Analysis Of The External Environment: Bosch in China

When we are talking about Bosch in China, we are placing our analysis in a globalized context, where the reduction of costs of transportation and communication brought the integration of countries and peoples and the flows of goods, services, capital, knowledge, and people across borders is free. This involves the application of models where the factors of the external environment are the main keys to understand the organizational behaviour, especially referring to the human resource management. In this paragraph we will focus more on the country level and we will analyse external factors such as the engineering and electronics industry, the Chinese institutions and culture.

As Bosch history shows us, the very first environmental hurdle was to settle down in the chinese economy and more precisely in the engineering and electronics industry. Despite Bosch could rely on china’s continuing economic growth during the 2008-09 crisis, it had to adapt to a market that had developed under quite unique circumstances. Authors Bähr and Erker (2015) wrote that automotive industry in China had grown up only after the second world war and only with economic reforms of the 1980’s had it begun to grow rapidly.

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So when it came to serving a growing market of individual car buyers, imports and joint ventures with non-chinese manufacturers were extremely important.

The biggest competitor was Volkswagen but outside the urban centers of population, the market was dominated by vehicles like small models produced by Chinese manufacturers. It was to this situation that Bosch had to adapt, since it also wanted to become an original equipment supplier to the indigenous automobile industry.

The company adopted a corporate strategy and set up jointly with the local enterprises, as in the case of RBCD, where in 2004 Bosch held 67% of the capital stock, giving it the majority shareholding in a Chinese company for the first time. Moreover, the city of Wuxi represented a strategic position since it was a popular location both for Chinese and foreign investors. The integration strategy was successful and by the 2010 Bosch had 22 subsidiaries in China and the sales in the territory was the 44%, becoming the new focal point of the group’s global activities.

In order to be successful in the Chinese economy, Bosch had also to adjust its operations to the local institutions. The institutions, referring to Stiglitz (2002) definition, are “basic and stable mechanisms that govern the incentives of agents and coordinate activities in major political and economic games”. Accordingly to Xu (2011), the most important institution in Chine is the regionally decentralized authoritarian (RDA) regime, which is characterized as a combination of political centralization at the national level and an administrative and economic system decentralization at the regional level.

On the one hand, the national government’s control political governance and tax system; on the other hand subnational governments have influence or even direct control rights over a substantial amount of resources, such as land, firms, financial resources, energy, raw materials, etc. Laws and regulation represent a weakness in legal institutions: for this reason China introduced an administration-based regulatory decentralization scheme, in which the central regulatory authorities break down the regulatory tasks and delegate them to subnational governments. In concrete, this means that Bosch needs to face the RDA regime on two different levels when it comes to decision making and policy implementations. Regarding the national level, the company developed a department dedicated only to the relationships with the government, so that they can observe legislation strictly and cooperate smoothly when they need to apply for policies.

On the regional level, Bosch is a big tax-payer and contributor to the local economic development and this strategic role makes subnational government provide initiatives and protections to private firms, take advantage of the national legal vacuums. Even though duality theories suggest that firms face pressures towards global integration and local adaptation, the most important institution to cope with is culture and social norms. Using a cultural approach, we analyze culture as a given component of reality, shared by individuals as a means of conferring meaning, to add sense to social interactions. That means that enterprises can deal with institutional setting, whereas it is not possible to develop social trust deliberately or radically depart from established rules and norms. In this respect, Bosch strives to homogenize activities across national boundaries in line with a global strategy, whilst has a bigger plan to gain legitimacy among the population.

The firm is actively taking on social responsibility by increasing its efforts in the less developed mid-western regions and focusing on areas such as poverty and vocational training. In 2011 it has established the Bosch China Charity Center and in 2017 kicked off the program “I want to learn intangible cultural heritage”, with whom it supports multicultural education and gives awards. The outcome of the company’s strategy will therefore incorporate both national and global dimensions and variations in practices will be in line with different cultural contexts (rather than institutional setting).