Case study of China

China

Cummins is faced with a number of structural challenges that is feels are hindering the effectiveness of its Chinese operations. While the company feels that there is considerable growth potential at its plants there, the company also feels that it is having undue difficulty in capturing that potential. The case paints a real-life picture of managerial decisions at foreign subsidiaries.

At present, Cummins and its JV partners do not agree on a vision for the company. On the Chinese side, the vision appears to be focused on CPC interests, since the party is heavily involved in the company. This orients the company to a defensive strategy that may emphasize a low-risk approach and a focus on the status quo. The Cummins side sees the plant as an underutilized asset. Cummins' relationship with the Chinese market in general has shifted since it first entered the country, and it needs to communicate its new views with the Chinese side of the JV. If it does this, then the company is likely to gain more support for its growth strategy.

Leadership is also an issue that is hindering the performance of the Chinese subsidiaries. Cummins has been force to adopt a team strategy to leadership because there are few leaders within the organization who combine the necessary cultural and technical skills. For their part, the Chinese managers and workers prefer stable leadership rather than dynamic and seek to do things based on traditional collectivist methods. The appointment of Chapman to the VP International Operations meant that the company believed in his work in China, and that China was to become the most important component of International Operations. That there is no good leadership candidate from within the organization in China must be given a long-run solution. China as a market is notorious for lacking leaders, and even though Cummins has emphasized local management it clearly has not cultivated local leaders. This means that Chapman needs to build the pool of leadership candidates more aggressively, tapping Taiwan, Hong Kong or his old contacts in Singapore to find leaders capable of managing in the Chinese culture.