Index
4Ps of IPR (product, process, people and prevention)
An, Gary
Balance scorecard
Beijing
Bilodeau, Robert A.
Bouvard, Hans-Peter
Burgers, Willem P.
bureaucracy
business growth
Business units (BUs)
Business Week
Callarman, Thomas E.
career development
Carrefour China
Central Government
Centrally Planned Economy (CPE)
Chai, Wei Joo
Chéreau, Jean-Luc
Chery
China First Auto Works (FAW)
China International Trust and Investment Corporation (CITIC)
Chinese companies
Chinese consumers
Chinese government
Chupa Chups
Communist Party of China (CPC)
compensation
Copeland Corporation
corruption
Critical success factors (CSFs)
culture conflict
DaimlerChrysler
District Managers (DMs)
Doug, Ho Song
Eli Lilly and Company
Emerson Electric (Suzhou) Co., Lt
Emotional Intelligence Model
entrepreneurs
expatriates
family needs
Financial Times
foreign-invested enterprises (FIEs)
Fortune Magazine
Fryxell, Gerald E.
Gabrielle Chou
Ganghofer, Bettina
General Electric (GE)
Ge, Dingkun
General managers (GMs)
General Motors (GM) China
Goleman, Daniel
Gross Domestic Product (GDP)
Guangzhou Peugeot Automobile Co., Ltd (GPA)
guanxi
headquarters-subsidiary relationship
Human Resources Management (HRM)
Industry Weekly
Intellectual Property Rights (IPR)
International Finance Corporation (IFC)
Jenster, Per V.
Joint Ventures (JVs)
Kwauk, Angeli
law enforcement
leadership
Lesnyak, Sergiy
Li, Xiaotong
Localization
local government
logistics
Market-oriented economy (MOE)
Maxwell, John C.
McKinsey Quarterly
Mercedes-Benz
mianzi
Microsoft
Ministry of Foreign Trade and Economic Cooperation (MOFTEC)
Mission, vision and values (MVVs)
Mobley, William H.
organizational culture
Original Equipment Manufacturer (OEM)
People's Daily
Pepsi
people development
performance management systems
Peugeot Citroen of France (PSA)
Picanol China
Profit & loss (P&L)
public affairs
Quality Brand Protection Committee (QBPC)
Ramasamy, Bala
Rauh, Alain
Recruitment
Regional managers (RMs)
regulations
Rein, Shaun
Research and development (R&D)
retention
Small and medium-sized enterprises (SMEs)
Shanghai Volkswagen Co., Ltd
State Economic & Trade Commission (SETC)
State-owned enterprises (SOEs)
Suzhou
talent development
Tomas Casas i Klett
training
Volkswagen (VW)
Wal-Mart
Ward, Howard
Wholly foreign-owned enterprises (WFOEs)
World Trade Organization (WTO)
Wuhan Wild Animal Park (WWAP)
Zhao, Yufeng
Zhang, Ruimin
Zhou, Dongsheng
Zhu, Gousheng
Introduction
Acknowledgments
Chapter 1: Leadership in China: Putting the heart where the mind is
INTRODUCTION
CASE STUDY EMERSON ELECTRIC (SUZHOU) CO., LTD
CASE COMMENTARIES
Chapter 2: Human resources in China: Chasing the runaway bride
INTRODUCTION
CASE STUDY: ELI LILLY AND COMPANY, CHINA AFFILIATE, WAR FOR TALENT
CASE COMMENTARIES
Chapter 3: Joint ventures: Dancing the Chinese tango
INTRODUCTION
CASE STUDY GUANGZHOU PEUGEOT AUTOMOBILE CO., LTD
CASE COMMENTARIES
Chapter 4: Dealing with headquarters: The art of juggling
INTRODUCTION
CASE STUDY PICANOL CHINA
CASE COMMENTARIES
Chapter 5: Counterfeiters in China: Catch me if you can
INTRODUCTION
CASE STUDY: GM CHINA VERSUS CHERY, DISPUTES OVER INTELLECTUAL PROPERTY RIGHTS
CASE COMMENTARIES
Chapter 6: Chinese consumers: The new kids on the block
INTRODUCTION
CASE STUDY MERcEDES-BENZ AND WUHAN WILD ANIMAL PARK
CASE COMMENTARIES
Chapter 7: Government relationship: Playing Chinese poker
INTRODUCTION
CASE STUDY: CARREFOUR CHINA, REVAMPING BUSINESS TO FOLLOW LOCAL RULES
CASE COMMENTARIES
Chapter 8: Expatriates in China: Lost in translation
INTRODUCTION
CASE STUDY: THE LOLLYPOP THAT TURNED BITTER, THE EXPERIENCE OF AN EXPATRIATE COUPLE IN CHINA
REFLECTIONS
CASE COMMENTARIES
Chapter 9: Foreign entrepreneurs: Chasing the China dream
INTRODUCTION
CASE STUDY PERSONAL REFLECTIONS OF THREE FOREIGN ENTREPRENEURS IN CHINA
CASE COMMENTARIES
Index
Copyright © 2007 John Wiley & Sons (Asia) Pte Ltd
Published in 2007 by John Wiley & sons (Asia) Pte Ltd
2 Clementi Loop, #02-10, Singapore 129809
All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop, #02-01, Singapore 129809, tel: 65-6463-2400, fax: 65-6463-4605, E-mail: enquiry@wiley.com.sg.
This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought.
Other Wiley Editorial Offices
John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, USA
John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester PO19 BSQ, England
John Wiley & Sons (Canada) Ltd, 5353 Dundas Street West, Suite 400, Toronto, Ontario M9B 6H8, Canada
John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia
Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany
Library of Congress Cataloging-in-Publication Data:
978-0-470-82224-1
Wiley Bicentennial logo: Richard J Pacifico
Cover design and page layout by Alicia Beebe
I want to dedicate this book to my parents, Laly and Eugenio, and my sister Laura. Despite the enormous distance between us, I want you to know that the heart can travel through time and space much faster than light.
Juan A. Fernandez
To those I love and those who love me.
Shengjun Liu
Acknowledgments
There are many people to thank. First, the companies that so generously allowed us to write cases about them. Second, the professors and practitioners who gave their time to work on the case studies. Dr. Jianmao Wang, Director of the Case Development Center and Associate Dean at CEIBS, gave us great support. We also thank CEIBS for allowing us to use the cases. Linda (Dongmei) Song, our extremely competent assistant, gave assistance that was fundamental to the preparation of this book. Finally, Joan Draper took the time to read the manuscript and make suggestions. Thank you all.
Introduction
Welcome to China CEO: A Case Guide for Business Leaders in China. The book that you have in your hands is the result of more than five years of work with companies in China. It includes a collection of cases on international companies doing business in this country. These cases have been used in the course Managing in China that Juan has delivered to international executives from all over the world.
The objective of this field guide is to complement China CEO: Voices of Experience from 21 International Business Leaders, my previous book with Laurie Underwood, published in February 2006 by John Wiley & Sons. While China CEO introduced a number of important themes and was based on interviews with CEOs of multinationals in China, this new book presents case studies on the same topics.
Every chapter in the field guide follows the same structure:
1 A short introduction to the topic covered by the chapter.
2 A case study tailored for that topic.
3 Commentaries on the case studies by a professor at the China Europe International Business School (CEIBS) and at least one practitioner with years of work experience in China.
Our purpose with this new book is to offer new information not included in China CEO. The case studies included in the collection are:
CASE STUDY 1: EMERSON ELECTRIC (SUZHOU) CO., LTD
This case deals with the communication problems experienced between US and Chinese management on the operation of the multinational company in Suzhou (China). The general manager from Taiwan resigned after one year in the position, leaving the new general manager with the difficult task of regaining control of the organization. He will need to create a culture of trust and open communication among its members.
CASE STUDY 2: ELI LILLY & COMPANY, CHINA AFFILIATE, WAR FOR TALENT
Eli Lilly and Company is a global, research-based pharmaceutical company with a history of over 126 years. Lilly China had more than 50 representative offices and about 500 medical representatives in 2003. Compared with its key global competitors, Lilly's presence in China is still very small. To facilitate Lilly's expansion strategy in China, Lilly China had an urgent need to recruit and maintain a pool of top medical representatives. However, Lilly China had high employee turnover for three consecutive years. Obviously, the company needed to strengthen employee retention. Should Lilly maintain current recruiting practices or switch to better options? Human Resource Director Mary Liu decided to ask a consulting team to help out with the whole problem. The case describes Lilly China's background, its human resources concept and structure, and the Chinese labor market.
CASE STUDY 3: GUANGZHOU PEUGEOT AUTOMOBILE CO., LTD
In 1985 Peugeot established a joint venture in South China. Peugeot introduced its management system into the joint venture, controlled key decisions and helped Chinese employees learn French and Peugeot culture. Before 1992, the joint venture enjoyed glorious days. With the increase in competition, however, many problems emerged, including unsuitable car designs, outdated car models, high prices, bad quality and poor service. Its production dropped so quickly that it almost ceased operation by 1996. Moreover, the serious cultural conflicts and interest fights dimmed the future of the joint venture. Finally, the Chinese partner lost patience until the joint venture ended in divorce.
CASE STUDY 4: PICANOL CHINA
Picanol was founded as a family business in 1936. It manufactures weaving machines for the textile industry and is headquartered in Belgium. Picanol hired a new CEO with the mandate of preparing the company for the competition in the global market. As part of the changes, the new CEO introduced a new business unit structure. Picanol China, under the leadership of expatriate manager Hans, is in a dilemma as to whether to implement the new structure rigidly or to be more flexible. The case traces the development of the new organization, together with the problems that ensued. It also discusses how an expatriate manager works with headquarters.
CASE STUDY 5: GM VERSUS CHERY, DISPUTES OVER INTELLECTUAL PROPERTY RIGHTS
Chery, a Chinese domestic car maker, launched a new mini car model, the QQ, in July 2003. This was several months earlier than the planned launch date for General Motors' (GM's) new mini car, the Chevrolet Spark. The QQ looked very similar to the Chevrolet Spark, but was much cheaper. GM claimed that the Chery QQ was a knockoff of the Matiz, a model owned by GM Daewoo. The QQ turned out to be a real hit with consumers, while Chevrolet Spark sales were much lower than expected. To make matters worse for GM, Chery was aggressively expanding into other countries where GM had a presence. Intellectual property rights (IPR) disputes were common in China's automotive industry; several multinational car makers had also brought infringement cases forward. GM had its hands full: it had to compete with Chery head to head in the market while deciding what actions to take with regards to its IPR infringement claim.
CASE STUDY 6: MERCEDES-BENZ AND WUHAN WILD ANIMAL PARK
In the morning of December 25, 2001, many people in Wuhan, a large city in middle China, were surprised to see a Mercedes SLK230 sports coupe being towed by a water buffalo in the street. The next day the car was wrecked by five strong men in Wuhan Wild Animal Park (WWAP); this publicly humiliated Mercedes. After the negotiations between WWAP and Mercedes failed, WWAP threatened to smash another Mercedes car. Why did such a terrible incident occur? What makes the car owner resort to such an extreme solution? How will Mercedes handle this situation? Could Mercedes avoid this incident happening again? No matter what Mercedes plans to do, the threat of another incident means that they have to act fast. This case will be particularly useful in discussing the company's public relations strategy and crisis management skills.
CASE STUDY 7: CARREFOUR CHINA, REVAMPING BUSINESS TO FOLLOW LOCAL RULES
China was a market that tempted the MNCs (multinational corporations). However, it set strict restrictions to protect domestic retailers. Though China did have a plan of opening the domestic market to foreign retailers step by step, it seemed to be beyond the patience of retail giants like Carrefour. As a result, many foreign retailers managed to expand in a secret but illegal way in China. Carrefour found that local governments had a strong motivation for introducing foreign retailers for the sake of employment and taxation benefits. With the help of local governments, Carrefour quickly established footholds in China's major business cities and developed into the No. 1 foreign retailer. It was not hard to imagine that the illegal expansion irritated local retailers and the Central Government. After this the Central Government issued circulars and regulations to warn foreign retailers and local governments, who just turned a deaf ear to the warnings. In 2001 rumors spread that Carrefour would be shut out and the Central Government would not appease it any more. Carrefour would have to do something to solve the crisis.
CASE STUDY 8: THE LOLLYPOP THAT TURNED BITTER, THE EXPERIENCE OF AN EXPATRIATE COUPLE IN CHINA
This case describes the experience of an expatriate couple in China. Alain, the husband, decides to take a challenging assignment in China. Montse, the wife, follows, but has to give up her own career. Once in China, things don't go as expected.
CASE STUDY 9: PERSONAL REFLECTIONS OF THREE FOREIGN ENTREPRENEURS IN CHINA
In this case three real stories are told by foreign entrepreneurs in China. The first protagonist was an expatriate who became a supplier to his previous employer. Later, he started a successful new company. The second protagonist started her China experience as a diplomat. After trying a low-risk, small business, she made a new move with help from a venture capitalist. The third protagonist went to China attracted by its culture. He learnt the language and even studied in a Chinese university. He later founded several companies with his classmates. Though these three foreign entrepreneurs had different growth paths and met different challenges in their ventures, they did share a lot of best practices and lessons for doing business in China.
Each case study covers one specific topic that is connected to the previous book China CEO: Voices of Experience. The relation between the two books is presented in the following table:
The case guide includes a Chapter 9 that has no corresponding chapter in China CEO: Voices of Experience. This chapter covers the topic of foreign entrepreneurs in China and it caters to the request from several readers for us to include a chapter on small companies and their challenges in China.
The guide can be used in two ways:
1 As a self-study book. We recommend that our readers follow the following steps:
2 As course material. You can follow the same procedure used for self-study, except that you can add group discussions after your own reflections on the case study. Basically, the steps to follow would be:
We wish to thank the commentators who so generously shared their experiences with us. Each case study received comments from a professor and at least one practitioner. A big thank you for your generosity.
Contributing professors
Bala Ramasamy is Professor of Economics at China Europe International Business School (CEIBS), Shanghai, China.
Dingkun Ge is Professor of Strategy and Entrepreneurship at CEIBS.
Dongsheng Zhou is Professor of Marketing at CEIBS.
Gerald E. Fryxell is Professor of Management at CEIBS.
Howard Ward is Professor of Management at CEIBS.
Per v. Jenster is Professor of Management at CEIBS.
Thomas E. Callarman is Professor of Operations Management at CEIBS.
Willem P. Burgers is Professor of Marketing and Strategy and Bayer Healthcare Chair in Strategy and Marketing at CEIBS.
William H. Mobley is Professor of Management at CEIBS and the Founder of Mobley Group Pacific Limited.
Contributing practitioners
Angeli Kwauk is Area Director of Human Resources of China Grand Hyatt Shanghai.
Bettina Ganghofer is Deputy General Manager of Shanghai Pudong International Airport Cargo Terminal Co. Ltd (Lufthansa JV).
Doug Ho Song is Managing Director of Doosan Leadership Institute, Doosan Group.
Gary An is General Manager of Amphenol East Asia Electronic Technology (Shenzhen) Co., Ltd and Amphenol Commercial Products (Chengdu) Co., Ltd.
Guosheng Zhu is Operation General Manager of BOC China.
Hans-Peter Bouvard is Business Development Director of Northern Asia Reichle + De-Massari Far East (Pte) Ltd.
Sergiy Lesnyak is Chief Representative of Ferrexpo Group in China.
Shaun Rein is Managing Director of China Market Research Group (CMR).
Wei Joo Chai is Factory Manager of Shanghai Kerry Oils & Grains Industries Ltd.
Xiaotong Li is HR Director of Shared Service Organization at Henkel (China) Investment Co., Ltd.
Xuezheng Li is Global Sales Director of Beijing BOE Optoelectronics Technology Co., Ltd and former Chief Public Relation Officer of BOE Technology Group Co., Ltd.
Yufeng Zhao is General Manager of Progress Strategy Consulting Co., Ltd.
Most of the cases have been written by the two co-authors of this case guide, sometimes in cooperation with others. We want to thank all of you:
George Chen, former Research Fellow at CEIBS.
Jacqueline Zheng, HR Manager of Eli Lilly China.
James G. Clawson, Professor at Darden.
Linda (Dongmei) Song, Research Assistant at CEIBS.
Wei (Wendy) Liu, Darden MBA 2003.
A special thanks to Lydia J. Price, Professor of Marketing and Associate Dean at CEIBS, and Dr. Junsong Chen, Research Fellow at CEIBS, for allowing us to use their case Mercedes-Benz and Wuhan Wild Animal Park.
Finally, we want to thank all the companies that have contributed to the case studies. Without them, this book would not have been possible.