Multinational Petroleum And Petrochemical Company's Investment In China Business Strategy And Its Impact Analysis

Some multinational companies have begun their investment in china since the 1980's and some world famous multinational petrochemical companies have begun their investment layout since the 1990's. After China's accession to the World Trade Organization (WTO), they have showed a tendency of accelerating investment progress, increasing investment power, broadening investment fields and changing investment modes. The principle of their strategy is relying on their superiority in capital, technology and marketing, enter the market first, then occupy and develop the market, and affect and control the market eventually. Under the guidance of this principle, their strategy to China shows a feature of changing from indirectness to directness, and from part to whole. Large amounts of multinational petrochemical companies's investment to China consequentially should bring a series of influence on China's resource, market and so on. In this paper the author used some transnational operation theories, put emphasis on analyzing the multinational petrochemical companies's operation strategies which changed with Chinese petrochemical industry policies, and made further analysis of their investment tendency. On the multinational petrochemical companies investment influence, the author stressed on analyzing the investment to China's petrochemical industry. On how to deal with the multinational petrochemical companies's investment to China , the author think the countermeasures relay on two sides: one is country policy support and strengthening management, the other is that Chinese petrochemical companies should be self-improvement.This paper consists of five parts. In part 1 the author made a systematic summary about the transnational operation theories and the concept of multinational company. On the same time, the author also introduced investment entry modes and the factors which affected entry modes. In part 2 the author give a globe look to the basic situation of multinational petrochemicalcompanies's investment in china, then introduced WTO terms of entry on China's petrochemical industry. The author focused on analyzing multinational petrochemical companies's different investment tactics along with the change of investment policy after China's entry into the WTO. According to China's WTO commitment, these multinational petrochemical companies selected investment modes such as heads of agreement, stock investment, multinational union, joint venture, contractual venture and so on. They took the advantage of technology, capital and management, used different investment entry modes according to China's policy and market situation. They have invested in upstream, midstream and downstream area in petrochemical industry, and have showed a tendency of accelerating investment progress, increasing investment power, and broadening investment fields. The essential purpose of their investment in china is to occupy the market and profit after China open its petrochemical products market to foreign investors completely. In part 3 the author further elaborated multinational petrochemical companies's investment strategy in china from an example that BP invest in china LPG area. The BP's tactics is entry Chinese market firstly, then conquer the end market rely on the Chinese investment policies, and invest to up industry chain gradually, form the industry chain investment finally. This can avoid the influence of outer market, and can take internalization advantage. In order to form technical monopolization and market monopolization, BP changed its investment mode from joint venture to sole investment gradually. This will make it strengthen market competitiveness and prepared for conquering China market deeply and overall. In part 4 the author firstly discussed the main problems in Chinese petrochemical companies about crude oil supply, technical innovation and technical advancement, then discussed the advantage and disadvantage that multinational petrochemical companies brought to china. The investment of multinational petrochemical companies to china brought some advantage in technology and capital, but it will make a rigorous challenge faced with Chinese enterprises because of the different level. In part 5 the author proposed some counter-measures on how toface the challenge. Because the important role of the petrochemical industry in the development of national economy, the departments concerned should support it in policy, on the same time, china petrochemical companies should attach most importance to state interest and form domestic union. The oil price system should be developed. On the investment policy, the department concerned should guide these multinational petrochemical companies to invest to the areas where the foreign investment is of great benefit to the development of the Chinese petrochemical industry. The paper also proposed that Chinese petrochemical companies should be self-improvement in order to form their core competence.