In this paper we will discuss the Shui Fabrics Case Study and its implications on managing in a global environment. The research of case studies gives us the opportunity to understand and apply the lessons we have learned in the course. The case explains that for 10 years, Shanghai Fabric Ltd., a Chinese fabrics company, and Rocky River Industries, a United States textile manufacturer, have been part of a 50-50 joint venture to produce dye and fabric. This venture, called Shui Fabrics, produced dye and coat fabric for domestic and international sportswear markets. Ray Betzell, general manager for five of the 10 years, found himself in the middle of a tough situation (Daft, 2012, p. 119).
The objective of this case study is to identify the main problem, analyze its implications, and integrate the management skills we have learned in the course. I will discuss the differences between the American and Chinese views of the company in regards to the Global Leadership and Organizational Behavior Effectiveness (GLOBE) project value dimensions [ (Daft, 2012, pp. 106-107) ]. We will also learn the importance of researching the socio-cultural values of the country we want to do business with.
Ray Betzell has a dilemma. On one side, the Rocky River president and Ray’s boss, Paul Danvers, was unhappy with the 5% return of investment (ROI) the company was producing and wants Ray to find solutions or they would pull out of the joint venture, while considering staying in China. On the other side, the Chinese deputy general manager was actually very happy with the venture because it was having a positive impact on the local economy by providing jobs, and producing the right amount of profit allowed by the government. The problem is that Ray Betzell needs to find a way to convince his boss that Shui Fabrics has actually been very successful, if you take into consideration that China is a very difficult market to enter, and that it has great possibilities of growth. There are two sides to the problem, the Chinese and the American, and Ray is the only one who can see both of them.
The reasons for these two points of view are the socio-cultural differences that exist among countries. Culture is what defines a country and it can be composed of the language, values, religion, models of conducts, and beliefs, among others. There are many cultural differences between China and the U.S. China has a strong sense of hierarchy and respect towards figures of authority. For example, the vice president of a company might decline to participate in a very lucrative opportunity if it meant going over the president and his boss. This is a behavior that many Americans would find difficult to understand because their priority would be to make money. Another example is the role women play in business world. Even though the number of professional Chinese women has grown, men still think they are inferior, which is why when they see a woman succeeds in a position usually occupied by men; she earns great respect (Fang, 2008).
This is actually something that other countries looking to enter Chinese market can use to their advantage. These and the many other cultural differences that exist between China and the U.S. explain why they see the problem in a very different way. Based on these differences, if Rocky River decides to pull out of the venture, it will be very difficult for the Chinese to trust the company and the American business in general again. It will be very difficult for the Chinese to understand why the American business thought Shui Fabrics was a failure because for them it was the opposite.
The GLOBE project value dimensions identified five dimensions that global managers can use to explain cultural differences between countries. Based on the case details we can we can identify several differences. The first difference deals with the humane orientation dimension, because it relates to caring for the people. The Chinese have a high unemployment rate, which means they are concerned with job creation. The joint venture has been successful in their minds because it has created about 3,000 jobs, which is a big contribution to the local economy. On the other hand, the Americans think they should lay off workers to earn a higher profit. Therefore, the Americans are more concerned about making money than providing the jobs that are helping the people (Daft, 2012, pp. 106-107, 119). The second difference deals with the performance orientation dimension. The Chinese and the Americans have different performance expectations.
Chiu Wai, the Chinese deputy general manager, believes that the 5% ROI that the Americans are earning is appropriate because earning more than that would not be viewed well by the government. The American president of Rocky River thinks the 5% ROI is unacceptable because he was expecting to me making around 20% (Daft, 2012, pp. 106-107, 119). Both companies have very different performance expectations. The third difference relates to the future orientation dimension. The Americans are not really taking into consideration the long term success Shui Fabrics has shown, based on how difficult it was to enter the Chinese market. They are also not considering the future long term favorable results they probably would experience based on the huge Chinese market, and the lower wages they pay to Chinese workers.
Rocky River is more concerned about quick gratification than long term results (Daft, 2012, pp. 106-107, 119). It is Ray Betzell’s responsibility, as a manager who understands both the Chinese and American views, to explain all the possible opportunities that Shui Fabrics can bring to Rocky River. He needs to use the GLOBE dimensions to explain the cultural differences between the Chinese and the U.S. and how pulling out of the venture could do more harm than good. Ray should also try to help the Chinese understand the Americans point of view on profitability. There might be opportunities to renegotiate with Shanghai Fabric if they can understand the American’s socio-cultural views on business. These are actions Ray could follow as a global manager.
Evaluate how your management skills are advancing and how you will apply your knowledge to integrate people working in a global team environment. Again, draw from knowledge gained in this unit. I do not work for a company that has any plans of expansion to other countries. However, when it comes to socio-cultural differences, we need to remember that we live in a country that is rich in diversity. There are people from many countries living in the United States who came with their own culture and values.
As a manager, I can apply the knowledge and skills I have acquired in this course to understand the behavior of my coworkers and direct reports who came from foreign countries. I don’t necessarily need to travel to a foreign country to have and develop cultural intelligence. As managers of a diverse workforce, we also need to “reason and observe unfamiliar gestures and situations and devise an appropriate response” [ (Daft, 2012, p. 109) ].
I found this case study very interesting because sometimes I do not even think about the many socio-cultural differences that exist between countries. It was very difficult for me to understand why Rocky River could not see how they have accomplished something that seemed impossible by entering the Chinese market. Based on my learning, I truly believe that we cannot enter a foreign country without performing the appropriate research on the impact we can have on the people. We cannot make such a decision with the sole objective of making money. It is clear that the Chinese places great importance on their people, thus I believe that if Rocky River pulls out of the venture, they will probably fail at other attempts to enter into similar contracts with other Chinese companies.
They will probably feel disappointed and will reject a company that bases all decisions on money, with no regard on people. Based on what I have learned, if I were the general manager, I would use all my skills to try to convince my boss that we would be making a big mistake if we pull out of a venture that has brought so much good to the Chinese. Of course, I would also use forecasting and experience to show them how in the near future, we could earn more profit. These are the lessons that I take with me upon completing this paper.
Daft, R. L. (2012). Management. Mason: South-Western Cengage Learning. Fang, G. (2008, March 18). U.S./China Differences and Their Impacts on Business Behaviors. Retrieved from Womble Carlyle Sandridge and Rice Web Site: http://www.wcsr.com/articles/us-china-differences-and-their-impact-on-business-behaviors