The Joint Venture Organization:The Chinese Model

Team - Phoenix

Joint Venture

Agenda• History and background of the Blue Sword • Its work culture• Need for the venture capital• Failure of the venture capital• Steps that should have taken to avoid the failure of the

venture capital• HRM related issues (like recruitment, rewards and

motivational issues)• Success of the other joint ventures (Post-Interbrew) • Recommendation to the Blue sword for its international

operation • Conclusion and references

Some facts about wine in China

• Today China is the fifth largest wine consumer and quickly

gaining on German for the No. 4 spot.

• the Chinese go for quantity not quality and they often

raise nutrient-robbing peanuts in their vineyards.

• About 40 percent of China’s wine production is in Shandong

province between Bohair Bay and the Yellow Sea.

http://factsanddetails.com/china.php?itemid=142&catid=11&subcatid=73

History and Background of the Blue Sword Group

• Founded in 1986 & was an independent company with no government interference

• After taking over a small bankrupt beer company it become one of the leading beer and drink producer in the southwest of the china with annual capacity of 60,000

• 30 kinds of product in 4 broad category with beer as major product followed by the soft drink, food, packing, medicine, printing and international trade and commerce

• Almost all of the production system and management skill were adopted from US, Europe and Japan

• It has a work force of about 2800 employees

http://sudeepgoswami.info/blog/?p=52

Work culture of the Blue Sword

• Quite different from other state owned enterprise (SOE)• The management system is more marketing-oriented

• provides opportunity of self-development to the employee by sending them to the universities for degree and training program and promotes them after they finish their studies.

• Overall work culture of the Blue Sword is more dependent upon the long term relation of the employee and employer

• High level of employee commitment and loyalty

• Manager have complete authorities• Sword treat market as the battlefield, it

continually develops new products as per the market need, changing the existing ones and withdrawing the certain products as per the market need

Why need joint venture?

• The growing market competition and for the aim of going global blue sword was lacking money

• To overcome this problem, management of the blue sword decide to form an alliance with an international company, this would also help international companies to enter the Chinese market

• So after consulting with the French investment bank Blue Sword agreed to form an alliance with the company called Belgian Interbrew S.A.

http://www.sabmiller.com/index.asp?pageid=149&newsid=425

Belgian Merger and its FailureMerger comes to an end within a year because of the following reasons :

Who was controlling the merger was not clear. Human resource management. Interference from the Local government

The aim was totally different Blue Sword sought to advance the quality of the product and keen to export

the product to the global market, where as the Interbrew wanted to focus on the domestic low and medium level market.

China is long term value oriented country and on the basis of this, Chinese wanted to compete in the international market, but on the other hand Interbrew was more influenced by western societies and hence was focusing on the short term aim of making profit

when the expatriate manager from Belgium had taken charge at the plant level, they got very high salary with perks like house and car, and their dominate nature created several problem among the Chinese local managers and the employee working under them. Chinese manger were felling insecure in terms of their growth in the organization at the higher level

http://jacksonville.bizjournals.com/jacksonville/stories/2000/08/28/smallb2.html

Contd…• Major problems that are leading towards the failure of the joint venture in

china consist of the human recourse administration, especially in the area of performance management, motivation and staff withholding

• The policy of recruiting new Chinese manager publicly and redefining the other HR policies like pension, housing etc also created the chaos among the Chinese mangers and employee of the Blue Sword.

• Government interference also played an important part in the failure of the merger, after evaluating the assets of the Blue sword according to the new law, they find that the Interbrew level of investment was quite low, and considerable change in the employee policy and the condition for future development forced Interbrew to terminate the merger, which only last for less than a year

http://findarticles.com/p/articles/mi_qa3674/is_199904/ai_n8840484/

Steps that could have saved the Belgian merger

Blue Sword had grown by taking over a bankrupt company, and had different work culture than any other State Owned Enterprise (SOEs); Interbrew should have done a thorough research on the culture values of the Blue Sword.

Both the companies have different view of merger, and they have not shared their intention of why we are going for the merger properly

Proper study of the employee management, like employee retention, motivation, policies for expatriate managers like their power, salary, perks should be such that it should not dominate the Chinese managers, hiring policies and study of other traditional HR practises would have help a lot to take the merger forward.

Knowledge of the level of interference from the government, and changing policies that could affect the merger.

Output of the merger, considering the post merger problems and plans to handle the issues coming after the mergers, could have also helped to some extents.

This failure could have been a success if following points should have kept in mind during the time of merger:

Reasons for the success of the other mergers (Post-Interbrew)

• State firms were now paying more attention on training and performance-based rewards.

• China’s business situation is experiencing an extensive transform with the adoption of western style HRM practices.

• Improvement in the new labor law, there was more flexibility for the western companies to impose their HR policies.

http://sudeepgoswami.info/blog/?p=52

Recommendations

• Most of the merger failed because of cultural differences, Blue Sword should explain this to its international team, and try to avoid the cultural difference.

• Who is taking the responsibility should also be very lucid, and the questions like why we are doing this merger should be well communicated among the merging companies

• Power and responsibility of expatiate managers must be clear, and the managers should spend more time with the local employees to understand the work culture of the company.

• Proper communication of the integration and every steps of the merger should be made clear to everyone associated with the merging organizations

Conclusions

• Failure and success of the merger depends upon the culture of the merging companies.

• Mergers and joint venture in china was mainly dependent on the employees integration rather than technical integration.

• The collectivistic nature of the Chinese are now changing to more individualistic and as a result of this, the difficulty of implementing the standard HR policies of the western companies over the local Chinese companies is decreasing.

• Performance based award system for the employees are more common in china now.

Thank You