Ford’s expansion into the Chinese market through a joint venture with the Changan Auto Co. makes perfect strategic sense. Explain, therefore, why the joint venture has not developed as successfully as had been anticipated. China had experienced the global recession of 2008-2009 with minimal losses unlike most Western markets such as the US and Europe. Because of that, as in many markets, China overtook the US and became the largest car market in the world in the beginning of 2010.
Its internal market was rapidly growing, including cars, so since the Western markets were still suffering, the expansion of Western car manufacturers into Asia and especially China seemed like a great strategic move. Such a move was made by Ford, which went into a joint venture with Changan the fourth largest Chinese car manufacturer over 100 years old. The joint venture was proving to be successful but no as successful as anticipated. The reason for that are the severe cultural differences between the American and Chinese managers.
The two companies had to work together and complement one another’s skills, but instead there was a lack of cooperation due to these cultural differences. Some of these differences are the different values between managers, or different points of view which if worked on can produce new ideas and suggestions which can be very successful and effective. Also, American managers work individually, they make decisions on their own, work on their own and mind their own business unless they are asked to do otherwise, whereas Chinese managers always work as a group and decisions are made as a group.
Americans consider that not to be important and a waste of time since the Chinese’ process of decision making is too long. Furthermore, in the Chinese managerial systems, people readily accept leadership authority and bureaucracy whereas in America people have the right to question the organisation’s decision making. Also, in Chinese companies’ managers choose a ‘seniority’ system due to their culture’s respect for elders while Americans respect their young people as well and place priority on ability rather than seniority.
In addition, in the American culture it is acceptable for subordinates to question their superiors, though Chinese employees don’t tend to do so, not directly anyway, so as to avoid conflict or causing embarrassment to managers. Only their leaders state their views directly and openly. Moreover, Chinese people find great importance in relationships inside the organisation, between colleagues and try to promote mutual understanding and friendship between them. Whereas on the other hand, Americans keep their private lives separate from their professional lives and think that the Chinese approach of public relationships is unreasonable.
Aside from the cultural differences, there are a few other reasons the JV is not developing as successfully as expected. Reasons such as the Local development issue in which Ford does not make its engineering resources available to their JV partner, led to bad criticisms from the Chinese market. Or the issue of the new vehicle introduction where Ford had used the Indian market to estimate consumption and preferences of Chinese people, which resulted in the non-acceptance of the first local vehicle which had sold well in India.
That was not the only vehicle to get rejected by the Chinese market, the S-max which did very good in Europe did not meet Chinese customers’ requirements as it was more than what they wanted and were prepared to pay for. Another issue is that of Ford Engineering. Ford have their own engineering centre in China, aside from the JV one and do not work closely with the JV, that way they have lower efficiency, waste human resources and block local engineering improvement. This could result in the loss of the JV’s competitive advantage without strong local engineering.
In my opinion it is of vital importance that Ford and Changan both work on resolving their cultural differences . Both Americans and Chinese managers should compromise and train to manage the JV in a mutual way somewhere in-between their cross-cultural managerial traits. If they manage to communicate correctly and understand how each side works and how they intend to act it would be easy for the JV’s management to tackle these other issues affecting their successful development. References: * G. Johnson, R. Whittington, K. Scholes, Exploring Strategy Text & Cases * http://ajc. sagepub. com/content/5/2/57. full. pdf+htmlю
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