Strategic and Competitive Position of The News Corporation (TNC)

Table of Content

 

Executive Summary

SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Mission

Strategies of TNC

Rational for Diversification to Satellite Broadcasting

Motivation for Diversification to Satellite Broadcasting

Diversifying into Satellite Broadcasting

Advantages of Acquisition

Disadvantages of Acquisition

 

Conclusion……………………………………………………………….                   

 

                             
Executive Summary

 

The company’s overall performance are said to be influenced by internal and external environment. Such environmental aspects specifically impact the functions of the management of specific industries. In this regard, the company must consider efficient and effective management approach to lessen the impact of such factors and maximize the positive effects of these internal and external influential factors. Herein, this report aims on discussing and evaluate the strategic and competitive position of The News Corporation (TNC) through the use of marketing tools such as SWOT analysis. In addition, this paper will also evaluate the motivation and rational behind TNC approach of changing into satellite broadcasting and assess the advantage and disadvantages of acquisition as an approach of international expansion in accordance with what have been considered by TNC. Finally, this paper will also attempt to provide pertinent recommendation for a strategic development plan for the company from 2006 to the future.

 

1.      Discuss the strategic position of TNC in 2006 emphasizing the strengths, weaknesses, opportunities and threats for the organization at that time.

 

Strengths

                      

·    The ability to transform and to diversify from he conventional media industry to a major digital player is one of the strengths of TNC.

·    The leader’s personality which give emphasis on a consistency approach. Which enables Murdoch to understand the business more and get into the core of the business to ensure successful operations?

·    Good financial performance making TNC one of the largest in the listed company.

·    The recognition as one of the media and entertainment industry in the global market since the acquisition of Sun newspaper and converting it into a tabloid format, which enhances the sale and increases marketability daily.

·    The international expansion has made the company more globalized and enabled them to build a strong internationally recognized brand which attracted different types of customers.

·    The intense financial strength having -55.7% of the total revenues in the fiscal year 2006. Such increase in revenues from the US and Canada have reached $14,102 million in 2006, which improve on an increase of 9.5 over 2005

·    The ability of the company innovates and development new products to meet consumer demand. The diversification of their products gives different varieties and fills the gap for more multiple demographic groups in the marketing mix.

 

Being a globally and internationally recognized media industry, TNC, it can be said that the company hold a strategic position in the media market. Based on the given case, it is stated that when TNC streamlined and reincorporation in 2003-2006, they already gain advantage in terms of size and market niche.  With the multibillion income and sales, TNC has outgrown their major rival companies to be the largest firm in this market. In addition, the decision of the management to diversify and the consideration of committing to satellite broadcasting and its acquisition of the MySpace.com, the company has been able to enhance more its strategic proposition and developed a brand which is difficult for other rival companies to outgrow. Likewise, the firm has been characterised by different analysts to be capable of adapting to changing market needs so as to maximise their profit.  Their ability to listen and identify the needs of their target market has permitted TNC to construct corporate culture that is recognized by their loyal and satisfied clients.

 

Another strengths of TNC is their ability to continuously reinvent and enhance their service in line with the internet, media and communication while efficiently managing the needs of their customers which enables them to maintain leader status in the competitive market.

 

 

 

Weaknesses

•         Poor management structure of the company which is very informal and emotionally influenced.

•         The management control of Murdoch may have negative effect on the company

•         The inability of the management to compliment as Murdoch does not consider the interests of the shareholders.

•         Financial issues because of the breach of the private bank loan contract and agreement.

•         The inability to use strategic planning for company operations.

•         Decreasing market share due to the existence of substitute industries like Virgin.

•         The management’s poor recognition of the broadband internet technology which may lead to high investment risks and costs.

•         Poor management of the information technology which may lead to mismanaging important documents and insecurity of such information.

 

TNC is focusing too much on the high-end acquisition and diversification despite of the risky impact of their decisions.

 

 

 

Opportunities

 

The basis for the long-term success of the TNC is their ability to continuously develop new generations of more advanced media services. Hence, one of the TNC’s opportunities is their chance to tap into more markets as the output of their innovations being provided in the television, media, and internet industry.

 

·    Technological development – the transformation from the conventional terrestrial system of TV distribution in competition with cable system and satellite, to the adoption of digitalization as well as the recognition of the importance of the internet.

·    The coverage of the Iraq War from 2003 makes the company to be recognized in the market.

·    Having new subscribers because of the exclusive rights to Broadcast of English football Premier League

·    The chance of developing single-language media in the US market.

·    The option to control satellite programming through their decoding technology as their response to the law passed by China

·    The opportunity of modifying the broadcast content to meet the demands of the Asian market

·    Achieving market development because of the acquisition of Turner South to attain market and product development.

·    Acquiring two other newspaper groups for increasing the market share (market penetration)

·    The opportunity to have a strategic alliance with China Mobile, to develop innovative media products and services/

·    Continuous global market expansion takes advantage and generates new markets to increase its profit. Specifically, with the developing countries.

 

TNC has also the chance to enter new growth markets because of their acquisition of Myspace.com. They also have the opportunity to get ahead of their competitors.

 

Threats

           

•         The slow economy in the main market of the company may affect their international expansion which posts threats on their global position.

•         Threats of the specific country policies and regulations where TNC is operating

•         the inability to make their program used the local language may serve major threat in international expansion/

•         Other rival companies of TNC may post greater challenge like Virgin in UK and Disney in the US market.

•         Inability to meet environmental expectations of the company may post threat to the overall performance.

•         the emergence of the internet may hinder the growth of newspaper and other print and publishing of the company.

•         Changing consumer behaviour and media market may post a threat to TNC.

•         Inability to cope and adjust to the technological advancement may generate critical challenges to the entire business operations of TNC.

•         The inability to retain loyal clients can also post a threat for the TNC in operating successfully.

 

 

2.      Evaluate the rationale and motivation behind TNC’s strategy of diversifying into satellite broadcasting

 

Mission:

To give the highest quality content with the most convenient marketing communication approach and distribution channel, among different clients, News Corporation has been able to offer high quality and innovative media services and productions which suit the needs of the people in the world market.

 

Strategies of TNC:

 

 

·               Willingness to accept changes in terms of management approach to meet the needs of the global market.

·               Investing in new businesses and generating new trends in the media and broadcasting industry than acquiring and buying existing companies

·               Consideration of the shareholders and maintaining good relationship among shareholders to enhance market share.

·               Strengthening bargaining power as well as market position through the use of e-purchasing on their supply chain, specifically for Sun and Times newspaper.

·               Raising investment fund through the use of bank loans and loans from other financial institution that offers minimal interest.

·               Continue their expansion through merging and acquisition to enter the new market or new international market.

 

            TNC is in line with their ability to change ad adjust the business into an industry which give the latest and innovations in the media corporations. TNC objective is to establish a business empire which is united, creative and logical and to create a corporation that utilizes strategic opportunities as they arrive, with the aim of anticipating challenges brought by the changing environment.

 

 

Rational for Diversification to Satellite broadcasting

 

1) To gain economic of scales the company should learn to share their expertise among others and efficiently manage their resources as well as personnel across platforms in the global market.

2) In line with the personality of Murdoch, the leader should have the ability to retain full accountability and control through acquisition approach.

3) The aim of the company is to transform the media industries to become major digital player in the market

 

Diversification Rationale

Rationale

Strategic Stretch

F Strategic use of resources

F Generating economy of scale

Generate connections in the value chain

F Consideration of technical /

management expertise

Improvement of key success factors and core competencies

F Reduction of dependency on

one revenue strength

Generating robust business portfolio

 

Create Linkage in Value Chain

F Meeting the needs and demands of both the customers and the shareholders.

F Providing as many clients by giving superior quality content with the use of convenient and affordable distribution channels.

F  

Enhance core competency

F  Using well integrated strategy which will includes management and technical expertise and skills of the employees to enhance core competency.

F  Strengthening of the industry’s ability to responds on global events and incidents.

 

 Creating robust business portfolio

F Transformation from traditional media industry to becoming major digital player.

 

Motivation for Diversification to Satellite broadcasting

 

·         Creating a media empire I terms of agility to have strategic opportunities and to sustain their management control and competitive position in the international market.

·         It enables TNC to gain enhance the distribution of any channel, which allows them to distribute programmes to different nations

·         Murdoch’s aim of international expansion will pursue.

·         International expansion will generate more revenue and profits of TNC.

 

 

 

Diversifying into Satellite Broadcasting

 

l   Satellite Broadcasting enables TNC to establish an effective distribution channels that provides high quality content for consumers,

l   Higher Revenue and Profit

l  The diversification enables the company to gain more revenue and profit due to the emergence of new subscribers.

l  Diversification enables TNC to be considered as the most competitive and the most profitable television broadcaster in the entire UK.

l    Political Factors

l The influence of the leader of TNC enables them to meet the challenges of regulations and policies of politics and government.

l It enables them to adhere to the national regulatory systems of the host country.

l The political relationship will bring the company into a better performance.

l   Low Cost

l  Through the use of different distribution channels, the resources of TNC which include their expertise are able to fully utilised to reduce variable and operational costs.

 

 

 

 

3.      Evaluate the advantages and disadvantages of acquisitions as a method of development with particular reference to the acquisitions undertaken by TNC.

Acquisition of the company can be said to have advantages and disadvantages. TNC has been involved in major deals in the media market from 1981 to 2002.  The company has acquired different companies such as Gemstar-TV Guide DirecTV and also they acquire small stakes of 20th century fox and other local TV stations. Furthermore, TNC has started to operate a satellite TV system for their UK subscribers and also invested in Asia for another TV system which is Star and cable Fox News Network.  The latest acquisition of the TNC is their acquisition of MySpace.com which is the largest social networking website in the internet.

 

Advantages of Acquisition

           

•         It helps in speeding up the international and global expansion from being an Australian based to global multinational corporations.

•         Enables them to diversify their products and services and easily develop new products through the acquisitions with NewsCorp, BSB and others.

•         Enabling them to reach various types of clients and reaching target audiences easily.

•         Helps them to easily enter US market and UK market through the acquisition of companies like 20th century fox, NewsCorp and others.

•         Enabling the company enter new market and business venture like television, print and publishing industries, direct TV, internet news and satellite broadcasting.

•         Increasing market share and market growth and reaching different types of clients.

•         Market domination because of the existence of newly developed products offered by TNC to the market such as the satellite broadcasting.

•         Generating competitive position in the market environment and becoming the market leader.

•         The chance of reducing costs of initial capital and expertise because of acquisition of existing business.

•         generate loyal and basic group of clients such as their 11 million TV viewers from Direct TV alone

 

TNC is in line with market niche growth. With their acquired industry, TNC has been able to diversify their business and meet the demands of the clients in the global market. Furthermore, through this, TNC has also been able to see their potentials in various markets which include the online market.  The investment of the company has also grown because of this acquisition, specifically in terms of the market share. The industry has more opportunities to provide innovative services in the communication and interactive media leading to their success.

 

 

Disadvantages of Acquisitions

Many acquisitions are in line with the threat of major downfall if they are not able to handle the acquired companies effectively. The acquisition also entails large values of financial budget involved and if the company would not give importance with each acquired companies, then they have to meet economic disability in the future.

 

•         Increase debt since acquisition needs larger capital and investment to buy or acquire existing company such as the NewsCorp.

•         Increase debt for investing in the acquired company in enhancing and improving its marketability.

•         Restrictions due to the government policies and regulations for some business operations this includes the prevention of the UK and US law for expatriate to hold certain percentage of any industry in line with the broadcasting license.

•         Acquisitions may encounter some risks in going against political and government law.

•         Financial risk in terms of radical expansion which is due to rapid decision making and acquisition. Because of the slowing of economies in main market, gap in terms of working capital may lead to higher and expensive short-term lending.

•         Implications in terms of breach of contract from private bank agreement because of unpaid high debt level used for acquiring companies.

•         Cultural diversity may lead to employees and management clash and conflict or issues.

•         May lead to shareholder issues because not all may be given the opportunity to have transparent information.

•         Inability to cope up with the expectations of the hosts countries and the government, environmental and customer expectations.

 

 

 

4.      Recommend a strategic development plan for TNC from 2006 on wards – justifying the recommendations made.

TOWS Matrix

 

 

 

External Opportunities
(O)

External Threats
(T)

 

1.  Enhance and expand the market of its Internet Business

1. Emergence of highly competitive company.

2. Growth of the company’s subsidiaries.

2. Economic downturn.

3. Increased customer loyalty.

3. Increasing prices of key inputs.

Internal Strengths
(S)

 

 

SO

      Focusing on internet marketing approach to enhance internet market.

      Providing high quality content to gain customer loyalty and good customer relationship

ST

      Strong reputation and resources of TNC attract industrial expertise which can improve customers’ trust in considering its Internet channel.

      Consideration of Joint venture to improve and expand market portfolio

      Enhancing information technology and technological equipments to outgrow rival companies

       

1.  Good Customer relationship

2. State of the art equipment and facilities that caters to the needs of clients

3. Access to cheap and secure financing.

Internal Weaknesses (W)

 

WO

      Managing financial resource effectively to minimise weaknesses

      consider joint venture and other investment to international market to enhance customer reach

WT

 

      Applying strategic management structure to gain shareholders trusts

      Investing in information technology infrastructure

      Enhancing brand loyalty though customer satisfaction.

1. Saturated Market

2. Inability to manage financing sources

3. Limited access to international markets.

 

 

Recommendation (Strategic Development Plan)

The result of the analysis using, TOWS Matrix have resulted in strategically choosing the most appropriate management approach to minimise threats and weaknesses and maximise opportunities and strengths of TNC. Herein, it can be said that the management can use total quality management to ensure that they meet and satisfy the needs of their clients.

Ø  Strategy Description

      In order to ensure competitive advantage and to be able to take advantage of their opportunities and strengths and to minimize the effects of their weaknesses and threats, the company is recommended to consider the following vision for the next 5 years. Vision is an important aspect of strategic plan to make sure that the innovation is successful. In this regard, the following are some of the probable vision for TNC which they can use as part of their enhancement and improvement to achieve organization objective.

·         To be known as a diversified industry that provides innovative and high quality diversified products in different industries.

·         To be identified as industry that provides the needs and demands of the consumers by using technical and technological advancement as an integral part of its corporate strategy.

·         To be the leader in providing diversified customers both from individual and organisational level by means of strategic management.

 

      Herein, the strategy that should be implemented by the company will be based on strategic management approach, through integrated management system, focusing on their globalization, internationalization and technological advantages.

Ø  Action Plan

      This part of the report, aims on identifying if the firm is capable of initiating the said strategic actions (Avison & Fitzgerald, 2003).

• Project Management

      The consideration of project management as part of the action plan is important since it enables the company to determine the responsibilities for implementing the new strategy for The News Corporation Company. Herein, project management requires their human resources to posse’s innumerable competencies from management proficiencies, personal skills, technical professionalism and other important aspects to adjust with the changes by the external market factors (Meredith & Mantel 1995). 

 

• Specific Processes to Successfully Implement the Action Plan

A.  Team Organisation

The strategy will not be able to pursue without the team that will implement such strategy. Hence, the team for TNC includes the top management and chosen employees

B.  Controls Establishments

       In order to implement the plan effectively, the management of TNC should consider the control of establishment which includes scheduling and monitoring. Scheduling is helpful to have a guidelines and guidance in implementing the change and monitoring is needed to know which part of the project or strategic actions needs to be improved.

• Contingency Planning

      This is needed to make sure that the company will have a back-up strategy in case the first approach is not successful in making the company competitive in the next five years

 

Conclusion

It can be concluded that the management must be able to know what is occurring in the internal and external environment of the company. This is also done to know if changes are needed by the company to meet the changing needs of the clients.  In this regard, strategic management through proper organizing, planning, leading and controlling is needed. Through this, the management will also be able to counter the negative effect of technology advancement and other internal and external factors.

 

 

Cathay Pacific Airways Swot Analysis

Assignment Topic

For an Organization of your choice: (Cathay Pacific Airways Limited or Others)

a) Construct a SWOT analysis to summarize its current strategic position. (20%)

*Use to construct a TOWS form of SWOT analysis to answer

b) Identify options for the future development of the organization both with regard to
 Resource-led strategic development
 Market led strategic development (50%)

*Consider whether the organization should construct a value – offer on the basis of consistent
generic strategy

*Consider how the organization should build and exploit its core competencies

*To identify strategy option from a Market-Led perspective, Ansoffs product/ market Matrix is useful

c) Evaluate the relative merits of potential future strategies (20%)

*Evaluation of option informs subsequent choice. A way to do this is to consider (1) Suitability
(2) Feasibility & (3) Acceptability OR Alternatively refer to Lynch approach to risk assessment

d) Recommend specific courses of action to be implemented by the organization. (10%)

*In recommending preferred options for subsequent implementation, include reference to what you
consider to be critical success factors for the organization? Also to suggest Performance Indicators
(P.I.) to measure successful implementation

Report should be more than 2500 words in length (not including appendices, which may be properly cross-referenced to the report if included)

CHINESE FOREIGN RELATIONSHIP WITH ISRAEL

            This paper will try to discuss the Chinese foreign policy with the government of Israel. It will attempt to discuss about the diverse aspects of diplomatic relationship between these two countries. It will also try to point out the different areas of interest and fields of knowledge in which these two nations are united. The paper will also state the different current issues and topics that are essential in contemporary China-Israel relations.

            On Jan. 24, 1992, Israeli Vice Premier and Foreign Minister Levy visited China and signed a communiqué together with Chinese State Councilor and Foreign Minister Qian Qichen and the two countries officially established diplomatic relations at ambassadorial level.[1] This joint communiqué stated that the government of the State of Israel officially recognizes that the government of the People’s Republic of China as the sole legal government representing the whole of China and Taiwan is an inalienable part of the territory of the People’s Republic of China.[2] Likewise, the two countries agreed to develop friendly relations and cooperation between the two countries and two peoples on the basis of the universally recognized principles of mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other's internal affairs, equality and mutual benefit and peaceful coexistence.[3]

 To further strengthen the diplomatic ties between the two countries, Israel set up a consulate-general in Shanghai in August 1994. Visits between the two countries after the establishment of diplomatic relations increased gradually.[4] From the Chinese side, many high-level officials visited Israel. They were State Councilor and Foreign Minister Qian Qichen (twice, the second time as Vice Premier and Foreign Minister), Vice Premier Zou Jiahua, Minister of Foreign Trade and Economic Cooperation Wu Yi, State Councilor and Minister of National Science and Technology Commission Song Jian, Vice Premier Li Lanqing, Ministerr of National Planning Commission Chen Jinhua, Member of the Central Political Bureau of Communist Party of China (CPC) and Member of the Secretariat of the Central Political Bureau of CPC Wen Jiabao, Vice Chairman of the Central Military Commission, State Councilor and Defence Minister Chi Haotian, Vice Chairman of the Standing Committee of the National People's Congress Peng Peiyun, Chairman of the Standing Committee of the National People's Congress Li Peng and President Jiang Zemin.[5]

From the Israeli side, there were President Herzog, Foreign Minister Peres, Prime Minister Rabin, Speaker of Knesset Dan Tichon (attending the 96th Inter-parliamentary Conference) ,Vice Prime Minister and Foreign Minister Levy, Vice Prime Minister and Minister of Agriculture and Environment Eitan, Prime Minister Netanyahu, Minister of Defense Mordechai, President Weizman.[6]

In May 1993, the two countries signed an agreement on cultural exchanges.[7] And in November 1998, the implementation plan of Sino-Israeli cultural exchanges from1999 to2001 was signed.[8] From 1993, the two governments started to exchange 5 students in each direction every year.[9]

In March 1992, the two countries' civil aviation administrations signed a memorandum of understanding and agreed for Israeli airlines to operate chartered planes from Tel Aviv directly to Beijing.[10] In October 1993,the two sides signed a civil aviation agreement. In June 1994, agreement on tourist cooperation was signed between the two countries.[11]

There have also been a lot of state visits between the leaders and prominent authorities of both China and Israel to further boost the relationship between these two countries. Notable of these visits is the official trip made by then President Jiang Zemin in Israel during the year 2000. He met with Israeli President Ezer Weizman, Prime Minister Ehud Barak, parliamentary leaders as well as other senior officials.[12] The two countries are also signed two agreements on economy and education respectively. President Jiang also made a trip to see the Holocaust Memorial Center and the high- tech industries and factories in Israel’s agricultural sector. Other notable officials that have visited Israel are the Chinese legislator Li Peng, the Chinese Defense Minister Chi Haotian and Dai Bingguo, head of the International Department of the Chinese Communist Party Central Committee.[13] These acts of diplomacy were reciprocated when Israeli President Weizman visited China following the then Israeli Prime Minister Benjamin Netanyahu's visit to China in 1998.[14]

The President of Israel, Mr. Moshe Katsav and his wife went on a state visit December 14, 2003 on a State Visit to China.[15]  The President and his wife were invited on the State Visit, which will last approximately one week, by the President of China, Hu Jintao. The President’s delegation were composed of the President of the Israel Academy of Science and Humanities, Professor Jacob Ziv, the Chairman of the Likud faction, M.K. Gideon Saar,  the Chairman of the Labour faction, M.K. Dalia Itzik,  the Managing Director of the Manufacturers Association of Israel, Mr. Yoram Blizovski, and the Chairman of the Israel Export and International Corporation Institute, Mr. Shraga Brosh.[16]

During the visit, the President met with the President, Hu Jintao, with the Prime Minister, Wen Jiabao and with the Chairman of the 10th National People’s Congress (NPC), Wu Bangguo. Economic agreement signing ceremonies of private companies, with the participation of the President with their Chinese counterparts are completed during the state visit.[17] During his visit, the President inaugurated the new building of the Israeli Embassy, “Beit Yisrael,” which includes living quarters, in the capital of China, and he also participated in a Chanukah candle lighting ceremony which were be attended by some of the Israeli community in China and Jewish diplomats of the Diplomatic Corps serving in China.[18]

Diplomatic relations between these two countries are not limited to state visits and other formal diplomatic responses, there also has been diplomatic exchange that are viewed militarily although both nations are silent in explicitly stating that they are having arms and weapons deals and negotiations for fear of antagonizing one of the Allies of Israel which is the United States.[19] Based on researches, studies and opinions made by respectable defense organizations and websites, the arms deal and weapon exchange that is being made between China and Israel is definitely one sided and imbalanced with the Israeli defense companies supplying a large part of weapons, defense technology and other military hardwares to China.[20]  This transfer of technology of Israel to China has produced diplomatic friction between Israel and the United States since Israel is transferring weapon technologies that are made and are incorporated to the U.S. military.[21] 

United States officials and defense analysts perceived that a Chinese military equipped with the third party U.S. military technology and weapons from Israel will be a potential threat to the stability and equilibrium in Asia.[22] What worries US strategic planners is that, as a consequence of these apparently warm ties, high-technology weaponry that leaks from Israel to China could, in turn, find its way to what the US regards as rogue states in the Middle East.[23]

Despite the pressure exerted by the United States to Israel, the Israeli government and defense contractors are silently supplying and developing weapons and military equipments for China.[24] Israel is China's second-largest arms supplier (the first being Russia) and although diplomatic relations between Israel and China were established only in 1992, military ties go back to the early 1980s.[25] Until formal diplomatic ties were established, the military relationship was covert. Israel sold about US$4 billion worth of arms to China before the establishment of diplomatic relations.[26] In the 1990s, the Sino-Israel military relationship grew rapidly. In fact, arms sales contributed to the strengthening of diplomatic engagement.[27]

Recent concerns have centered on the transfer of laser weapons technology. In early 1999, the Washington Times said the Defense Intelligence Agency suspected Israel had shared with the Chinese restricted technology obtained during a joint US-Israeli effort – the Tactical High-Energy Laser (Thel) program - to build a battlefield laser gun.[28] The evidence was said to have come from US contractors in Israel who had seen Chinese technicians working with one of the Israeli companies involved in the laser project.[29]

Such reports help explain the motivation behind the setting up of a House of Representatives sub-committee to investigate the relationship under the chairmanship of the Republican, , which made its findings partially public in May 1999. The  report noted that recent years had been marked by increased Sino-Israeli co-operation on military and security matters. It also noted that Israel had given China "significant technology co-operation" in aircraft and missile development, most notably in developing the F-10 fighter and airborne early warning aircraft.[30] The F-10 is closely modeled on Israel's Lavi fighter, a project dropped in 1987 after it had been funded by the US to the tune of some $1.5billion.[31]

Israel also tried to sell its IAI Phalcon Airborne Early Warning and Control  (AEW & C) radar system to China which was developed by Israeli Aircraft Industries and Elta Electronic Industries. This military hardware is considered to be the most sophisticated and advanced AEW & C system in the world capable of tracking high maneuvering targets and low flying objects from hundreds of kilometers away under all weather conditions in both day and night.[32] When the United States found out about the purchase, Pentagon officials pressured the Israeli companies involved to rescind from the business deal saying that this military technology would give Beijing a strategic edge in any Taiwan conflict in the future.[33] As a result, Israel ultimately had to pay China $350 million in compensation, and there were no known arms sales through 2003.[34]

Western military attachés in Beijing said that cooperation between Israel and China in the defense field runs deep. They stated that aircraft industries of Israel are involved in Chinese projects covering fighter development and airborne early warning technology.[35] They believed that Israel’s military industries are providing cruise missile related technology to China and stated that Rafael – the Israeli Defense Research and Development Agency for air launched weapons --- has sold Python 3 air to air missiles to the Chinese and is seeking to sell them the more advanced Python 4.[36] U.S. naval intelligence has long assumed that Israel has passed American provided technology to the Chinese for China’s -10 fighter program.[37]

This problem on weapons transfer was highlighted during the diplomatic crisis regarding the China U.S. spy plane debacle that happened in April 1, 2001 where a United States Navy EP-3E was intercepted by a People’s Liberation Army Air Force J-8 fighter jet near the island of Hainan. One of the Chinese jets bumped the wing of the EP-3E forcing it to make an emergency landing on Hainan.[38] U.S. released pictures of the Chinese F-8 fighter plane that collided with the American EP-3E surveillance jet, in an attempt to show that the Chinese jet was in fact at fault.[39] But the real news was that attached to the wings of the F-8 plane were Israeli Python missiles, built under license in China.[40] Israel designed the Pythons by studying the technology of U.S. Sidewinder missiles, sold to Israel many years earlier. So like a boomerang, U.S. arms exports to a trusted ally came back to threaten U.S. military forces in a most unexpected place.

          Military hardwares and weapons technology are also not the only things that are being transferred by Israel to China. Training and personnel equipments exchange are also part of the ongoing military relationship between the two countries.[41] Training programs for People’s Liberation Army representatives and police at the Israel Military Industries Academy for Advanced Security and Anti-Terror Training are currently under discussion.[42] Another possible area of future cooperation involves the leasing of Israeli unmanned aerial vehicle services.[43] Ministry of Defense Director-General Yaron reiterated these two projects, citing homeland security and counter-terrorism as potential areas for expanding Israeli-Chinese cooperation.[44] The active participation of Israeli security experts in the preparation for the forthcoming 2008 Olympic Games can be seen as one notable example of this type of cooperation.[45]

          After viewing this growing military relationship and cooperation between China and Israel, Chinese policy also dictates that it establishes military relations with Middle East countries that are foes and enemies of Israel. This is necessary to court and to get preferential price for the oil that countries in the Middle East produce. Iran, a zealously anti Israel nation has initiated its nuclear enrichment program for humanitarian purposes but Western nations and the European Community view this movement as a step on making Iran a nuclear power capable of mass producing nuclear bombs and missiles. China is definitely helped Iran in it becoming a nuclear capable nation since it provides equipments, parts, guidance systems, components and other technical tools that are helpful in using nuclear power for electricity and for building a nuclear tipped missile.[46] China has also provided Iran with two 300 MWe (Megawatt) nuclear reactor units possibly located at Darkhovin, Iran during the administration of then President Khatami.[47]

            China has also provided Iran with ship-borne longer range cruise type missiles called C-802, which are at the top of the line in terms of Chinese production capability.[48] These missiles have a range of between 60 and 90 kilometers and they are classified as sea skimming missiles making them harder to intercept and destroy. China has also helped Iran in developing the propulsion and guidance system of its Shahab 3 missile which is an identical copy of the No Dong missile developed by North Korea. The Shahab-3 is capable of carrying a one-metric-ton warhead over 800 miles. Tehran announced that the Shahab-3's main target is Israel. Six Shahab-3 missiles were put on display in September 2003 during a parade in Tehran celebrating the anniversary of the Iran-Iraq war. One of the missiles carried a banner declaring "We will wipe Israel off the map." [49]

            This double dealing made by China with regards to the nature of its diplomatic relationship with Israel while supporting and helping the enemies of this same country to develop and to manufacture weapons that would grievously harm Israel is part of a compromise that is related to the oil industry and the continuing supply of fuel to Chinese industries. If China wants to acquire oil and other petroleum based products that are needed by its growing industry and economy, it must acquire these essential products at a much lower price to lessen the impact of these purchases on its dollar reserves. The military aid and equipments that is being funneled by the Chinese government serves to act as an leverage and a “carrot” in this diplomatic dance. Military hardwares and weapon systems are the “products” that are needed by these Middle East nations while China needs oil for its economy. To be able to strike a deal, cooperation and symbiosis of this kind is necessary from the point of view of the Chinese policymakers.

            Petroleum industry studies indicate that China uses about 600 000 barrels of oil per day and if the Chinese economy continues to grow at the present rate, this demand is expected to increase to about 1 000 000 barrels per day by the year 2000 and to 3 000 000 barrels by 2010.[50] The friendship and goodwill that will be extended by China by using military hardwares and equipments as bargaining chips will have a direct impact on the future supply of oil for the country’s development. Beginning from 1993, China has changed from a pure oil exporter to a pure oil importer. In 2001, China's pure import of oil reached as high as 64.9 million tons.[51]

As early as the 1980s, China had already had such anxiety with regards to its constant supply of oil. Oil is a limited resource, although China is a large oil producer ranking fifth in the world, it is at the same time a large oil consumer, oil output lags behind the rapid economic growth demand for oil. Since 1984, the average annual growth of crude oil output has come to 1.7 percent, but the average annual growth of oil consumption has reached 4.9 percent in the same period. In 2000, the import of oil and oil products reached 70 million tons, an all-time high (a slight drop in 2001), accounting for 30 percent of the amount of the nation's consumption in that year.[52] Based on such a rate, by 2010, China will need to import 40 percent oil from abroad, and this proportion will reach as high as 50 percent by 2020. Any sign of disturbance in the international oil market and conflict with the Middle East will immediately exert negative effect on the economy of China with so high a degree of dependence on imported oil.

While China's imports from smaller oil producing countries rise and fall, the Chinese partnerships with major producers such as Saudi Arabia and Iran have increased exponentially. Whereas in 1994, Iran accounted for just one percent of China's total imports, less than a decade later, Beijing purchased $2 billion (US) of oil from Tehran, representing more than 15 percent of its total 2002 oil imports.[53] Today, the figure is probably larger still. In October 2004, the head of China's National Reform and Development Commission and Iranian oil minister Bijan Namdar Zanganeh signed a memorandum of understanding regarding bilateral energy cooperation. According to the agreement, the Chinese government will buy 10 million tons of Iranian oil each year for the next twenty-five years. In return, China Petroleum and Chemical Corporation (), the nation's second largest oil producer, may develop the Yadavaran oil field in Iran's western Kurdistan province, giving China a 50 percent interest in the field's estimated 17 billion barrel reserve.[54] Yadavaran could be China's biggest oil investment in the Middle East. Nevertheless, China-Iran trade should be kept in perspective. While the China trade may be significant for Iran, the opposite is not true. Bilateral Sino-Iranian trade accounts for only 0.6 percent of the Chinese total.

Beijing views the Middle East not only in terms of its value as a source of oil but also in the context of its huge potential as an oil services market. Early in 1979, Chinese labor services companies entered the Gulf Cooperation Council markets. By 2001, China had signed almost 3,000 contracts in all six Gulf Cooperation Council states for labor services worth $2.7 billion.[55] The overseas construction arm of China National Petroleum Corporation moved into the Kuwaiti market in 1983, and a major business expansion took place in 1995 when the group won an oil storage reconstruction project in Kuwait. Since then China has expanded into oil services in Egypt, Qatar, Oman and other parts of the Arab world

China is also not only focusing on the Middle East countries for its oil. The China National Petroleum Corp. has developed oil cooperation with the Sudan, bringing in 5 million tons of share oil from the country through the Straits of Malacca. China's largest energy company in Sudan is pumping crude oil, sending it 1,000 miles upcountry through a Chinese-made pipeline to the Red Sea, where tankers wait to ferry it to China's industrial cities.

In October 1992, Deputy Minister of Foreign Trade and Economic Cooperation Shi Guangsheng visited Israel and signed a trade agreement between the two governments. Afterwards, the two sides also signed agreements on avoiding double taxation and investment protection. The total trade volume between the two countries in 2000 amounted to $1,050 million, of which China exported $720 million and imported $330 million. The trade volume between the two countries in 2001 was US$1,310,000,000, of which the Chinese export was US$830,000,000, and import US$480,000,000.[56]

In 1993, China and Israel signed a Memorandum of Understanding between the two countries' Ministry of Agriculture, and successively built a Sino-Israeli Agricultural Training Center in Beijing Agriculture Engineering University and a Sino-Israeli Model Farm in the suburb of Beijing.[57] Some projects such as a demonstration farm and the cooperative research on water resources, biology, and nano-technology have become good examples of Sino-Israeli cooperation.

Israel also hosts today approximately 20,000 Chinese workers. Most of them are employed in construction; the rest in agriculture, nursing, and services. Although security is pretty tight in inside Israel, Chinese laborers and workers are sometimes the victims with regards to suicide bombings and mortar attacks aimed at Israeli civilians. On June 8, 2005, a Chinese named Bi Shude from the Jilin Province of China was killed in a Palestinian mortar attack in the Jewish settlement of Ganei-Tal located in the Gaza Strip.[58] The spokesman of the Chinese embassy meanwhile stated that eight Chinese have been killed and more than 20 wounded in the past five years of conflict between Israelis and Palestinians.[59]

 

 

 

 

 

 

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