Journal of Organizational Behavior Education 11.

© 2018 NeilsonJournals Publishing Ref. No.: JOBE11-0CS1

This case study has been peer reviewed by the editorial board of the Journal of Organizational Behavior Education (JOBE). For further
information on this journal please visit the JOBE website at www.neilsonjournals.com/JOBE

When Cultures Meet: A Case of Nike and Kukdong in Mexico

Divya Bhutiani
University of Groningen, The Netherlands, Nanyang Technological University, Singapore, and
LM Thapar School of Management, Thapar Institute of Engineering & Technology, Punjab, India

K. Ravi Kumar
University of Southern California, USA and Nanyang Technological University, Singapore

Abstract. It was March of 2008, the senior executive team of Nike in the US headquarters is under stress because of the results presented to them
by the consulting team they had hired in December 2007. Mex Mode is a subsidiary of the Korean company, Kukdong Apparels operating in
Atlixo, Mexico and is a key supplier of college T-shirts and hoodies for Nike USA. Many operational issues have emerged at the Mexican facility

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since it started its operations in 1991, causing sleepless nights for the executive team at Nike Apparels and Kukdong. This time it was not a labor
strike like the one back in 2001, but the poor performance of the facility and high defect rate leading to high internal rework that was bothering

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them. To find out the reasons behind the poor productivity of this facility, Nike Inc. and Kukdong USA decided to hire a consulting team from
the University of Southern California (USC) School of Business who carried out three months of pre-assessment at the facility. As the team

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presents their assessment results, the senior executive team wonders if any of these problems could be solved in the short run. The consulting team
has proposed to carry out training programs and interventions to mitigate the problems at the workplace. Now the senior executive team has to
quickly make a decision if they believe that a change intervention will be able to resolve all the issues that have appeared in the pre-assessment
report. It is a critical decision to be made as it involves lot of investments in terms of time, money and efforts besides the fact that the success rate
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of most change interventions is relatively low.

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Keywords: cross-cultural management, international human resource management, communication gap, performance.

Michael Spillane is the President, Product & Merchandising, joined Nike in 2007. Ever since he joined, he has not felt
this level of heat in the boardroom. He is joined by Antonio Hwang, the senior Vice President HR of Kukdong Apparels
USA who manages international relations for the company with their clients, for example, Michael in this case. The
consulting team from USC will be presenting the results of the pre-assessment phase done at the poorly performing
manufacturing Mexican facility Mex Mode that is a key supplier of college T-Shirts and hoodies for Nike USA. The
consulting team was hired to look into the reasons for the poor performance of the production department of Korean
company in Mexico and streamline its manufacturing operations at every stage.
Mex Mode is a subsidiary of Korean apparel company, Kukdong Corporation which started its operations in 1967
in Seoul, South Korea and over the years has expanded to Indonesia, Mexico and the US. Mex Mode was established
in January 1999 in Atlixo Mexico mainly to take advantage of the cheap Mexican labor and close proximity to its
biggest customer- Nike Apparels in the US. The marketing and sales are handled by the headquarters in Korea. The
production capacity of this Mexican facility is around 800,000 pieces per month. The major activities of the production
department of the plant can be divided into five major activities: cutting, sewing, dyeing, knitting and packaging (refer
Exhibit 1 for the dominant process flow). This plant has been in news for multiple reasons like exploitation of local
workers by the management that led to a huge strike in 2001. The company was shut down for a year resulting in the
formation of an independent trade union of workers. But this time the problem was slightly different. The performance
of the facility was poor due to underutilization of the equipment; high inventory levels; higher internal rework rate;

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 2 Ref. No.: JOBE11-0CS1 When Cultures Meet: A Case of Nike and Kukdong in Mexico

alarmingly high employee turnover and high absenteeism were some of the key issues bothering the top executive team
of Kukdong Corporation in South Korea and their biggest customer - Nike Apparels Inc. in the US (refer Exhibit 2a and
2b). In addition, there were serious issues with the productivity of the workers at the Mex Mode plant which was at least
30% lower than Kukdong’s standards in Korea, Bangladesh and Indonesia. This is when Michael and Antonio decided
to seek help from the consulting team of University of South California (USC), a key sports licensor to Nike. Michael
had heard about the successful consulting assignments that this group at USC had done for managing the operational
inefficiencies for big manufacturing companies.
The consulting team from USC headed by senior Prof. Ravi Kumar, Ph.D in operations management from
Northwestern University and a specialist in operations management, was hired to ensure that lean manufacturing
practices were implemented at Mex Mode. After the first few days of analysis into his new assignment, Ravi realized
that there were significant cross-cultural issues at the facility (refer exhibit 3 for the organizational cross-cultural
context). Mex Mode has two different groups of employees belonging to two distinct national cultures:

1. Local Mexican female workers working on the shop floor, majority of whom are single mothers with high level of
family responsibility due to having young children and aged parents.

2. The Korean expatriate managers, who have moved to Mexico without their families who visit them occasionally and
for whom work takes priority over everything else.

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Besides, their biggest customer is the American apparel company Nike, for whom product quality and timely

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delivery of their order matters the most.

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To understand these different cultural perspectives towards work, another professor specializing in cross cultural
management was invited onboard the project, along with her team and both the professors decided to first spend three
months for a pre-assessment of the root cause of the problem at the Mex Mode facility in Mexico.
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During this pre-assessment phase, the team had conducted interviews with 105 Mexican workers at the shop floor
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across the five activity departments (either individually or in groups of 2-3 workers), 40 Mexican supervisors and 10
Korean managers. Each interview lasted from 20 minutes to 50 minutes and was taken by a team of 2-3 researchers.
Most of the interviews were carried out in an informal manner to understand the complexities of the organizational
culture of Mex Mode. The consulting team asked them questions related to the work place; their relationships with their
supervisors, subordinates, peers and their level of job satisfaction. In their analysis, three major problem areas had
emerged, namely organizational culture, working conditions and work-life-community balance (refer Exhibit 4). The
consultants had attributed the root cause of all the productivity related issues to the three problem areas.
Not able to withhold his curiosity, Michael asked, “quickly tell me what are those three areas and we can work
towards improving them.”
“Hold your breath, Michael” laughed Ravi, who now stood up to present the results of the three-month pre-
assessment done by his team at Mex Mode and the way forward.

Ravi: Well! Regarding the team’s assessment of the operational design that was currently followed at the assembly line
at the shop floor of Mex Mode, the results of the analysis were quite predictable. There was poor coordination and lean
practices were not implemented at the process flow level, both were causing poor efficiency and higher number of
defects in the finished product. We are confident that once the cultural issues are handled, the operational efficiency
will improve automatically.
The information related to our cross-cultural examination that I am going to share with you now will help you in
realizing the importance of cross cultural understanding for companies expanding globally. It is very strange for us to
learn that no cultural orientation program was organized for the Korean expatriates before they were relocated from
Korea into a new context. Also, Mexican workers were not sensitized to the work practices and expectations of the
Korean culture.
The three broad themes that we have come up with based on our qualitative research are related to: organizational
culture, working conditions and work-family-community.
Due to lack of cultural sensitivity to each other, there is a huge communication gap between the Mexican workers and
Korean managers. What Korean managers are perceiving as a way to motivate the shop floor workers is interpreted as
disrespectful and shameful by the Mexican workers. Since there is a language barrier, Korean managers tend to use
non-verbal communication with the workers which is perceived as derogatory and rude by the Mexicans.

“The Korean manager speaks very little Spanish. Once he yelled at me because he thought that I was chatting with my
co-workers. On the contrary, we were confirming the size of the garments so there would not be any confusion that would
result in defects in finished products.” Interview, Mexican Shop Floor Employee
 Journal of Organizational Behavior Education 11 Ref. No.: JOBE11-0CS1 3

Moreover, Korean managers have not brought their families here so for them work-life balance is not a concern (refer
Exhibit 5). On the contrary, majority of the Mexican workers, especially in the sewing department are single mothers
for whom work-life balance is extremely important. Majority of them depend on other family members for taking care
of their children rather than child-care facilities that are generally not very reliable. Also, Mexican culture emphasizes
on familial responsibilities like attending family functions, funerals etc., which further adds to their absenteeism. This
is treated as unacceptable and unprofessional by their Korean supervisors.

“My Korean supervisor ... told me to leave family issues at home and not bring them to the workplace.” Interview, Mexican
Female Shop Floor Employee

Another important finding is that the Mexican workers do not feel valued by the company. They told us that there are
just 4 ovens in the factory to heat up their lunch. As a result, majority of them spend their lunch hour standing in long
queues which further leads to their poor performance and dissatisfaction at work. Some of the workers also expressed
doubt about the long-term existence of the company and do not see a secure future for them with Mex Mode. This results
in low level of commitment and a lack of motivation to come to work every morning.
Some of them even thought that the plant could shut down any time and are always looking for opportunities outside as
having a job is extremely important for their family’s survival. This is a major reason for the increasing turnover rate.
Antonio: So that means the Korean expats are doing well in Mexico, but the local workers are the ones who are having
issues?

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Ravi: Unfortunately, that is not true Michael. The story of the Korean managers is also equally troubling. This was

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contradictory to our initial intuition, considering that majority of them are on expatriate contract. Korean managers
are disappointed and frustrated since they have to live away from their families. Besides, they also feel that they have

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no choice but to somehow survive in Mex Mode. They have no idea about the duration of their assignment in Mexico
and fear that if they show intention to go back to Korea, they might lose their jobs as majority of the opportunities in
the apparel industry are outside Korea. This frustration is adding to the insensitivity of the Korean managers towards
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the familial commitments of the Mexican workers.

We found that there is a lack of well-thought out system within the company and there is no Mex Mode culture per se.
Instead there are two separate cultures that prevail: Mexican and Korean. The successful blending of the two cultures
to form a unique organizational culture has never happened. Company policies are also adding to all the troubles at
Mex Mode. For example, there is no well-designed protocol to train the new employees, majority of whom learn by
observing other workers or from their supervisors. When we asked the reason for the absence of a formal training
program from one of the Korean managers, he showed concern,

“Workers get training at the factory and then leave to take a job at another factory.” Interview, Korean Expatriate Manager

Should that be a valid reason for not having a proper training program in place is something that you must consider
seriously, Michael.
Antonio: Absolutely not. Every company must train their employees which is considered an important part of employee
induction program.
Ravi: Besides, there is no transparency related to overtime and related compensation; rewards management system
whether it is group based or individual based; and no scope for developing new skill sets.
Last but not the least, there is no direct communication between the workers and the top management. As a result, the
workers have no idea about the big picture and do not feel good about working at Mex Mode. Lack of sharing the long-
term vision for the facility with the Korean managers and local workers results in constant rumors making the
employees doubt the future viability of the company.. Michael: But Ravi, how did you guys find out all these issues? I
mean, sometimes employees do not like a manager and they can say all negative things about them. I am not doubting
your results, but I am just curious how did you ensure that none of these comments were just personal opinions?
Ravi: I completely agree with your point and understand the concern. We could be wrong, but we confirmed our results
of face-to-face employee interviews with role plays. We made two teams of 8-10 members each. Team A comprised of
all Korean managers and team B comprised of all Mexican workers. We asked Team A to behave like team B and vice
versa in front of each other. While both teams learnt about how they were behaving with the other group, they also felt
embarrassed about their behavior. Sitting on the other side of the stage, each group of employees could now see how
they were behaving and how it was interpreted by the other party. We also made them do the role play on how one group
would like the other one to behave. This exercise was really helpful in bringing the two groups together and facilitated
mutual understanding. So, in a way, we have already done an icebreaker between the two groups of employees.
My team and I strongly believe that the two areas which we have analyzed are closely linked and will be handled in
parallel by us for the next 18 months. We will conduct lean training for the employees along with cross cultural training
 4 Ref. No.: JOBE11-0CS1 When Cultures Meet: A Case of Nike and Kukdong in Mexico

and most importantly, a customer-focus—everything they engage in must create value for their customers in terms of
improved quality, decreased delivery lead time and lowering of costs. The intervention will be implemented in stages.
In the last 3 months of our consulting assignment, we will do an outcomes assessment for you to know how much
improvements have been achieved with our intervention and what all can be adopted as part of the organizational
culture at Mex Mode.
Our ultimate goal at the end of our consulting assignment is to ensure development of a robust organizational culture
at Mex Mode that is culturally sensitive and adaptive.

As the presentation comes to an end, Michael sits there in deep thought looking at the other members of the senior
management of Nike who look equally tense with the results of the initial assessment of the consultants. The senior
executive team wonders if any of these problems could be solved in the short run. The consultants have proposed to
carry out training programs and interventions to mitigate the problems at the workplace. Now the senior executive team
has to quickly make a decision if they believe that a change intervention will be able to resolve all the issues that have
appeared in the pre-assessment report. It is a critical decision to be made as it involves huge amount of investments in
terms of time, money and effort besides the fact that the success rate of most change interventions, in general, is
relatively low.

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Acknowledgements: We would like to acknowledge the following faculty members:
1) Professor Michàlle Mor Barak, School of Social Work, University of Southern California.

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2) Professor. Sriram Dasu, Marshall School of Business, University of Southern California.
3) Professor Dolores Luna Reyes, University de la Americas, Puebla.

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4) Professor Padmakumar Nair, LM Thapar School of Management, TIET, Punjab, India.
4) All the MBA and PhD students who helped and supported.
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 Journal of Organizational Behavior Education 11 Ref. No.: JOBE11-0CS1 5

EXHIBITS

Exhibit 1: Process Flow @ MexMode, Mexico

Cutting and Sewing Knitting Dyeing Warehouse

Final Inspection
Yarn
Sewing WH
Knitting Machines Heat Set Brushing
(10 lines)
Cutting Crude Fabric Rolls
(4 lines) Crude
Fabric Rolls Dyeing
Warehouse
Inspection Quality Preparation Slitting

Packing Control Spin Dry

Yarn
WH Dyeing Machines Color Lab
Shipping Dyeing Office
WH

Source: Created and Compiled by Authors

Exhibit 2a: Turnover Rate across various activity departments @ Mex Mode

Turnover Rate

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0.9
77.05%
0.8 69.74%

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0.7 60.34%
0.6

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A P R%

0.5
0.4 31.25%
0.3 23.64%
0.2
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0.1
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0
Knitting Dyeing Cutting Sewing Embroidery

Source: Created and Compiled by Authors

Exhibit 2b: Capacity Utilization and Inventory levels

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Exhibit 3: Organizational cross-cultural context of Mex Mode

Source: Created and Compiled by Authors

 6 Ref. No.: JOBE11-0CS1 When Cultures Meet: A Case of Nike and Kukdong in Mexico

Exhibit 4: Three themes that emerged from Qualitative Interviews at Mex Mode

Source: Created and Compiled by Authors

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Exhibit 5: Work-family value clash between Korean managers and Mexican workers

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Source: Created and Compiled by Authors