The case revolves around JAFCO Asia’s investments and financial support in China while primarily being a Japanese firm. JAFCO, along with other venture capitalists has gone through major ups and downs in its relationship with Chinese companies and the Chinese government. This relationship has faced ups and downs as the Chinese government, primarily Communist in nature, has been exposed to capitalistic business ventures and enterprises. A point of concern for JAFCO Asia has been the status of its current and future investments in the People’s Republic of China.
A case in support for JAFCO Asia’s investments in China has been the liberalization of trade and foreign investment in China. China has primarily been a closed and nationalist economy with total focus on local companies. In the early 2000s, however, the economy has opened up to international companies. This step has been of a major benefit to venture capitalists such as JAFCO Asia, who have capitalized on the opportunity and funded many projects in Eastern China.
The SWOT Analysis below is presented while keeping in mind the interests of JAFCO Asia as a venture capitalist in China. Researchers have identified SWOT as an effective technique for analysis (Low & Gao, 2014).
- A proven track record of supporting business enterprises in China
- Failure to adapt to local customs and tastes
- Unsuccessful contracts and deals in the past
- Growing Chinese economy and strong financial institutions
- Deteriorating relationship on the national front between China and Japan.
- Riots and protests against Japanese interests and employees in China.
Currently, two options are available to JAFCO Asia in the scenario. Based on the background discussion in the case and ground realities, the company is faced the following options as alternative solutions:
Stated Conclusion of the Case
- Devote a major chunk of JATF III to China and have total focus in China as a country (Chen & Reger, 2006).
- Wait for the Chinese government and the market for technology to further stabilize and develop favorable rules and regulations for the investors (Chen & He, 2014). The recommendation presented in the last section would highlight one selected course of action and its justification.
The case concludes that JAFCO Asia is currently finalizing a deal with Asia Technology Fund, worth $200 million. In this arrangement, JAFCO Asia and JAFCO Company Limited are the major parties who will both be investing. However, the conclusion raises the point that whether JAFCO should invest the fund right now or wait for more liberalization and trade relaxations in China as a country.
The recommendation for JAFCO Asia is to take a higher risk currently for a higher return. That is, invest the funds right now in Asia Technology Fund. This is because the technology in China is transforming today into ever new technologies and innovative products. Hence, this is the correct time to invest funds in a technology-oriented venture. It may not be advisable to wait for more relaxations and benefits from the government in this regard.
Chen, H., & He, Q. (2014). Recent Macroeconomic Stability In China. China Economic Review , 30
Chen, X., & Reger, G. (2006). The Role Of Technology In The Investment Of German Firms In China. Technovation , 26
Low, S. P., & Gao, S. (2014). The Last Planner System In China's Construction Industry — A SWOT Analysis On Implementation. International Journal Of Project Management , 32