A Strategic Analysis Of The Changan Ford Joint Venture
With the growing practice of international integration, many companies and organizations seek to enter joint ventures for industrial expansion. When companies enter into joint ventures, the main characteristics of the agreement require flexible capital commitment as well as local commitment. Although entry into international markets is made relatively easy through joint ventures, it still necessitates a profound knowhow of local management skills. Joint ventures provide a good opportunity for long term profits. An essential feature that marks such ventures is cultural assimilation. China’s rapid pace of development and the fact that China simultaneously harbors the greatest population mass amongst all the countries of the world makes it a lucrative market for international ventures. When Ford decided to enter China’s automobile market, it completed its joint venture agreement with Changan, the third largest automaker in China in 2001.
When entering a host culture, there is a catalogue of behaviors that the foreign entrant should expect. Solomon (1987) suggests that international entrants should expect that Chinese negotiators will normally seek broad problems and will aim to build a relationship. The main problem that the management faced in the joint venture with was the optimization of the output in terms of efficiency and quality caused by poor communication and different decision-making processes between the parties(Nader et al., 2013). The venture’s competitive advantage was also affected by the differences in apprehending market changes and the ways to tackle them. The cultural dissimilarities have a profound impact on the business atmosphere and work environment.
Chinese cultural values are visible in their negotiating style where they are always more concerned about the means rather than the end. Where the American culture is more individualistic, the Chinese is more collectivist. The American work structure is more egalitarian whereas hierarchy is the basis of organizational structure in China. The American culture is information oriented as compared to the relation oriented Chinese culture. The American approach is reductionist whereas the Chinese way is holistic. Graham and Lam comment in The Chinese Negotiation, ‘When bargaining in China, be prepared to discuss all issues simultaneously and in an apparently haphazard order. Nothing is settled until everything is.’