MGT9130 Assessment Portfolio Case Study: People in Global Organisations

Almond Chemical: Culture Clash in the Board Room

The room was already packed when Liu Peijin walked in. His flight from Shanghai to Chongqing had been delayed, and he had fretted about missing the training. But fortunately, he’d gotten there in time. Liu knew his presence was important. As the president of Almond China, he wanted to show his Chongqing colleagues how much he cared about the topic under discussion: ethical business practices.

Taking his seat, Liu nodded at the head of HR, who was running the training. The two went way back: Both had been with their German parent company, Almond Chemical, since 1999, when it first established operations in China. Since then, Almond China had set up two joint ventures with local partners—the only way foreigners could do business in chemicals in the country. Almond controlled 70% of the stock in one of them. The other was a venture with Chongqing No. 2 Chemical Company, in which Almond had a 51% stake and the Chinese directors were very active.

Liu sat next to Wang Zhibao, the vice president in charge of sales for the Chongqing joint venture. Wang looked skeptical. He was good at his job, having closed several key deals that had kept the business afloat during its early years. But he was also at the center of a conflict between the venture partners: The Chongqing executives were increasingly vocal about how difficult it was to operate according to European standards, particularly the rules against gifts and commissions. Such incentives were commonly accepted in China and routinely employed by Almond’s competitors. Trying to do business without them, Wang argued, was foolhardy. “This is China, not Europe,” was his refrain.
But the line between these practices and breaking the law was a fine one. Almond was headquartered in Munich and listed on the New York Stock Exchange as well as the Frankfurt Stock Exchange, meaning it was required to adhere to the U.S. government’s Foreign Corrupt Practices Act, which specifically forbade the bribing of foreign government officials by U.S.-listed companies.

Liu kept an eye on Wang as the HR director explained Almond’s ethics regulations and the legal consequences of business bribery. Liu knew the rules made sales more difficult, but Almond’s policy was clear, and he wanted to make sure that every member of the sales team understood it.
He had taken the same hard line on safety and environmental practices. The production facilities in Chongqing had been built according to German national standards, and all the safety equipment—helmets, shoes, and protective clothing—had come from Europe. The Chinese partners had called these investments “wasteful” and “frivolous”—“luxurious expenditures” that the young venture couldn’t, and shouldn’t, afford. But, with backing from the head office, Liu had stood firm. Similarly, he’d insisted that the factory’s MDI (methylene diphenyl diisocyanate) waste be treated as a dangerous substance and processed with a special cleaning agent, in accordance with European standards, even though Chinese law didn’t mandate it. His partners had been dismayed at the millions of yuan this would cost. But Liu refused to compromise, because he had witnessed the consequences of lesser standards firsthand. Years before, when he was working for another Chinese chemical company, an affiliate’s chlor-alkali plant had
 
suffered an explosion, injuring 200 staff members and residents of the surrounding area and halting production for more than a month.

The training was reaching its end, and the HR director signaled to Liu that it was his turn to speak. Liu hesitated slightly as he looked at his Chongqing colleagues. “At Almond, ethics are nonnegotiable,” he said. “We need to remember these laws as we go about our business. We are not just a Chinese company; we’re a global one.” Solemn, blank faces stared back at him.
As he left the room, he couldn’t help feeling that his remarks had fallen on deaf ears.

Two weeks later, Liu was back in Chongqing for the second-quarter board meeting. As he walked into the lobby of the Hilton, he ran into 

George Ho, the finance director for the joint venture. Ho looked flustered.
“Are you all right?” Liu asked in English. Ho was from Hong Kong and didn’t speak fluent Chinese. He held a unique position: He reported to the general manager of the joint venture but also to the finance director at Shanghai headquarters.
“I’m worried about this meeting, Liu,” Ho said. “I had a disturbing conversation with Wang last week.”
Liu nodded, not surprised.
Ho continued. “Wang is close to making a huge sale—30 million yuan—but the customer’s purchasing manager is insisting on a 1% commission. He says that’s what he’s being offered by other companies.”
“We can’t do that,” Liu said.
“That’s what I said. But Wang was insistent. He said that if we can’t do that, we should at least be able to offer the manager a trip to Europe, a visit to Almond headquarters.”
“What did you say to that?” Liu asked.
“No—of course,” Ho replied. “But he accused me of jeopardizing the venture. He said that we ‘foreigners’ have so much money, we don’t care about the performance of the business.”
“You did the only thing you could do,” Liu said.
“I can’t believe Wang thought that suggestion would fly, especially after the training,” Ho said. He walked down the hall toward the boardroom. Liu followed.

The meeting had barely begun when Chen Dong, the chairman of the joint venture and a Chongqing No. 2 Chemical executive, raised the commission issue. (His leadership position was one of the many concessions Almond had made to lure his company into the joint venture.)
That was fast, Liu thought. He sat quietly while Dolf Schulman, the vice chairman of the venture and Almond Chemical’s senior vice president of business development, fielded the question.

“Chen, we cannot concede on these issues,” Schulman said. “There are no exceptions to be made. Almond must be a law-abiding corporate citizen—as should every Almond employee.”

Ho looked up and nodded at Liu. But Chen was not ready to end the discussion. “To the best of my knowledge,” he said, “many foreign-owned companies reward Chinese customers for their business. Some companies organize overseas visits, some provide management training, some arrange golf outings. This is good business practice in China. We need to be flexible in order to
 
compete. If we can’t provide the commission, let’s at least consider a visit to Munich headquarters.”
This was typical behavior for Chen. He had a tendency to develop very strong opinions but keep them to himself until the board met. Schulman waited for the translator to finish; then he hesitated, trying to come up with a suitable response. Liu knew he needed help.

“Commission or trips, it’s all the same thing: business bribery,” Liu said. “We can get orders without these tactics.”
Chen picked up the Q2 financial statement that had been distributed at the beginning of the meeting and said, “Orders? What orders? We made only 60% of our target for this quarter. When we set up this joint venture, we assigned our very best people to it—our best technicians, best salespeople, best managers. Why? Because we believed we could manufacture some of the best chemical products in the world and, in turn, get more orders. But look at this.” He threw the statement down on the table. “Our performance is sinking fast. This joint venture has done nothing but hurt us. We have yet to see any return at all.”

Chen paused to let the translator catch up but then thought better of it. “All you do is make us spend, spend, spend—on German goggles, unnecessary waste processing, and ridiculously high salaries.” He turned to Ho, who looked bewildered. “And now I hear rumors that you are planning to launch SAP’s ERP software to synchronize with headquarters. When will the spending stop?”

Chen continued, his voice rising. “We need a tighter control on costs. We can’t possibly meet our profitability target when our expenses are so high. We want to choose the finance director going forward, so we can give this venture a real chance at succeeding. We see no other option.”
He sat back in his chair and crossed his arms. Schulman was squirming in his seat. Ho was pale with shock. Liu wasn’t sure what to say. He was astonished that Chen had brought up the safety standards—he’d thought that issue was settled long ago—and astounded by the slap at Ho. But he needed backup if he was going to oppose the joint venture’s chairman.

Finally, Schulman spoke. “Chen, thank you for being honest about your concerns,” he said. “At this point I think all these issues are still open for discussion.” Liu almost choked. What was Schulman thinking? Seeing Liu’s expression, Schulman looked at his watch and said, “Should we take a 15-minute break?”

Liu reflected on the situation as the boardroom emptied. He knew how high the stakes were. China accounted for 3% of Almond’s current business, but the company was depending on the country for future growth. The Chongqing operation was supposed to prove that Almond could expand further in China, and the company was already planning additional acquisitions. Liu understood that Schulman could not bend the company’s standards regarding ethics and safety.

“We need to stand strong,” Liu said, “not give in.” He was thinking about Almond’s reputation as well as the future in China. He had joined the century-old German company not only because it boasted the world’s leading chemical-production technology, but also because of its values, management approach, and safety ethic, which he hoped would serve as a model for Chinese industr.

Assessment Portfolio Guidelines

The portfolio consists of two parts. Part A involves choosing and analysing a topic with practical application to the case study and Part B is a reflection on your personal experience of interacting with different cultures.

Part A: Choose one of the three topics below to address the issues in the above case study:

1.    Cross-cultural negotiations
2.    Diversity in global organisations
3.    Cross-cultural team-working

Emphasis will be on highlighting the significance of the chosen topic based on existing research, employing appropriate national and institutional frameworks to apprise the topic, identifying issues and strengths, examining the benefits and challenges of the chosen topic from individual, organisational, and societal perspectives, evaluating, and critiquing the current leadership approach, and highlighting a plan of action. – (2200 words)

You will need to:
•    Briefly explain why the topic you have chosen is significant to the case study organisation

•   Apply the relevant theories and approaches to explain/analyse the case and the chosen topic

•   Consider the cultural and institutional contexts that have an impact on the case

•   Propose recommendations for any identified issues considering academic theory

•   Highlight managerial implications of your findings and recommendations to managers working in a global setting

Part B: Involves a reflection on your own learning and development during the module - exploring how your understanding of managing People in Global Organisations has developed over the term based on your interactions with different cultures. How has what you have learned over the course the module helped you understand those interactions with cultures different than your own.
How have your experiences and the theories covered throughout the semester shaped your understanding of the nuances and challenges of managing or working with different cultures? How will you use your new knowledge as you progress in your career or move on in life?
Develop your reflective account using academic theory, highlighting whether you found the theory to hold true or not based on your experience. Emphasise how your learning will inform your career in future. - (800 words).
 
Contribution to Final Module Mark: 100% Part A – 2200 words

Part B – 800 words

Total Portfolio – 3000 words

This assignment is limited to 3000 words. The word count includes everything in the main body of the text (including headings, tables, citations, quotes etc). It does NOT include your reference list.

The word count should be clearly stated on the front cover page. Please note that the word limit for this assignment is an absolute maximum. Misrepresentation of word counts in an attempt to gain an unfair advantage in assessment may be referred as an academic offence.
Students should be aware that the marker will not include any work after the maximum word limit has been reached within the allocation of marks. Students may therefore be penalised for a failure to be concise and for failing to conclude their work within the word limit specified. Likewise, a failure to meet the maximum word limit may result in lower marks based on the quality of the work because they may not have included the necessary information required for the assessment and met the intended learning outcomes.
Detailed instruction for this assessment and the marking criteria are contained on the module’s Blackboard site under ‘Assessment Submission Guidelines’ and in the module handbook.

Learning Outcomes Assessed:

LO1 Explain organisational processes from the perspectives of individuals and organisations in the global context.
LO2 Evaluate global organisational context within which individuals operate and assess how economic, political, and social influences impact individual/team behaviour.
LO3 Analyse strategies for managing international teams and projects with particular emphasis on the impact of national culture on the function and culture of the organisation.
LO4 Evaluate organisation and management theory in relation to students’ own experience and/or competencies as manager.
Portfolio:
a)    100% of your overall grade
b)    3,000 words
c)    Electronic submission via Turnitin
d)    Due by Wednesday, 8th January 2025 at 12 pm (noon) UK Time
 
Reference List

Xin, K. and Haijie, W. (2011) HBR Case Study: Culture Clash in the Boardroom. Harvard Business Review, September. Available from Culture clash in the boardroom [accessed 20 September 2022].

Note that HBR’s fictionalized case studies present dilemmas faced by leaders in real companies and offer solutions from experts. This one is based on a teaching case at China Europe International Business School