NUTS - another EPIC post.
This topic is really about entrepreneurial enterprises and their investment strategies - be they owner-operated startups, or corporate funded or financed.
To put the discussion into context, is the business operation low cash-flow high profit or high-cash flow low profit. If the business is high cash flow, high profit - the Foreign entity would probably still be here.
Low cashflow, high profit operations are typically expensive products and or services, such as a waste-water treatment facility at DianChi. Once you sell one - that market is essentially saturated.
On the other end of the spectrum, are high cash flow, low profit businesses. This is typically the realm of food and beverage and hospitality industries, and related B2C operations. These operations suffer from intense competition, causing erosion of market share and sales turnover, so companies must be adept at both maximizing their resources, expanding into other products and or services, and tapping into other markets. These things are well understood - from Starbuck's use of floor space to quietly hawk merchandise (ludicrously expensive mugs and paraphernalia), to Salvadors side businesses of health/energy bars, clothing, mugs(?does Sals sell mugs?), etc.
Most startups understand general business requirements of startup incubations - to include controlling the timing of business launches (try to NOT start your business during the spring festival break, in general), the location and market segment of your opportunity, and the executive and line management, and the most critical issue oft neglected - sufficient working capital to make the transition from startup (spending money) to operations (making money).
if a foreign company survives the first 1-2 years - chances are it has a reasonably sustainable business model.
However, business is also an investment and most startups fail to understand, perceive, or deliver on the key issues associated with investments - aka growth and scalability.
So, while a startup MAY be profitable and sustainable, eventually competition erodes market share and revenues, eventually rendering the operation unprofitable, justifying the eventual and inevitable business shutdown and market exit.
It's critical to continuously seek growth and revenue opportunities for additional sources of revenues.
Starbucks is an excellent example of resource utilization - with all of their product placements and sales - from perishable foods, to coffee beans and branded souvenir memorabilia - mugs, french presses, t-shirts, stationary. If smoking weren't frowned upon - we'd probably even see Starbucks branded cigarettes with various coffee flavors (cappuccino, latte, etc flavored or aromatic cigarettes). Maybe they'll look into vaping...
Many times, viable business expansion opportunities are blocked by the corporate home office. Their inability to co-brand or cooperate in a parasympathetic manner dooms a business to it's eventual death by self asphyxiation or starvation. The analogy - isn't it better to share a plate of food (or piece of pie) than to insist on dining alone and starving?
A major IT company I once worked for forbid us from bidding on projects that contained competitor's products and or services. And here we are today, with companies like Nokia-Siemens Networks (soon to be Nokia Siemens, Alcatel Lucent). Now, there's a company that seriously needs a universal rebranding.
For service-based businesses, a key expense is maintenance of brick and mortar offices and skeleton operating staff - secretary/receptionist, janitorial, and security - as necessary.
Sub-letting office space to non-competitive or even parasympathetic enterprises would help reduce overhead, free up working capital, and continue to make the office look busy (assuming your tenants aren't doing strange things).
Most established firms stubbornly refuse to share, accelerating their death by starvation and or self-asphyxiation. Searching for potential partner firms to share office space might also increase sales staff and opportunities through cross-pollination - theoretically. This is akin to a contractual joint venture relationship. JVs got a bad rep from microsoft's heyday as a Black Widow (they'd JV to steal IP, destroying a company's main line of business, sending them into death spirals).
An example of a mutually beneficial joint venture would be an IT services company, paired with hardware vendors, software vendors, application services vendors, etc. OR if you REALLY want to cook - pair your IT services with a janitorial services firm or firms - disparate seemingly unrelated markets - but potentially same clients.
Apartment sales move into this direction when sales are slow - offering pre-furnished and decorated move-in condition homes (essentially, buying somewhat customized model homes). Profit margins take a hit - but product is moving, which is reducing their cost of capital. Unsold real estate is like financed inventory - it generates interest expenses that cut into overall profits.
The ability and desire to continuously seek out new ingredients/opportunities to cook new and innovative deals is critical to startups. Unfortunately, innovation is a talent that is neither encouraged, nor recognized in China's educational or traditional employment systems.
Most conventional staff stick to traditional sales models, practiced globally as it carries zero risk. Core knowledge is rarely shared as it is viewed as a form of job protection. The ability to cook and structure major deals outside the norm requires time, patience, and management buy-in. If the management is also cut from the same block of wood (or clod of dirt) - innovation will never happen and the company will strangle itself to death, not for want of opportunity, but for the inability to recognize opportunity and retain talent to exploit those opportunities.
