First-Time Expatriate's Experience in a Joint Venture in China
1.0 Source Problem
The root problem in the joint venture between Controls and the Chinese state-owned company is poor planning. This is because the failure of many international joint ventures is traceable to poor planning, which covers lack of planning or insufficient level of planning reflected in the inability to understand the full complexity of the situation and enable enough room for flexibility since contingencies are likely to occur in the process. It is common for the firm, which are parties to the international joint venture, to make adjustments commencing with the negotiation process until the implementation of the agreed terms. In fact, joint ventures comprise continuing negotiations (Yan, 1999). In the given case, the company has not made concrete plans for the joint venture so that even if James was already working as part of the joint venture, adjustments continue.
2.0 Secondary Problems
Poor planning finds expression in a number of secondary problems that are short and long term.
2.1 Short Term
The short-term problem is the lack of resources of the company to handle the international joint venture. It was the first time that the American company would engage in international operations and it is understandable that it does not have the experience and best practices to support international business planning. Concurrently, Controls does not have any experienced personnel to handle initial joint venture negotiations or even the finalization of the agreement. Although James did not form part of the initial negotiating team, he had to negotiate with his Chinese counterparts, and even he did not have any experience in managing a joint venture since the thrust of his experience is in the management of the production process. In addition, the first team did not receive enough resources to support their survey of potential partners, which resulted to the identification of only one potential partner. (Thompson, Strickland & Gamble, 2007) This reflects poor planning since resources are necessary to support the determination of the best joint venture partner for the company, with the long-term benefits overshadowing the costs. In this case, Control just considered one company preventing comparisons to locate the best possible partner.
2.2 Long Term
One long-term problem is the poor human resource management of the expatriates of the company as observed during the inclusion of Controls, as a subsidiary of Filtration, Inc. Controls has a poor human resource system because its selection process for expatriates was tainted by personal influence. James was bypassed in the Japan joint venture and there was no formal selection process for the China joint venture (Thompson, Strickland & Gamble, 2007). Controls does not have an established learning or training program for its expatriates as shown in the orientation conducted by Filtration, Inc. Although the business needs of Controls changed after becoming a subsidiary of Filtration, Inc. but operating autonomously and competing with the other suppliers of Filtration, Inc. as well as its entry into the international market, Controls has not updated its human resource management to extend policy, resource and development support for expatriates. It had to rely on Filtration, Inc. for the orientation.
Another long-term problem is the ineffective corporate culture of the conglomerate including Controls as a subsidiary fit to support international joint ventures. This finds expression in the lack of communication channels between Filtration, Inc. corporate headquarters and the local office in Singapore in preparing the test visit of James to China. In addition, James had little direct contact or communication with Controls or Infiltration, Inc. that hampers policy and resource support to enhance the success of the joint venture (Thompson, Strickland & Gamble, 2007). There was also poor and ineffective coordination among the business units or subsidiaries and corporate headquarters. There was no transfer of knowledge and best practices from Infiltration, Inc. to Controls and there was also poor coordination between Infiltration, Inc. headquarters and the regional office in Singapore.
3.0 Analysis
Controls operated as an in-house supplier to Infiltration, Inc. so that it experienced security in terms of a ready buyer of its products (Thompson, Strickland & Gamble, 2007). This means that it did not have to contend with issues such as competition and other market pressures. This led to the stagnation of the innovativeness of the company in terms of improving its human resource management and other internal systems. Although Controls have been operating in Europe, Asia and South America, Controls in the United States had no experience with international joint ventures. This meant that it had to rely on Infiltration, Inc. to provide it with lessons and best practices in engaging in joint ventures.
When Controls became a subsidiary of Infiltration, Inc. it was permitted to exercise autonomy in expanding its operations outside of its role as a supplier to Infiltration, Inc. However, as an inexperienced company Controls recognized the contribution of engaging in international joint ventures in China in order to expand its market and achieve cost effective operations. However, it failed to develop a training program to prepare its expatriates for the challenges posed by engaging in an international joint venture with a Chinese partner. This led to difficulties or problems for James as an expatriate managing production within the joint venture. This, Controls has not developed the competence or capability to engage in preparation for the international joint venture.
There are also problems in the relationship between Controls and Infiltration, Inc. As a conglomerate, Infiltration, Inc. failed to manage effectively its subsidiaries and business units in terms of the implementation of standards and best practices on joint ventures. The subsidiaries operated autonomously but the success of the subsidiary redounds to the benefit of the conglomerate so that it could have extended a greater degree of support to Controls to ensure the effective engagement in the joint venture as well as the development of competencies necessary to manage the problems or issues that could arise.
In addition, there was a difference in the financial benefits received by expatriates of Control and Filtration, Inc., with the expatriates of control receiving a lower amount than that received by Control expatriates such as James (Thompson, Strickland & Gamble, 2007) This can contribute to the problem since this could constitute a disincentive to the expatriates to perform effectively because of perceptions of unfair treatment.
At the onset, Controls did not apply a formal or standard procedure of selection of qualified personnel to work as expatriates in the joint venture in China. James expressed his interest in the expatriate position to the international human resource manager. Although the language barrier and the cultural differences did not dampen his interest in the position, the lack of a formal process of selection affected James’ credibility and competence as a management representative in the joint venture project in China. James received the position since the human resource office thought that he seemed qualified and there was dire need to consider the part of the joint venture. In addition, the offer came in the guise of a consolation price since he was considered as an expatriate for the joint venture in Japan but he was bypassed by a more politically linked individual.
The tasks given to James are two-fold. One is to manage the manufacturing system in China with the intention of developing a production system in China. This is needed to support the eventual transfer of production in China. The other is to establish the marketing presence in China. (Thompson, Strickland & Gamble, 2007) These tasks are within the experience of James since he worked as a manager in charge of customer support, engineering, quality control and program managers for fifteen years.
This means that had the selection process been formalized and standardized, James could have achieved the position anyway in a more valid manner instead of just a consolation. This makes a difference in his completion of his role in the joint venture in China, since his credibility is put to question especially by the management staff of Controls in America as well as the people in the regional office in Singapore. The sudden removal of James as manager in the China joint project, in exchange for a younger manager from the local office, could have been the effect of the perception of the local personnel over the capacity of James as a manager. In addition, Controls headquarters or Infiltration, Inc. did not endorse James to the regional office in Singapore or even the members of the joint venture negotiating team in China. This is expressed through the lack of coordination of his test trip prior to James’ relocation to China.
The continuation of the poor human resource practice at Control can be expressed through the sudden pull out of James from the China Joint venture without finishing the three-year term. His replacement did not seem to have a similar or better experience than him in handling joint venture projects. There was also no formal process of evaluation of his performance and the developments in the joint venture that could justify James’ removal. It could be the case that political connections influence his replacement since James was already able to achieve significant results in the joint venture especially in connecting to the local business and social culture and improving production practices.
The impact of these problematic situations to the joint venture is apparent. First, at the beginning there was no certainty that the joint venture would provide Control with the optimum benefits since the company only considered one company as potential partner. This means that there could be other better partners. Second, the lack of experience and resources of the joint venture negotiating team led to a very basic joint venture agreement that requires continuous negotiations, which could lead to problems for the inexperienced company. Third, poor planning results to uncertainties in the success of the joint venture especially if expatriates are pulled out of the field since another inexperienced replacement needs to again start from scratch.
4.0 Criteria of Evaluation
The target is to improve the planning system of the company in order to support the human resource needs of expatriates handling the expansion of the company via joint ventures. Training and development programs for expatriates would ensure preparedness not only of expatriates in holding positions in joint ventures but also the human resource division in establishing the necessary linkages with regional office or other business units or headquarters for coordinated and standardized processes. Expatriate performance and joint venture success are the evaluation criteria.
5.0 Alternatives
5.1 Short Term
In addressing lack of resources including human and capital resources, the alternatives are 1) budget appropriation by channeling funds to the training of expatriates or capital for negotiations, 2) resource re-allocation especially when the company has limited resources by moving resources from one area to another, and 3) re-prioritization involves the evaluation of the expenditures of the company, determination of priorities, and focus on key areas.
5.2 Long Term
In addressing poor human resource management and poor corporate culture, there are a number of alternatives focusing on change management. One, the company can develop a corporate culture and human resource management that recognizes the emerging needs of expatriates including training and coordination. Another, Control can adopt the corporate culture of Filtration, Inc. in order to ensure standardization including information sharing and access to the coordinating system of the conglomerate to support its expatriates. Still another alternative is the adoption of some aspects of Infiltration’s corporate culture and human resource practices but allowing room for flexibility in developing a culture and management system that fits its needs.
6.0 Recommended Strategy
6.1 Short Term
Control would benefit most from its engagement in budget re-prioritization to accommodate the needs of expatriates.
6.2 Long Term
Adopting best practices of Infiltration, Inc. but integrating these into the corporate culture and human resource management that suits Control serves its needs best.
7.0 Justification of Recommendations
It is the first time that Control would engage in expatriate agreements with the thrust towards expansion so that it needs to evaluate its priority areas. In addition, Control operates with autonomy so that it needs to adopt practices of Infiltration for purposes of standardization and coordination but it has a different history and thrust than Infiltration, Inc. requiring the development of a semi-customized system.
8.0 Implementation, Control and Follow-up
Resistance is the strongest problem in implementation because the change would enforce a more formal and standardized system of selection instead of just operating on influence. However, this can be addressed by using incentive and motivational factors.
References
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2007). Crafting and executing strategy: The quest for competitive advantage (15th ed.). New York: McGraw Hill Irwin.
Yan, Y. (1999). International joint ventures in China: Ownership, control and performance. Hampshire: Palgrave Macmillan.
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