Changan Ford Automobile Co Management Essay

Joint venture of Changan-Ford Automobile Co has reported increase in sales and revenue. The joint venture has proved successful as recorded in 2009 where it sold 319,000 units for revenue of £360 million. The sales has increased from 2008 recorded 210,000 units for revenue £270 million (Riley, 2002).

The products are innovative and differentiated whereby the Western designed cars attracted the Chinese. The models offered sold well in China due to their appeal to a segment of buyers who liked the superior quality, innovative technology and aesthetic appeal of western manufactured cars.

When both cultures combine together, they produce synergy. Differing points of views from Chinese and Western influences can produce fresh ideas and suggestions. Those participating in a joint venture can use technological skills and specific knowledge that is not generally available.

Weaknesses

Lack of trust between partners, scarce information, different management and cultural styles, control conflicts, and changes in the business or strategic objectives of partners are some of the more usual pitfalls of the joint venture option.

The Western culture is one of individualism, while the Chinese culture practices collectivism. Americans tend to work in isolation and do not have the initiative to help others, unless when they are asked to. Chinese advocated harmony, using a collective, balanced and harmonious approach to resolve conflict an avoid confrontation. The Chinese are not tolerant of the Western management style which they perceived as disrespectful. This will potentially cause conflicts in the company’s management.

Americans tend to use direct expressions, while Chinese use the traditional tactful expressions. This will cause issues in the decision making process where the Americans think that the Chinese are too slow in making decisions while the Chinese feel that the Americans make hasty and rash decisions. Hence, whatever the decision is, this situation is bound to cause misunderstandings and dissatisfaction.

Ford engineers are not sensitive to the Chinese local requirements and tastes, especially in areas of craftsmanship, driving styles and habits and different road conditions. This is due to the vehicle being designed by Ford, which does not share their engineering resources with the Chinese partner. Furthermore, unlike GM and VM which started to invest in local engineering, Ford merely transferred their own engineering over the partners, without customization to local demands (Martinsons and Tseng, 1995).

Ford introduced 2 new models which were poorly researched, hence were not well received by the Chinese. One was because it had copied an Indian design and it used the Indian market to estimate consumer preferences. The other model was ahead of the Chinese’s basic requirements and they were not prepared to pay for it.

Opportunity

The opportunity for technology sharing between the East and West could not have come at a better time. China is fast emerging to be the largest world car market, while the Western market was still attempting to gain a foothold. Hence, many Western car makers began to adopt the “Look East” strategy, naturally targeting China to expand and tap on the growing Asian markets. This advent of western technology was a boost for the China market, which now has the opportunity to learn new technologies and be able to deliver cars which are deemed of higher quality than the locally produced cars.

When the West comes to the East, local employment in China was boosted, creating thousands of job opportunities for the Chinese. Since Ford Motor was already a global leader in the car industry at that time, the joint venture created a large market optimization its cars. Ford was also business smart to have sold part of their stake in Mazda and later divested the Volvo brand, to boost its financial strength. Ford also owned many successful models, four of them were assembled by the Changan-Ford joint venture, thus monopolizing the market with these models.

With the joint venture, consumers in China had the opportunity to enjoy the luxury of owning higher quality cars. New technology resulted in superior product quality and innovative capabilities. Many consumers enjoyed the prestige of owing such cars which were proven to be of better quality than locally produced models.

The marriage of Western and Eastern values and standards in the joint venture had its pros and cons. Cultural differences eventually proved to be a divide and it hindered subsequent progress. Changan-Ford had an external consultant’s report to thank for when it opened Changan-Ford’s eyes to these issues. Since the report surfaced, the company found ways to overcome the issues to improve and strengthen the joint venture.

Threats

Firstly, glaring cultural differences (Agarwal and Wu, 2003; Nolan and Zhang, 2002; Nolan and Zhang, 2003; Yan, 2004) caused great disharmony in the ways the Chinese and Americans work. The Chinese take personal relationships very seriously. Relationships are important, but money has a place too. Hence, the Chinese see the Americans as selfish workers while the Americans think the Chinese lack intuition and individual responsibility.

Poor and lack of communication between the Chinese and Americans also proved to be a growing threat to the way operations are being run in the company. Americans tend to be more direct in expressing their opinions and views, while the Chinese tend to be more tactful and diplomatic. These differences cause a lot of misunderstandings for both parties. The Americans are frustrated with the Chinese’s long winded way of communications with no apparent solutions, while the Chinese find the Americans’ free and direct expressions rude and disrespectful.

The Chinese adopt an authoritative approach where staff accepts without question the decisions and authority of high level leadership. On the other hand, Americans adopt a flat organization structure, and a right to challenge decision making made by higher authorities. The Chinese find open criticisms unacceptable and they will accept whatever decisions made without question, as a mark of respect to higher authority and to maintain good relationship. Americans will pay more respect to decisions made based on ability, rather than to blindly obey decisions made out of hierarchy.

The Ford engineers were not willing to understand and comply with the local requirements. Ford engineers were not willing to help their Chinese colleagues to improve the products to satisfy the local customer. When Ford developed a new model, Ikon, using specifications derived from the Indian market. Naturally, the Ikon did not sell well in China as it did not meet the Chinese customers’ basic requirements.

Competitors like General Motors (GM) and Volkswagen (VW) began to invest in local engineering to improve their local design capability. This move also proved to be cost reductive due to its local developments. On the other hand, Ford continued to transfer its engineering drawings and specifications without the advantage of local engineering improvement. The Ford team did not work closely with the joint venture team to leverage on the competitive edge and local human resource capability. As a result, costs continue to elevate without local engineering and they lost their market advantage when the demand for their products continue to shift to other competitors.

Strategically, the joint venture of Changan-Ford Automobile Co. had proven successful, as evidenced from its balance sheet figures. The company has also invested in an information system which will enhance its research, design, sourcing, production, marketing, sales and service to achieve optimum integration of resources and capabilities.

Appoint an independent consultant to help resolve problems

It is advisable to engage an independent consultant, who will be in a neutral position to commence this task. By listening and understanding, it opens up each other’s eyes to the background and values and the different approaches in their management styles. The consultant should gather views and suggestions from both parties, present them to the firm’s Board of Directors for consensus and approval, then work closely with Human Resource to address the issues.

Create out of office interaction among employees

Another effort is to encourage employees’ interaction by having events like team-building, family day and company dinners, to foster interaction and understanding of each culture’s practices and behavior. This understanding and tolerance can be carried over to the working environment to promote harmony in the office.

Technology transfer

Some of Ford’s competitors have invested in local engineering and improved their local design capability to expand their local customer’s base. Ford should come down from their pedestal and take lessons from their competitors, in order to stay ahead of the competition and to gain a stronger foothold in the local market. Superior technology will mean nothing if they fail to gain the respect and meet the demand of the Chinese.

Be sensitive to local requirements and demands

Ford engineers do not seem to want to help their Chinese colleague to improve the product or to customize it to meet local demands. Ford’s researches have also failed to take into account what the Chinese majority wants and have instead based their research on another country which is poles apart, i.e. India. As a result, local customers have not accepted some of the designs. Ford should shed its arrogance and put its ears on the ground to understand the Chinese’s needs better. It must be willing to share its technology with its Chinese partners so that resources and capabilities can be utilized to the optimum.