCs for the study of overseasinvestment strategy, deeply analyzes their comprehensive factors such as historic backgrounds, business models and government backup, as well as thedifference from China’s current environment. Combined with the operation ofShanghai companies, the paper wishes to provide reference for Shanghai evenChinese companies’ implementing “go global” strategy in future.