Shui Fabrics Critical Analysis of a Global Problem

¶ … Global Problem

Shui Fabric Case

The purpose of writing this paper is to discuss and analyze the case of Shui Fabrics, which is a joint venture of an American and Chinese company. This assignment will explain the problems identified by the global managers at Shui Fabrics and will also suggest possible solutions to manage these problems in a global environment. This paper will give the opportunity to integrate the management skills and apply the global concepts learned in the course.

One of the problems with the managers working on international level is their inability to understand the culture and environment of the other country. Similar is the case with Shui Fabrics, which is 10 years old 50-50 joint venture, textile company manufacturing fabrics for both Chinese and international market. A problem arises when Ray Betzell, who is the general manager of the venture since 5 years, founds himself stuck in a tough situation (Daft, 2010, p.122).

On one side, his boss, Paul who is the president of Rocky River is not happy with 5% Return on Investment produced by the company. He expects Ray to increase annual ROI from 5% to 20% or he plans to move back from the joint venture as he points out in the case "But a 5% ROI is just pathetic" (Daft, 2010, p.122). He also suggests Ray to reduce the labor cost by laying off the labor in China. On the other side, the Chinese deputy general manager "Chiu Wai" is very much satisfied and happy with this venture. He believes that this venture is helping the economy by providing employment and making the right amount of profits that are allowed by the Chinese government.

Analysis

The reason behind the conflict in thinking of Chinese deputy manager Chiu Wai and American President Paul is due to the economic, political and cultural differences between the two countries. The differences between the management of Chinese and Americans in this case are as follows:

Chinese emphasize more on people "Humane oriented approach" while Americans give preference to performance "Performance oriented."

Chinese don't want to cut jobs but Americans want to pull the plug if performance doesn't improve.

Chinese are happy to give 3000 jobs to the economy. Americans on the other side are unhappy due to low ROI and expect it to be 20%.

Chinese believe to have better relations while Americans focus on task performance.

Chinese want to create more jobs and in contrast American side wants to earn more profits.

GLOBE (Global Leadership and Organizational Behaviour Effectiveness) Project Dimensions serves as a tool that helps managers identify and solve the cultural differences. Keeping in mind the GLOBE dimensions mentioned by Daft (2010, p.109), President Paul based in USA is very high on assertiveness and performance orientation while low on humane orientation dimension. He has a different working style, compare to the Chinese who are human oriented. Paul expects a high performance and prefers to have quick and short-term results. He uses the performance oriented approach and therefore wants an increase in the annual ROI at any costs.

Integration

The people working in a global team environment should integrate effectively and give flexibility to each other considering the cultural, economic, environmental and political differences. (Dierickx and Cool, 1989). Managers working with joint ventures or multinational organizations should communicate with each other effectively and design strategic plans keeping in mind the cultural differences of both countries. Therefore, in order work in joint ventures, it is not only important but extremely necessary for the global manages to understand the economic, political, social and cultural differences of other country (Dowling et al., 2008a and Dowling et al., 2008b).

Solution

In this case, both parties need to make a compromise in order continue as it is not a good idea to immediately pull out from this 10 years old joint venture. Looking at the positives of Shui, it should be given a chance and enough time to make better profits in future.

Shui should also take steps to increase efficiency and cut labor costs by using latest technology as suggested by Paul (Daft, 2010, p.122). This will decrease the fixed cost but company will have to make huge investments on new machinery which means addition in the non-current assets of the company. This will further lower the ROI because low return on assets gives low return on investment. Ray can also solve the problem by increasing sales in China as well as on international level. However, in order to do this, Ray will have to design a new marketing strategy which will bring additional costs.