Shui Fabrics: resolving cultural conflicts in joint venture management

¶ … 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.

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.

Therefore, Ray should look for options that satisfy both Chinese and American management. For instance it should make most use of its labor resources and make it more efficient by providing trainings. Labor force should have expertise in their specific area and the required technical knowledge to increase the productivity. In addition, Roy should also take steps to improve the recruitment and selection system of Shui so that right person is assigned with the right task. This way production will be increased which will ultimately increase the ROI.

Conclusion

It can be learned from this case that it is very necessary for the global managers to know and understand the socio cultural and economic differences between the two countries. Every country has different cultural values according to which managers design organizational values. Joint ventures can only be successful if both companies look at the mutual benefit of each other instead of just focusing on the one sided goals.