Culture Clash in The Boardroom Case Study Solution
German Parent Company, which is currently known as Almond Chemical Company, started its operations in the year 1999 in China. Currently the Almond Company is involved in two major joint ventures with the chemical companies located in China, in order to approach the foreign chemical companies and offer them to incorporate their business operations in China, as this is a great market opportunity for them. As it is known that the Almond Chemical is a German based company, so the German policies are followed by the company, which might create the differences during the joint venture between Almond Chemical and Chongqing which is the Chinese company and the policies within this company are totally based on Chinese rules and regulations. So, the cultural differences are the reason why the Almond Chemical Company is facing difficulties in its joint venture with Chongqing. After making the decision that Almond Chemical will start its operations in China by a joint venture;the company has seen cultural difference in the business practices. One major concern raised when Wang mentioned that his potential client would like to receive a 1 percent commission payback on the proposed large settlement. At that time, Pepin replied that the Almond’s ethics are non-negotiable. In essence. Wang Zhivago wanted to close the deal with the second largest local chemical manufacture in China, in order to attract the massive Chinese customer segment for the purpose of generating more revenues immediately to strengthen the company’s financial position in the global market. It has been recommended to the company that the understanding of work itself can be valued differently across cultures.In the article, it is implied that, individuals from China establish relationships by engaging in conversation outside their workplaces, such as: getting to know one another’s families. At last, with the request in compensation for the sales achieved; Almond should implement a performance tool, known as the balanced scorecard. This strategic tool will allow Almond to align the companies’ internal and external goals while using additional financial metrics, as it gives an overall view of the organization’s performance, and can provide individual performance-based rewards.
Introduction and Background Information
German Parent Company which is currently known as Almond Chemical Company, started its operations in China, in the year 1999. Currently the Almond Company is involved in two major joint ventures with the chemical companies located in the China, in order to approach the foreign chemical companies, to incorporate their business operations in China as this is the great market opportunity for them.(Xin & Haijie, 2011).
During its joint venture phase; the Almond Company took 70 percent stock of one of the local chemical company in China, while it took almost 51 percent stock of another chemical company in China, which was known as Chongqing. The key players from the side of Almond Chemicals in first joint venture,are: Liu (the president of the company) and Schumann (the vice chairman of the company’s joint venture system). In second joint venture in Chongqing, the key players are Wang (the vice president of the sales department of the company), Ho (the financial director of the company) and Chen Dong (the chairman of the company’s joint venture system).
As, the Almond Chemical is a German based company, so the German policies are followed by the company, which might create differences during the joint venture between Almond Chemical and Chongqing, which is the China based company, having Chinese rules and regulations and policies. So, the cultural differences are the reason due to which Almond Chemical Company is faced with numerous hardships during its joint venture with the Chongqing.
The case discusses the joint venture’s issues between the German company (Almond Chemical Company) and the Chinese company (Chongqing), such as: the conflict in the business practices due to the cultural differences and the dis-alignment of ethical values. As the Almond Chemicals is a German company that wants to expand its business in the global market, which that why it is considering to have a joint venture with the second largest chemical company in the China, named: Chongqing.
So, as the company’s representative in the joint venture: Mr. Lui Peijin, who is the director of operation in the company located in China, is facing a critical ethical dilemma in a meeting. This meeting would help Lui to fin dour whether the operations of Almonds Chemical in China would face some backlash from their joint venture partner, which especially includes the president of the sales department, i.e. Wang Zhiabo(Mighty Recruiter, 2020).
Wang Zhiabo describes that he has issues with the company’s financial performance, along with the unconventional practices, such as: the implications of European safety standard within China, which clearly describes the definition of wasteful and frivolous-luxurious expenditures within the company.
In essence. Wang Zhiabo wants to close the deal with the second largest local chemical manufacture in China, in order to attract the massive Chinese customer segment,in order to generate more revenues so that the company’s financial position could be strengthened in the global market.
Apart from these financial benefits; the Almond Chemical Company is basically annoyed with the cultural differences in the joint venture with Chongqing. The company presents itself as the most ethical company in the Germany, and follows all the fair practices while dealing with suppliers and customers. So, this joint venture is a very critical decision for the company, as its ethical and fair practices might be on stake.(University of California, 2009).
Peijin joined the company at the beginning of his career due to the ethical and fair practices of the German company and its management approaches to follow the ethical practices in the company, which provides a model to work in the Chinese industry.
This will examine the cultural differences in the organization’s values as well as other key differences. In addition to this, this document will also include recommendations to avoid the cultural differences between the companies while executing this joint venture, which will also help in providing a surety regarding the company’s future success.
The main problem with the case is that this culture has proved to be an obstacle for the German company’s joint venture with China. Due to the unavoidable cultural differences; the joint venture is experiencing problems in selling and making profits, so the performance has massively declined. Due to cultural differences between China and Germany, it is very difficult for the companies to achieve their goals through this joint venture. In China, commercial bribery is very common. It is normal for those who are trying to start a business to play golf together, buy gifts for customers, and so on. For the Germans, however, the company believes this is contrary to their “corporate culture” and beliefs. The German company is facing with a dilemma regarding whether it should be flexible and take bribes to achieve its goals, or should it try other alternatives.
When doing business in a foreign country; there are many problems that could be faced by different countries and there are many cultural differences that may cause many problems for foreign countries.
In the Chinese culture, the business decisions are very smooth and efficient. Make your business decisions on behalf of network connections or connections. The trend in the Chinese market is that the business-to-seller relationship is better than another business, and a good business-to-seller relationship should close the deal. This is the normal culture of the Chinese companies. A small amount of bribery is required to run a business.(Analytic Technology, 2020).
In China, a business is normally able to play golf together, give gifts to customers, and offer a certain percentage of transactions to the purchasing manager of another company. The Germans realized that this was a complete violation of their culture and values. The aim of this German company is to conduct its business in a formal and direct manner. All decisions are made in accordance with German standards and guidelines. Given China’s corporate culture, this completely contrasts Almond Chemical’s corporate culture. The crucial question, then, is whether the people are aware of Chinese corporate culture or they are conformed to the true German corporate culture.
One of the main problems is that the manufacturing plant which is established in Chongqing, includes all the safety equipment directly that are imported from Europe, such as: helmets, shoes and protective clothing. These are safety measures taken by the German companies to ensure the safety of its workers at the Chongqing plant. In order to avoid accidents and injuries; the Germans accepted the equipment needed for the manufacturing plant’s-security measures.
Ethical differences in the work environment are seen as advantages of a globalized world, not disadvantages in accessing the opportunities.Almond Chemicals, which is a German company, has made a joint venture with a Chinese company in China, in order to have its influence in China. However, as these two companies operate in very opposite ways, with several unavoidable cultural differences. Ats board meeting; the members of the executive committee discussed several issues and challenges from the progress of negotiations with China……….
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