(WFOE)
WFOE versus Joint Venture: What should I Choose to Do Business in China?
The Wholly Foreign Owned Enterprise (WFOE) has become a very popular business concept in china and new businesses from foreign normally prefer this method, if they have enough resources to take with the problems coming in their ways. When you start your business in china as a foreign company and you prefer not to take local partners, it means you are going to make a big decision because without any support, you are going to win customers from local Chinese markets. Of course, you must have enough resources, big investment and dedicated local or international sales and management staff who can think your business as their own and support you to make a place in local markets for your services and products.
On the other hand is Join Venture which is considered to be much easier than the WFOE because you have local partners who are well aware with the local markets and have connection and therefore, it does not take a long time for them to introduce your products to the locals. This seems to be a much better option as the foreigners don’t have to put lots of efforts and everything is done locally by the partner who arrange human resources from other companies and try to manage things and within a month, you see yourself as a big Chinese business. However, there are some big issues with this option.
First all, you are not alone in making decision and in fact, your local partner has the advantage of knowing local language, contacts and business and thus he has more say than you in making decision which simply means, you are not the in charge of the operational practically. Secondly, when you give all your assents in the hands of a partner who is using local resources, you might not expect high quality in everything. You might have thought to make your company as a high standard one but when you start with JV system, it seems almost impossible to take the company at that level.
WOFE in China is not very popular option because of the fear of failure but those foreign companies which have adopted this approach and become successful are doing very well as once they made their place in local markets, it is not at all difficult for them compete with the local businesses in the same industry and few making some sensible efforts, they come in the position to start generating review from business operations.
First all, you are not alone in making decision and in fact, your local partner has the advantage of knowing local language, contacts and business and thus he has more say than you in making decision which simply means, you are not the in charge of the operational practically. Secondly, when you give all your assents in the hands of a partner who is using local resources, you might not expect high quality in everything. You might have thought to make your company as a high standard one but when you start with JV system, it seems almost impossible to take the company at that level.
WOFE in China is not very popular option because of the fear of failure but those foreign companies which have adopted this approach and become successful are doing very well as once they made their place in local markets, it is not at all difficult for them compete with the local businesses in the same industry and few making some sensible efforts, they come in the position to start generating review from business operations.