Quiz 4: Managing in a Global Environment

Shui Fabrics Ray Betzell, general manager for the past five years of a joint venture between Ohio-based Rocky River Industries and Shanghai Fabric Ltd. was feeling caught in the middle these days. As he looked out over Shanghai's modern gleaming skyline from his corner office, Ray knew his Chinese deputy general manager Chiu Wai, couldn't be more pleased with the way things were going. Ten years ago, Rock River had launched Shui Fabrics, a 50-50 joint venture between the U.S. textile manufacturer and the Chinese company, to produce, dye, and coal fabric for sale to both Chinese and international sports wear manufacturers. After many obstacles, considerable red rape, and several money-losing years, the joint venture was fulfilling Chiu Wai's expectations-and those of the local government and party officials who were keeping careful tabs on the enterprise-much more quickly than he'd anticipated. By providing jobs to close to 3,000 people, Shui was making a real contribution to the local economy. Job creation was no small accomplishment in a country where outside experts estimated that the actual (as opposed to the official) unemployment that the routinely hovered at 20 percent. From Chiu Wai's point of view, Shui was generating just the right level of profit-not too little and, just as importantly, not too much. With so many U.S.-Chinese joint ventures still operating in the red, Chiu Wai saw no reason Rays American bosses shouldn't be more than satisfied with their 5 percent annual return on investment. But those earnings weren't going to land him in hot water with local authorities, many of whom still viewed profits made by Western companies on Chinese soil as just one more instance of exploitation in a long history of foreign attempts at domination. If Chiu Wai had been eavesdropping on the conversation Ray had just had with Rocky River president Paul Danvers, the Chinese manager would have certainly been dismayed. Ray, who'd thoroughly enjoyed his time in China, was painfully aware of the quiet frustration in his boss's voice as it traveled over the phone lines from the other side of the world. To be sure, Paul conceded, Shui had cut Rocky Rivers labor costs, given the company access to the potentially huge Chinese market, and helped inoculate the firm against the uncertainty surrounding the periodic, often contentious U.S.-Chinese textile trade negotiations. Current U.S. tariffs and quotas could change at any time. "But a 5 percent ROI is just pathetic," Paul complained. "And we've been stuck there for three years now. At this point, I'd expected to be looking at something more on the order of 20 percent." He pointed out that greater efficiency plus incorporating more sophisticated technology would allow Shui to reduce its workforce substantially and put it on the road to a more acceptable ROI. "I'm well aware of the fact that the Chinese work for a fraction of what we'd have to pay American workers, and I do appreciate the pressure the government is putting on you guys. But still, it doesn't make any sense for us to hire more workers than we would in a comparable U.S. plant." After an uncomfortable silence, during which Ray tried and failed to picture broaching the subject of possible layoffs to his Chinese counterparts, he heard Paul ask the question he'd been dreading: "I'm beginning to think it's time to pull the plug on Shui. Is there any way you can see to turn this around, Ray, or should we start thinking about other options? Staying in China is a given, but there has to be a better way to do it." How would you characterize the main economic, legal-political, and sociocultural differences influencing the relationship between the partners in Shui Fabrics? What GLOBE Project dimensions would help you understand the differences in Chinese and American perspectives illustrated in the case?

What specifically would the experience of living and working in another country contribute to your skills and effectiveness as a manager in your own country?

Ah biotech 86 Dr. Abraham Hassan knew he couldn't put off the decision any longer. AH Biotech, the Bound Brook, New Jersey-based company started by this psychiatrist-turnedentrepreneur, had developed a novel drug that seemed to promise long-term relief from panic attacks. If it gained approval from the Food and Drug Administration (FDA), it would be the company's first product. It was now time for large-scale clinical trials. But where should AH Biotech conduct those tests? David Berger, who headed up research and development, was certain he already knew the answer to that question: Albania. "Look, doing these trials in Albania will be quicker, easier, and a lot cheaper than doing them in the States," he pointed out. "What's not to like?" Dr. Hassan had to concede that Berger's arguments were sound. If they did trials in the United States, AH Biotech would spend considerable time and money advertising for patients and then finding physicians who'd be willing to serve as clinical trial investigators. Rounding up U.S. doctors prepared to take on that job was getting increasingly difficult. They just didn't want to take time out of their busy practices to do the testing, not to mention all the recordkeeping that such a study entailed. In Albania, it was an entirely different story. It was one of the poorest Eastern European countries-if not the poorest-with a just barely functioning health-care system. Albanian physicians and patients would practically line up at AH Biotech's doorstep begging to take part. Physicians there could earn much better money as clinical investigators for a U.S. company than they could actually practicing medicine, and patients saw signing up as test subjects as their best chance for receiving any treatment at all, let alone cutting-edge Western medicine. All these factors meant that the company could count on realizing at least a 25 percent savings (maybe even more) by running the tests overseas. What's not to like? As the Egyptian-born CEO of a start-up biotech company with investors and employees hoping for its first marketable drug, there was absolutely nothing not to like. It was when he thought like a U.S.- trained physician that he felt qualms. If he used U.S. test subjects, he knew they'd likely continue to receive the drug until it was approved. At that point, most would have insurance that covered most of the cost of their prescriptions. But he already knew it wasn't going to make any sense to market the drug in a poor country like Albania, so when the study was over, he'd have to cut off treatment. Sure, he conceded, panic attacks weren't usually fatal. But he knew how debilitating these sudden bouts of feeling completely terrified were-the pounding heart, chest pain, choking sensation, and nausea. The severity and unpredictability of these attacks often made a normal life all but impossible. How could he offer people dramatic relief and then snatch it away? What Would You Do? 1. Do the clinical trials in Albania. You'll be able to bring the drug to market faster and cheaper, which will be good for AH Biotech's employees and investors and good for the millions of people who suffer from anxiety attacks. 2. Do the clinical trials in the United States. Even though it will certainly be more expensive and time-consuming, you'll feel as if you're living up to the part of the Hippocratic oath that instructed you to "prescribe regimens for the good of my patients according to my ability and my judgment and never do harm to anyone." 3. Do the clinical trials in Albania, and if the drug is approved, use part of the profits to set up a compassionate use program in Albania, even though setting up a distribution system and training doctors to administer the drug, monitor patients for adverse effects, and track results will entail considerable expense.

Students , to access the On the Job and BizFlix video cases for this and all chapters, visit the CourseMate web site or, if you do not have access to CourseMate, ask your instructor for a copy of the cases. Instructors , to access the On the Job and BizFlix video cases for this and all chapters, visit www.cengagebrain.com. At the Cenga.geBrain.com home page, search for the ISBN of your title (from the back cover of your book) using the search box at the top of the page. This will take you to the product page where free companion resources can be found. Please feel free to share the cases with your students for use in classroom discussion.

Shui Fabrics Ray Betzell, general manager for the past five years of a joint venture between Ohio-based Rocky River Industries and Shanghai Fabric Ltd. was feeling caught in the middle these days. As he looked out over Shanghai's modern gleaming skyline from his corner office, Ray knew his Chinese deputy general manager Chiu Wai, couldn't be more pleased with the way things were going. Ten years ago, Rock River had launched Shui Fabrics, a 50-50 joint venture between the U.S. textile manufacturer and the Chinese company, to produce, dye, and coal fabric for sale to both Chinese and international sports wear manufacturers. After many obstacles, considerable red rape, and several money-losing years, the joint venture was fulfilling Chiu Wai's expectations-and those of the local government and party officials who were keeping careful tabs on the enterprise-much more quickly than he'd anticipated. By providing jobs to close to 3,000 people, Shui was making a real contribution to the local economy. Job creation was no small accomplishment in a country where outside experts estimated that the actual (as opposed to the official) unemployment that the routinely hovered at 20 percent. From Chiu Wai's point of view, Shui was generating just the right level of profit-not too little and, just as importantly, not too much. With so many U.S.-Chinese joint ventures still operating in the red, Chiu Wai saw no reason Rays American bosses shouldn't be more than satisfied with their 5 percent annual return on investment. But those earnings weren't going to land him in hot water with local authorities, many of whom still viewed profits made by Western companies on Chinese soil as just one more instance of exploitation in a long history of foreign attempts at domination. If Chiu Wai had been eavesdropping on the conversation Ray had just had with Rocky River president Paul Danvers, the Chinese manager would have certainly been dismayed. Ray, who'd thoroughly enjoyed his time in China, was painfully aware of the quiet frustration in his boss's voice as it traveled over the phone lines from the other side of the world. To be sure, Paul conceded, Shui had cut Rocky Rivers labor costs, given the company access to the potentially huge Chinese market, and helped inoculate the firm against the uncertainty surrounding the periodic, often contentious U.S.-Chinese textile trade negotiations. Current U.S. tariffs and quotas could change at any time. "But a 5 percent ROI is just pathetic," Paul complained. "And we've been stuck there for three years now. At this point, I'd expected to be looking at something more on the order of 20 percent." He pointed out that greater efficiency plus incorporating more sophisticated technology would allow Shui to reduce its workforce substantially and put it on the road to a more acceptable ROI. "I'm well aware of the fact that the Chinese work for a fraction of what we'd have to pay American workers, and I do appreciate the pressure the government is putting on you guys. But still, it doesn't make any sense for us to hire more workers than we would in a comparable U.S. plant." After an uncomfortable silence, during which Ray tried and failed to picture broaching the subject of possible layoffs to his Chinese counterparts, he heard Paul ask the question he'd been dreading: "I'm beginning to think it's time to pull the plug on Shui. Is there any way you can see to turn this around, Ray, or should we start thinking about other options? Staying in China is a given, but there has to be a better way to do it." How would you define Shui's core problem? Are sociocultural differences the main underlying cause of this problem? Why or why not? How would you handle the conflict with your boss back in the United States?

Do you think it is realistic that BOP business practices can have a positive effect on poverty and other social problems in developing countries? Discuss.

Shui Fabrics Ray Betzell, general manager for the past five years of a joint venture between Ohio-based Rocky River Industries and Shanghai Fabric Ltd. was feeling caught in the middle these days. As he looked out over Shanghai's modern gleaming skyline from his corner office, Ray knew his Chinese deputy general manager Chiu Wai, couldn't be more pleased with the way things were going. Ten years ago, Rock River had launched Shui Fabrics, a 50-50 joint venture between the U.S. textile manufacturer and the Chinese company, to produce, dye, and coal fabric for sale to both Chinese and international sports wear manufacturers. After many obstacles, considerable red rape, and several money-losing years, the joint venture was fulfilling Chiu Wai's expectations-and those of the local government and party officials who were keeping careful tabs on the enterprise-much more quickly than he'd anticipated. By providing jobs to close to 3,000 people, Shui was making a real contribution to the local economy. Job creation was no small accomplishment in a country where outside experts estimated that the actual (as opposed to the official) unemployment that the routinely hovered at 20 percent. From Chiu Wai's point of view, Shui was generating just the right level of profit-not too little and, just as importantly, not too much. With so many U.S.-Chinese joint ventures still operating in the red, Chiu Wai saw no reason Rays American bosses shouldn't be more than satisfied with their 5 percent annual return on investment. But those earnings weren't going to land him in hot water with local authorities, many of whom still viewed profits made by Western companies on Chinese soil as just one more instance of exploitation in a long history of foreign attempts at domination. If Chiu Wai had been eavesdropping on the conversation Ray had just had with Rocky River president Paul Danvers, the Chinese manager would have certainly been dismayed. Ray, who'd thoroughly enjoyed his time in China, was painfully aware of the quiet frustration in his boss's voice as it traveled over the phone lines from the other side of the world. To be sure, Paul conceded, Shui had cut Rocky Rivers labor costs, given the company access to the potentially huge Chinese market, and helped inoculate the firm against the uncertainty surrounding the periodic, often contentious U.S.-Chinese textile trade negotiations. Current U.S. tariffs and quotas could change at any time. "But a 5 percent ROI is just pathetic," Paul complained. "And we've been stuck there for three years now. At this point, I'd expected to be looking at something more on the order of 20 percent." He pointed out that greater efficiency plus incorporating more sophisticated technology would allow Shui to reduce its workforce substantially and put it on the road to a more acceptable ROI. "I'm well aware of the fact that the Chinese work for a fraction of what we'd have to pay American workers, and I do appreciate the pressure the government is putting on you guys. But still, it doesn't make any sense for us to hire more workers than we would in a comparable U.S. plant." After an uncomfortable silence, during which Ray tried and failed to picture broaching the subject of possible layoffs to his Chinese counterparts, he heard Paul ask the question he'd been dreading: "I'm beginning to think it's time to pull the plug on Shui. Is there any way you can see to turn this around, Ray, or should we start thinking about other options? Staying in China is a given, but there has to be a better way to do it." If you were Ray Betzell, what other options to the 50-50 joint venture would you consider for manufacturing textiles in China? Make the argument that one of these options is more likely to meet Rocky River's expectations than the partnership already in place.

What do you think is your strongest component of cultural intelligence? Your weakest? How would you go about shoring up your weaknesses?

What steps could a company take to avoid making product design and marketing mistakes when introducing new consumer products into Brazil ?

Compare the advantages associated with the market entry strategies of exporting, licensing, and wholly owned subsidiaries. What information would you need to collect and what factors would you consider when selecting a strategy?

Should a multinational organization operate as a tightly integrated, worldwide business system, or would it be more effective to let each national subsidiary operate autonomously?

Why do you think many people are so frightened by globalization? Based on what is occurring in the world today, do you expect the globalization backlash to grow stronger or weaker over the next decade?

Two U.S. companies are competing to take over a large factory in the Czech Republic. One delegation tours the facility and asks questions about how the plant might be run more efficiently. The other delegation focuses on ways to improve working conditions and produce a better product. Which delegation do you think is more likely to succeed with the plant? Why? What information would you want to collect to decide whether to acquire the plant for your company?

Which style of communicating do you think would be most beneficial to the long-term success of a U.S. company operating internationally-high-context or low-context communications? Why?

How might the social value of low versus high power distance influence how you would lead and motivate employees? What about the value of low versus high performance orientation?