Question

5. Drysdale Co., a U.S. firm, considers to establish a Chinese subsidiary that produces cell phones in China and sells them in Singapore. This subsidiary pays its wages and its rent in Chinese yuan. The cell phones sold to Singapore are denominated in Singapore dollar. Assume that Drysdale Co. expects that the Chinese yuan will continue to stay stable against the U.S. dollar. The subsidiary’s main goal is to generate profits for itself and it reinvests the profits. It does not plan to remit any funds to the U.S. parent. Drysdale Co. also conducts the assessment of the country risk of China. Drysdale has identified various political and financial risk factors, as shown below where 5(1) is the best(worst)value/lowest(highest) risk. Political Risk Factor Assigned Rating Assigned Weight Blockage of fund transfers 2 40% Bureaucracy 2 60% Financial Risk Factor Assigned Rating Assigned Weight Interest rate 4 15% Inflation 3 25% Exchange rate 5 20% Competition 4 20% Growth 5 20% Drysdale Co. has assigned an overall rating of 53 percent to political risk factors and of 47 percent to financial risk factors. Drysdale Co. will not establish the subsidiary in China if the country risk rating is below 3.0. What is the country risk rating of China and should Drysdale Co. establish the subsidiary in China? (Points : 3.3)        6.15; yes        3.01; yes        2.83; no        1.98; no Question 6. Continued from Question 5, what should you do if you were the representative of the Drysdale’s Chinese subsidiary when, during negotiations, the representatives of the other Chinese business keep mentioning that the proposal is unworkable and that they fear agreement will not be met? (Points : 3.3)        Offer concessions to save the deal.        Display some anger to demonstrate your commitment to the partnership.        Suggest an end to the negotiations and gage their reaction. Question 7. Continued from Question 5, you, the manager of the Drysdale’s Chinese subsidiary, are holding a meeting with Chinese colleagues. (Points : 3.3)        Speak bluntly and expose why the idea is not workable. The Chinese respect plain speaking.        Acknowledge the suggestion and state that you will think about it. This saves anyone from losing face.        Reprimand the colleague. In China it is rude to make suggestions to the boss.

Answer 1

Question1:

Have a look at the following:

Answer: 3.01, Yes

Question 2

In China, patience is a virtue and anger, impatience, anxiety, threats to walk out of the negotiations etc. questions your sincerity and committment. This rules out the 2nd and the 3rd option. The best way is to listen more, and finally offer concessions to save the deal.

Question 3

In China, diplomacy pays off. While it is not advisable to bluntly and plainly reject their ideas, you should be very careful in explaining your reasoning. Chinese do not want to lose face and shall never disagree with you in the public. Hence, acknowledge the suggestion and state that you shall think about it.