The impact of Chinese culture on the service contribution in European manufacturing companies

Few Chinese subsidiaries of European manufacturing companies are reported as making profits. The majority find it extremely difficult to transfer their traditional business model to China. According to the business model, the European manufacturing companies generate a major share of their total value proposition through services. They earn, for example, about 25% of their total revenue through services in Europe, but their Chinese subsidiaries achieve only 10%. Thus, they are losing potential earnings and weakening their overall profitability. The main reason stems from the problems associated with managing the service business in the context of Chinese culture. The present article analyses these effects and offers some guidance for managers seeking to increase the service contribution in the Chinese subsidiaries of European manufacturing firms.