Managers' Forum ~ Business Case Reviews
STS Manufacturing in China
Business Case Review by: Ui-Jun Suk
Many people believe that the China market gives them lots of business
opportunities because of its 1.2 billion populations and abundant natural
resources. Therefore, many international businessmen are trying to
penetrate
the Chinese market just with optimistic view. However, as China started
participating in the world market in the latter1970s and has developed
its
own unique culture for a long time in East Asia, it does not always
guarantee the business success in the market to the foreign investors.
Especially, when the foreign investors do their business with native
Chinese
people for a joint venture partner, they would get in troubles unless
they
thoroughly study for the Chinese market.
The case, 'STS Manufacturing in China', provided by Thunderbird Business
School, demonstrates the problems from the different cultural perspectives
in a joint venture, STS Manufacturing, between Shanrong Manufacturing
of
China and Tellsan Products of the United States. STS manufactures
components for automotive steering assemblies and supplies those products
to
Volkswagen's joint ventures in China. Specifically, the case deals
with the
issues of China's foreign investment climate, quality problems in the
joint
venture, relations with Chinese counterparts, supplier selection, and
training. Some examples of those problems are briefly mentioned below.
- China's foreign investment climate: Even though China opened its market
to
foreign investors and their market forces are becoming prominent in
China's
economy, its government tightly controls and regulates all the activities
of
foreign firms.
- Quality standard: Below senior management level, anybody does not
consider
about safety, continuous improvement and quality without responsibility
because of the Confucian notion of hierarchy and orderliness, in which
somebody else in the organization is responsible for that.
- Supplier Selection: Because Chinese business is mostly performed by
human
relationships, Chinese partner wants to select the suppliers who are
close
to them, regardless of the selection standard.
- Training: There are conflicts between the joint venture partners in
training their employees, such as the selection of candidates for the
training, costs, problems with travel documents, etc.
In conclusion, the case shows us what kinds of problems can occur between
joint venture partners and how important it is that we should be aware
of
historical, cultural, and political dynamic before we penetrate other
markets which are different background from ours. Therefore, I highly
recommend this case to those who are interested in entering the Chinese
market with a joint venture partner.
Source: http://www.t-bird.edu/research/cases/1999.asp
Thunderbird Case # :
A07-99-0013
