Beijing Case Study

Running head: BEIJING CASE STUDY 1

BeijingCase Study

November4, 2014.

CaseQuestions:

Whatare major challenges in the business and institutional environmentthat Beijing Jeep is facing at the time of the case?

Aftera deal to incorporate the Beijing Jeep in China was made, culturaldifferences arose among the firm board members this led toproduction disputes and low product development. Governmentinterference on financial markets led to foreign exchange problems tothe new firm as special license was required whenever large scaleexchange was planned. In addition, the Chinese government made ithard obtaining importation license for production kits. Unstable,political and economic climate in China also posed a great hurdle forBJC operations.

Furthermore,the communist administration in China was faced with myriadspolitical and social unrest that negatively impacted on BJC businessactivities increased government regulations hurt businessactivities. However, after the signing of World Trade Agreement (WTO)and liberalization of financial markets, there was a reduction intariffs imposed on imports. This opened competition in the market asimported vehicles flooded in China and this had significant effect onBJC. As a result, Beijing Jeep Corporation lost its market share andprofits dwindled. Increased competition from Japan also presented agreat challenge for BJC products in the new Asian market.

Whatare the positive strategic adaptations that the firm has instituted?

BeijingJeep Corporation was given preferential treatment in form of tariffsand foreign exchanges as part of enhancing its adaptation in theAsian automotive market. In addition, before the firm was set inBeijing the BJC made positive contacts with government officialsthis enabled BJC to get protection over imports on materials neededfor production. Furthermore, BJC had a great brand name in Chinaespecially at a time when the local preference for better cars washigh. BJC offered the Chinese consumers better car options that werecheap compared to the competitors. The firm also allowed the companyboard management to have inclusive Chinese and Americans members.This cultural inclusiveness enhanced the firm wade through culturaldifferences that arose after production differences. The Chinesegovernment also owned the largest percentage of the BJC sharesthereby making the firm ownership inclined to Chinese government thanthe Americans. This enhanced government support through an effectivemarket and financial policies.

Therelationship with DaimlerChrysler played a significant role in theChina strategy for Beijing Jeep. What could BJC have done better tostrengthen its ties with the parent firm?

BeijingJeep Corporation would have renewed their joint venture withDaimlerChrysler as a joint effort to counter the growing competitionthreats. In particular, BJC would have used its close ties with theChinese government to influence more partnership with DaimlerChryslerin the production of more competitive cars. By having a joint venturein which DaimlerChrysler had more stakes in the BJC Company, thiswould have enabled the firm shy off competitors. Beijing JeepCorporation would have helped DaimlerChrysler overcome mergerproblems through increased production partnership. This would haveresulted in greater revenues, increased product quality andweathering cultural difference.

CourseContent Areas:

Describethe extent to which a clash in cultural values impact operations forU.S. firms that do business in China. Please refer to Hofstede’sdimensions in your response.

Culturalvariations have been a great hindrance for effective operation by U.Sfirms in China. The Beijing Jeep Corporation business operations werehampered by salient cultural differences in regard to the nature ofproducts. The cultural differences created a power distance in whichAmericans felt that new vehicles needed to have all features as perAmerican version. The Chinese consumers viewed foreign technology assuperior compared to local vehicles. In addition, the difference incultural perception regarding the conduct of business had asignificant effect on business operations. Chinese businessoperations are influenced by strong socialism values in whichpersonal relations and business charisma influence businessoperations.

TheAmericans on the other hand, are accustomed to less personalityinfluence in business operations business operations are run throughcontracts. According to Hofstedcultural differences creates mistrust and uncertainty as it happenedwith BJP during joint ventures with other foreign firms. The Chinesegovernment was wary of foreign firms merging with BJC and viewedventures as a capitalistic. This created the uncertainty anxietyamong Chinese government officials who viewed DaimlerChrysler Companyintended venture with BJC as a a setup to take over the BJC company.

Asthe Director of Human Resources for a U.S. firm operating a factoryin China describe the selection process for appointing a CEO for yourChina subsidiary and your preferences.

Toappoint a CEO for a U.S. subsidiary firm operating in China, thefirst step would be considering individual merit. However, for firmto conduct business effectively, majority of the board members shouldbe recruited from the Chinese race as well as the CEO. The minorityboard’s members should then be selected from other races. Therationale behind this preference is based on the assumption that,most workers are Chinese and having and a CEO who is different fromtheir race may adversely affected firm management operations.However, a deal would be made to have the position of CEO alternatedbetween races as part of promoting work diversity.

AnalyticalTable Beijing Jeep Corporation

Strengths

Challenges

Opportunities

Threats

Weakness

Good product brand name-Jeep

political conflicts, government regulations on market and social unrest

Mergers with DaimlerChrysler

Increased competition from Japanese car industry

Poor management made worse by cultural differences

Favorable government policies and tariffs

cultural differences

Large and growing market for foreign cars

Uncertainty of business environment due to political conflicts

Poor business approach to counter competition

Un-liberalized financial market in China

Cheap production inputs labor

Cultural Dimension

China

United States

Power/Distance (PD)

High power distances (HD)

  • Centralized companies.

  • Strong hierarchies.

  • Large gaps in compensation, authority, and respect

  • Acknowledge a leader`s power.

Low power distance

  • Flatter organizations.

  • Supervisors and employees are considered almost as equals.

Individualism (IDV)

Low individualism

  • Emphasis on building skills and becoming masters of something.

  • Work for intrinsic rewards.

  • Harmony more important than honesty.

High individualism

  • High valuation on people`s time and their need for freedom.

  • An enjoyment of challenges, and an expectation of rewards for hard work.

  • Respect for privacy.

Uncertainty/Avoidance Index (UAI)

Low uncertainty

  • Informal business attitude.

  • More concern with long term strategy than what is happening on a daily basis.

  • Accepting of change and risk.

High uncertainty

Differences are avoided.

Very formal business conduct with lots of rules and policies.

Culturaldifference between U.S. China in business activities