1. According to company sources, Motorola wanted to become more Chinese than the local Chinese companies. Analyse the strategic and environmental reasons why Motorola chose to enter China?
The case study states that due to the increase in competition and production costs, Motorola chose to move some of its manufacturing to China, by establishing the Motorola (China) Electronics Ltd and opening a manufacturing facility in Tianjin. Thus, one of the main reasons to enter China was to reduce production costs and gain competitive advantage. Chinese labour force and production materials are cheaper due to inexpensive Yuan exchange rate compared to US dollar, thus it allowed to decrease costs.
In 1979 China re-opened to foreign direct investment. This led to a huge flow of foreign direct investment into China, with a total of 134,423 projects totalling to $170 billion being approved, within 1979 until the end of June 1993 period (Pan, Vanhonacker & Pitts, 1994). Motorola anticipated that many international automobile companies will base their manufacturing in China. Motorola was expecting to use that to its advantage, by developing wafer production, in particular manufacturing of semiconductor products in China (Avishai, n.d.). The Chinese government created a great environment for foreign investment, through investment incentives and infrastructure supports in Special Economic Zones and Open Cities, including Tianjin, where Motorola had opened a manufacturing facility.
China being the most populous country in the world and not having a lot of foreign businesses, who just started their invasion after 1979, provides a lot of potential consumers. Thus, Chine seems to be a very lucrative market to penetrate. Entering such a market place would allow Motorola to significantly expand its global market share.
Even though the search for Chinese talent and their employment might not have been the company’s goal initially, and rather, became a necessity for Motorola. This took place due to government requirement for Multi-National Corporations (MNCs) working in China, as well as cost reduction objectives. Job environment in China with highly saturated work force and a limited number of prestigious vacancies in MNCs, creates high competition for a job place, and thus provides the international companies, such as Motorola, with a big number of top talent potential employees to choose from.
Another reason for entering China might have been diversification. By setting up and doing business in China, Motorola reached the customers, currency, production and investment diversification. By doing so, the company reduces its unsystematic risks.
According to Mike Zafirovski, president and chief operating officer (COO) of Motorola, "China is a very, very significant partner and the market here is very important for Motorola worldwide as well as a manufacturing base and research centre for the company" (cited in People Daily, 2003, n. p.).
2. Evaluate how effective Motorola’s entry strategy was in achieving their corporate strategy in China.
In 1987 Motorola had set up a representative office in China. Initially the company adopted a four-point strategy: 1) Investment/technology transfer, 2) Management localisation 3) Local sourcing 4) Joint ventures/co-operative projects.
Investment/technology transfer: Case study states that Motorola’s initial investment for the plant in the Tianjin was $120 million to produce pagers, simple integrated circuits and cell phones. In the second stage a $400 plant was built, which manufactured automotive electronics, advance micro-processors, walkie-talkies and fabricated silicon wafers. This helped building a manufacturing base in China, which was another goal set by the COO. In 1999 Motorola established the Motorola China Research and Development Institute in Beijing, as well as built a production procedure lab, an analytical lab, and software and equipment labs for developing new technologies that would make China a high technology manufacturing centre, just like Mike Zafirovski planned.
Over the years Motorola provided GSM technology to mobile service vendor, such as Hubei Mobile Communications and Eastern Communications Co. Ltd, and had won several contracts from Chinese mobile service distributors across China. These arrangements helped to increase the company’s market share in China, which was another objective set by the firm.
Management localisation: In order to achieve market share expansion, it was necessary to hire more Chinese employees. Due to the lack of managerial talent in China, Motorola had to set up a special training programme for its employees to train them to become world-class staff. Company provided internal training to its workers, and initiated a leadership training programme ‘Cadres 2000’. All these programmes allowed the company to produce highly professional employees who played a crucial role in the pursuit of its objectives.
Local sourcing: Motorola tried their best to source as many components from the local Chinese suppliers as possible. Company helped those suppliers to increase productivity and quality levels, and assisted them in developing of penetration strategies to the global markets. Motorola’s foreign suppliers were encouraged to build their factories in China. All of the above helped the company with its cost reduction objective, through increased efficiency, quality and economies of scale.
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Joint ventures/co-operative projects: In the period between 1995 and 2002, Motorola had started 9 joint ventures with other Chinese firms, to increase its influence in the market and boost its production capacity. These actions resulted in savings for the company, thus complying with its cost reduction objective.
In 2000, Motorola became the leader in the mobile handset sector with a 31% share, owing to its focus on its strategy. In the period between 1999 and 2002, Motorola’s sales in China where constantly growing even though the company had experienced drop in sales in other countries, thus diversification was effective.
3. Evaluate Motorola’s staffing approach for senior management in implementing their strategy in China?
In order to pursue the objective of market share expansion, company decided to employ more Chinese workers (PewGlobal, 2012). Most Chinese people are hardworking, competitive and inventive, however, at that time they lacked western management concepts, knowledge and practical application of theories. Thus, Motorola established the Motorola University in 1933, with a rigorous training programme: China Accelerated Management Program (CAMP) for its Chinese employees. CAMP required 6 weeks of learning and 14 months on-the-job training (action learning, project management, coaching and rotation through Motorola's facilities all around the world). CAMP taught market economy, value creation, business process design and benchmarking. Additionally, trainees where educated in the areas of team building, situational leadership, and presentation style.
To qualify for CAMP, candidates had to go through a thorough selection process, involving interviews and a test in English language. On the next stage of the screening applicants are evaluated on cognitive and administrative skills, self-organisation skills, motivation, and capacity for empathy, among other qualities. Motorola’s employees were also offered in-house training. The engineering staff was sent to its manufacturing plants in other Asian countries and to the US for practical training in high-tech manufacturing procedures. Another leadership training programme ‘Cadres 2000’ was set up, which entitled 20 top employees to be sent to Motorola manufacturing plants around the world.
It can be concluded that establishing an education programme is a smart approach taken by Motorola. By placing Chinese people in the senior management position, company will avoid cultural differences and barriers which could have emerged if a US senior boss would be set to manage a Chinese work force. Even subtle differences in traditions, religion and culture may lead to completely different perception, and to misunderstandings or conflicts. Most US senior managers might not be very fond of changing their management style, as they spent many years acquiring their experience to develop that style. Moreover, western managers may hold the belief that it works best.
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Even though the programmes above are costly and diverge with company’s objective to reduce costs, in the long term they will reap higher benefits, such as a supply of highly qualified, loyal and specifically trained for the company’s business process top quality personnel. Such staff will greatly assist Motorola in pursuit of its long-term objectives.
By expanding and hiring a lot of Chinese people, the company creates jobs and improves the Chinese economy. Government notices these things, and might payback Motorola through creation of a more favourable environment for their growth.
4. Effective management of the cross-cultural interface is a critical source of competitive advantage for a multinational firm. Using suitable theories, analyse why an understanding of the cross-cultural interface was important for Motorola’s success in China.
Culture affects how business is done on the daily basis. Mutual understanding during meeting and negotiations, in promotional policy, the way priorities are set – all of these can be affected by culture (Webe & Camerer, 2003).
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Geert Hofstede tries to explain how and why people from different cultures behave as they do, by using four dimensions of culture.
“The four dimensions are based on four fundamental issues in human societies to which every society has to find its particular response. These dimensions are:(i) Power distance is an indication of the extent to which the less powerful members of institutions and organizations accept that power is distributed unevenly.(ii) Uncertainty avoidance is the extent to which people feel threatened by ambiguous situations, and have created beliefs and institutions that try to avoid these.(iii) Individualism is the tendency of people to look after themselves and the immediate family only.(iv) Masculinity is a situation in which the dominant values in society are success, money and (material) things. Femininity, on the other hand, describes the situations in which the dominant values in a society are caring for others and the quality of life” (cited in Arora, n.d, p.18).
A perfect example of a bad cultural crossover is the Daimler-Chrysler merger, where the differences in culture were greatly responsible for their failure. Operations and management were not successfully integrated due to the management differences in which firms were used to operate. Daimler-Benz’s culture consisted of a formal and structures style of management, while Chrysler preferred a more relaxed approach. The two parties traditionally kept completely different outlook on pay scales and travel expenses. Chrysler employees felt like Daimler was forcing their culture on the whole firm, and became extremely frustrated (Webe & Camerer, 2003).
As we can see from the above, culture maters, and can have a big influence in business. The Daimler-Chrysler merger failure due to managerial culture differences is a big lesson, which companies can learn from. Contrary to Daimler-Chrysler, Motorola had a good strategy for the entrance into China, which incorporated cultural integration. By setting up the university and numerous training programs with trips overseas, the company was able to implement an education process where Chinese employees could learn the western management styles and culture. The Chinese senior managers could then teach everything they learned to their subordinates. The Chinese top manager could use the Chinese management and communication style with their subordinates, and switch to western style mentality when dealing with their non-Chinese superiors.