A Strategic Analysis of The Changan-Ford Joint Venture

A Strategic Analysis of The Changan-Ford Joint Venture

Student Name:

Teacher Name:

Date:

University Name:

1
 A Strategic Analysis of The Changan-Ford Joint Venture

Contents
Introduction .................................................................................................................................................. 1
Identification of cultural issues and relevant analytical models .................................................................. 1
The culture web ............................................................................................................................................ 2
Hofstede’s cultural dimensions..................................................................................................................... 3
Application of culture web to Changen-Ford joint venture ...................................................................... 3
Application of Hofstede’s cultural dimensions ......................................................................................... 5
Strategic planning and implementation of changes ..................................................................................... 7
Recommendation.......................................................................................................................................... 8
Conclusion ..................................................................................................................................................... 9
References .................................................................................................................................................... ii

i
 A Strategic Analysis of The Changan-Ford Joint Venture

Introduction

With the growing practice of international integration, many companies and organizations

seek to enter joint ventures for industrial expansion. When companies enter into joint ventures, the

main characteristics of the agreement require flexible capital commitment as well as local

commitment. Although entry into international markets is made relatively easy through joint

ventures, it still necessitates a profound knowhow of local management skills. Joint ventures

provide a good opportunity for long term profits. An essential feature that marks such ventures is

cultural assimilation. China’s rapid pace of development and the fact that China simultaneously

harbors the greatest population mass amongst all the countries of the world makes it a lucrative

market for international ventures. When Ford decided to enter China’s automobile market, it

completed its joint venture agreement with Changan, the third largest automaker in China in 2001.

Identification of cultural issues and relevant analytical models

When entering a host culture, there is a catalogue of behaviors that the foreign entrant

should expect. Solomon (1987) suggests that international entrants should expect that Chinese

negotiators will normally seek broad problems and will aim to build a relationship. The main

problem that the management faced in the joint venture with was the optimization of the output in

terms of efficiency and quality caused by poor communication and different decision-making

processes between the parties (Nader et al., 2013). The venture’s competitive advantage was also

affected by the differences in apprehending market changes and the ways to tackle them. The

cultural dissimilarities have a profound impact on the business atmosphere and work environment.

Chinese cultural values are visible in their negotiating style where they are always more

concerned about the means rather than the end. Where the American culture is more individualistic,

1
 A Strategic Analysis of The Changan-Ford Joint Venture

the Chinese is more collectivist. The American work structure is more egalitarian whereas

hierarchy is the basis of organizational structure in China. The American culture is information

oriented as compared to the relation oriented Chinese culture. The American approach is

reductionist whereas the Chinese way is holistic. Graham and Lam comment in The Chinese

Negotiation, ‘When bargaining in China, be prepared to discuss all issues simultaneously and in

an apparently haphazard order. Nothing is settled until everything is.’

Managers of the JV need to appreciate these differences and after understanding both

cultures’ characteristics, they need to conceive harmonious paths that can lead to a more conducive

environment at the workplace (Chen and Eisenberg, 2012). This change can be brought about using

systematic structures such as the cultural web and Hofstede’s model of cultural dimensions.

The culture web

The cultural web of Scholes and Johnson provides a detailed overview of an organization’s

culture and is a tool to plan or formulate changes strategically. The ‘paradigm’ refers to pattern of

the work environment and each of the factors in the web constitutes major elements present in any

organization. In the case of Changan-Ford venture the fundamental issue behind the problems is

cultural difference (Bell et al., 2014). By applying the cultural web model, the problem can both

be signalized and targeted. It has been applied by Teo et al to determine the use of technology

between Singapore and Malaysia (Teo et al., 2008). It has also been used to develop cross cultural

websites (Smith et al., 2004).

2
 A Strategic Analysis of The Changan-Ford Joint Venture

Hofstede’s cultural dimensions

The Hofstede model for cultural dimensions is a great help if one studies it and applies it

carefully when stepping into a foreign culture. It is undoubtedly one of the most useful, thorough

and effective culture models that have been used widely. SH Schwartz has used it to compare

different cultures (Schwartz, 1994). It was also used to study effects of culture on global web user

interface design (Marcus and Gould, 2000). Although the theory has invited criticism regarding

relevance today, political influences on variables used etc. but the theory still stands reliable

(Jeanine et al., 2014).

Application of culture web to Changen-Ford joint venture

The six elements of the culture web can be easily incorporated in the JV under study. The

Stories people tell in a company, about the happenings and the people who have worked there, tell

a great deal about the norms and culture of the organization (Taras et al., 2012). The managers of

Changan–Ford can easily learn from the stories regarding the previous management. Their ways

and culture which made Changan such a success previously can teach a lot of things.

The Rituals and Routines that are generally followed by the workers can tell a great deal

about the environment they are comfortable working in. They can guide newcomers or foreign

entrants about the acceptable ways of the company they also reflect the core beliefs of the people

working in an organization. The rituals can tell a lot about the way a situation or problem is

generally handled there and the smallest of rituals can serve as a major guideline for the foreign

person. The Logos of the company also depict the norms and values of the organization. The

Changen-Ford automobile corporation is essentially a Chinese company but is now joined with an

3
 A Strategic Analysis of The Changan-Ford Joint Venture

American company thus the name portrays that the company is guided by both the nations’ values

and culture. This is to be understood by all the employees and employers of the organization so

that they can develop the acceptance and patience required for each other.

The Organizational Structure include both the defined structure of organization as per

the written guidelines as well as the customarily accepted way of decision making and influencing

that indicate the value of member contribution. It is both an accepted and expected way of work

distribution pertaining to a certain firm. In the case of Changan- Ford, the organizational structure

has caused the most problem as the way of working in an American company is quite dissimilar

to that of a Chinese company. In an American organization, despite the existence of a systematic

hierarchy in management, decision making and innovation are a comparatively horizontal process

whereby all workers i.e. subordinates and top executives pitch in their ideas, solutions as well as

criticisms alike. Also the American managers often proceed according to their understanding of

the problem to be addressed displaying traits of quick decision making as well as individualism

(Fan et al., 2013). The Chinese on the other hand have a strict organizational hierarchy and work

in a collective manner when making a decision. In the JV under consideration, both the workers

from Ford and Changan need to carefully look at this particular sector and come up with an

intermediary way of running the organization that incorporates the better features of both

organizational structures so that the two differing cultures can be harmonized.

The Power Structures also define who holds the real power in the company. When a

company is running as a single entity, its operation executives can run it according to their wishes.

But when it enters into an agreement such as a joint venture, power structures also shift and have

to be aligned according to the wishes of both partners’ aspirations. Changan and Ford both have

4
 A Strategic Analysis of The Changan-Ford Joint Venture

their unique way of handling decision making as well as managing operations. However, they can

sit together and systematically identify how they desire different powers to be distributed among

the management and state it respectively. Then they have to practice to strictly adhere to the

decided power mechanism. Implementation of such changes is not an easy task as it requires

reshaping values, beliefs and behavior but this change needs to be prioritized in order to smoothly

function within a workplace that is facing cultural issues.

Application of Hofstede’s cultural dimensions

Hofstede’s five dimensions are a reflection of the basic beliefs that a culture inculcates in

its members. The power distance measures the level of inequality among the members of the

society or workplace that is both accepted and expected by all those who are a part of the entity.

Countries vary in their power distance index according to the culture that prevails in their

homeland. Where China ranks at 80 on the PD index, United States stands at 40. There is a vast

difference in the power structure of the two nations (Cronjé, 2011). The higher the PDI rank, the

higher the inequality in power and wealth distribution and vice versa. As power is concentrated at

the top level in China as compared to a more spread out and even distribution in the United States,

the members from China i.e. Changan, may require to seek approval from their supervisors more

often than usual and if the situation still persists, the negotiation process needs to be taken more

cautiously and slowly. Those belonging to Ford need to work on their team work skills to improve

relations.

Individualism vs. collectivism describes the extent to which a workplace or society is

systematized around an individual or a group. Where individualistic society like America

5
 A Strategic Analysis of The Changan-Ford Joint Venture

encourage the youth to be more independent, collective societies like China work in a more joint

manner looking after the welfare of each other. Hofstede’s theory suggests that negotiations with

a collectivist society can easily take a very long period of time and the relationship can alter with

a change in the negotiator (Chudzikowski et al., 2011). It leads to a difference in building and

managing short term vs. long term relations. The members of Changan- Ford need to work around

this issue by coming up with a working relation that respects and appreciates each other’s

expectations. Those coming from America need to show respect for wisdom, age and traditions

and to introduce change gradually. Those belonging to China need to show appreciation and

encourage debate and expression of ideas among workers.

As far as masculinity is concerned, both china and America rate on a very similar scale on

Hofstede’s measure. Thus balancing the team according to gender specific roles is not an issue in

both countries. They both have men and women equally capable and working in similar

environments (Seidler, 2013). They both have a slightly above average level of masculinity which

indicates that there is still a perception of male superiority in the minds of the Chinese as well as

the Americans but it is contained and actively managed at work places so that the equation is not

disturbed.

According to Hofstede’s uncertainty avoidance index the higher the rate of UAI, the

greater the anxiety in or avoidance for unknown and unexpected situations. China and the US both

are on a mediocre level of uncertainty avoidance and can thus adjust in both, expected and

unexpected situations with relative ease (Gholipour and Tajaddini, 2014). Thus in the JV of

Changan- Ford, the members should gladly welcome the fact that they are flexible to changes and

new situations. With a little time and hard work, they can implement some novel changes and

6
 A Strategic Analysis of The Changan-Ford Joint Venture

assimilate them in their professional lives. Differences are normal and can be sorted out through

planning and communicating.

Long term orientation refers to how much a society values long standing traditions and

values as opposed to short term relations. In countries that follow the Confucian philosophy like

china, high LTO (118) is experienced where acting according to social standards and avoiding

‘losing face’ are considered very important. On the other hand people in the United States have a

very low LTO (29) and praise innovation rather than tradition and do not place much value on

social norms. This may be another bone of contention among the workers ta Changan- Ford as the

difference is too great to not cause problems (Manrai and Manrai, 2011). However, nothing can

be too tough to achieve if addressed properly and the problems arising as a result of this cultural

dimension can be resolved by first identifying and then acting according to required changes. Both

cultures will have to give up something in order to gain a more feasible working environment.

Strategic planning and implementation of changes

The five stages of strategic management process can be a great tool for the implementation

of necessary cultural changes as identified by the given models. The initial task is Goal Setting

which will clarify the vision of the JV. They will have to first identify the short term and long term

goals, then identify the process e.g. negotiation etc. and then distribute tasks among participants

in order to set goals at individual level too. Then the Analysis stage sets in whereby strengths and

weaknesses, as well as the necessary changes required overcoming them will be analyzed.

Strategy Formulation entails prioritization of necessary changes required by the company and

deciding on the changes to be brought in at the cultural level. Strategy Implementation requires

7
 A Strategic Analysis of The Changan-Ford Joint Venture

a strict adherence to the set target and process by all members of the JV so that a collective effort

builds up to a substantial result. In the end, Evaluation and Control will determine whether the

changes brought about have been properly implemented and have they produced the desired

outcomes or not.

Recommendation

The joint venture of Changan- Ford Automobile Corporation has seen many successes and

for it fail for no reason other than the failure to resolve internal issues will be a shame. Both the

partner organizations need to systematically process and analyze the key factors of concern and

take steps to resolve the issues. China is a very large market and Ford is one of the most popular

automobile brands in the world. Their cooperation and continual of the JV will enhance the

capacities of the global automobile industry. Although they have taken steps to identify the causes

of dispute as suggested by the report of the external consultant, they still need to actively engage

themselves in the correction and resolution process.

The identification of cultural issues through different models suggests that there is a lot of

work required from both the parties in order to build an effective team. There are traditions and

values that play a great role in the Chinese culture and as the venture is situated in China, their

intrinsic system will have to be given greater importance. The best possible solution for the

American company is to train their native employees who will be working in China in a diplomatic

way or to preferably send employees who have a better understanding of the Chinese culture to

work for the Changan- Ford venture. The Chinese will have to show more hospitality and give

working space to the executives of such a high caliber as the Ford employees must be. Respect for

8
 A Strategic Analysis of The Changan-Ford Joint Venture

other cultures and resolution of conflict can be implemented with proper management and strict

guidelines and regulations for the workplace.

Lastly, nothing can be achieved without strategic management and implementation and to

implement cultural changes, the ground will have to be covered with great caution and effective

strategy so that no one is hurt and the situation does not worsen. The venture has lasted a long time

and it should continue in order to provide the Asian market with better quality western cars.

Conclusion

Joint venture of two businesses is a strategic decision, which require accurate planning

and policy making to assure the success of such decision. Plan and policy of such decisions also

require to take into account the cultural aspect, as the culture and organizational structure of

every organization is different. The strategic decision regarding cultural difference and proper

adaptation of new culture for Changan-Ford Joint Venture is discussed in detail, Hofsted culture

model was applied in this regard. Strategic plan for applying the changes essential for the

business, also helps to maintain a healthy organizational culture, which will lead to prosperity of

the business.

9
 A Strategic Analysis of The Changan-Ford Joint Venture

References
BELL, B. W., GROSHOLZ, E. R. & STEWART, J. B. 2014. WEB Du Bois on race and culture, Routledge.
CHEN, X. & EISENBERG, N. 2012. Understanding cultural issues in child development: introduction. Child
Development Perspectives, 6, 1-4.
CHUDZIKOWSKI, K., FINK, G., MAYRHOFER, W. & MIGLIORE, L. A. 2011. Relation between big five
personality traits and Hofstede's cultural dimensions: Samples from the USA and India. Cross
Cultural Management: An International Journal, 18, 38-54.
CRONJÉ, J. C. 2011. Using Hofstede’s cultural dimensions to interpret cross-cultural blended teaching and
learning. Computers & Education, 56, 596-603.
FAN, J. P., WONG, T. & ZHANG, T. 2013. Institutions and organizational structure: the case of state-owned
corporate pyramids. Journal of Law, Economics, and Organization, 29, 1217-1252.
GHOLIPOUR, H. F. & TAJADDINI, R. 2014. Cultural dimensions and outbound tourism. Annals of Tourism
Research, 49, 203-205.
JEANINE, K. A., LEANNA, L., MARTIN, B. & PETER, J. R. 2014. Cultural impact of human resource practices
on job satisfaction. Cross Cultural Management.
MANRAI, L. A. & MANRAI, A. K. 2011. Hofstede's cultural dimensions and tourist behaviors: A review and
conceptual framework. Journal of Economics, Finance and Administrative Science, 16, 23-48.
MARCUS, A. & GOULD, E. W. 2000. Crosscurrents: cultural dimensions and global Web user-interface
design. interactions, 7, 32-46.
NADER, K., DUBROW, N. & STAMM, B. H. 2013. Honoring differences: Cultural issues in the treatment of
trauma and loss, Routledge.
SCHWARTZ, S. H. 1994. Beyond individualism/collectivism: New cultural dimensions of values, Sage
Publications, Inc.
SEIDLER, V. J. 2013. Unreasonable men: Masculinity and social theory, Routledge.
SMITH, A., DUNCKLEY, L., FRENCH, T., MINOCHA, S. & CHANG, Y. 2004. A process model for developing
usable cross-cultural websites. Interacting with computers, 16, 63-91.
TARAS, V., STEEL, P. & KIRKMAN, B. L. 2012. Improving national cultural indices using a longitudinal meta-
analysis of Hofstede's dimensions. Journal of World Business, 47, 329-341.
TEO, T., WONG, S. L. & CHAI, C. S. 2008. A Cross-cultural Examination of the Intention to Use Technology
between Singaporean and Malaysian pre-service Teachers: An Application of the Technology
Acceptance Model (TAM). Educational Technology & Society, 11, 265-280.

ii