Chinefarge: A Sino-Western Joint Venture

INTRODUCTION

‘Chinefarge’ is an intercultural business case study report and refers to a Sino-western joint venture of Paris-based LAFARGE and Huabei Mining Company (HMC) near Beijing. Lafarge is a major global player in building materials that tries to gain a foothold in Asia, more specifically in China which has an extraordinary need of construction materials and know-how to satisfy its emergent economy. While one can gain market share and the other a powerful partner, the cultural challenges of the IJV constituted a barrier for both sides. This succinct case study report diagnoses the cultural challenges they encountered in the initial stages of the joint venture and recommends some solutions.

CHINEFARGE: A SINO - WESTERN JOINT VENTURE.

A CASE STUDY REPORT

Culture: Corporate asset or liability?

Due to the high concentration of dysfunctionalities in the psychological area, signaling insufficient cultural awareness by JV partners, I raise the question: What can be done to make culture work for, instead of against the JV, in line with Ghoshal’s, Bartlett’s and Birkinshaw’s emerging change management model (2002, p374), which addresses first psychology, then physiology and finally anatomy?

Attitudes

Identification with the organization

Attitudinal, behavioral and relational deficits seem to be imputable to the impossibility of reciprocating obedience and loyalty for care and control. The parent company, high on IDV, might have underestimated the vertical collectivist core values. It must evidence that the principle of reciprocation is complied with, to obtain the trade-off of identification, trust, discipline etc. Additionally, it depends on the solution of the double loyalty problem, discussed below. It can also be fostered through facework (mianzi) in the sense that affiliation with a notable global corporation is by itself face-giving to the Chinese. Additionally, in a vertical collectivist society, which differentiates between ‘in-group’ and ‘out-group’, it can be promoted by using ‘renqing’ (technique of converting out-group in in-group) and guanxi (doing mutual favors in the interest of long-lasting family of friendship-based relations) (Smith and Peterson, 2002, p.230). All in all, JV strategic policy should be aware of and accept Confucian/Taoist cultural standards, first and foremost ‘He’ (harmony, equality in inequality) along with Danwei, which together constitute the all pervasive reciprocity principle, based on the high PDI, collectivist (vertical -) orientation. Those standards being not met, even low UAV Chinese experience strong anxiety. Thus, the need of not only accepting, but reconciling core values as JV corporate success factors.

Relationships

Loyalty - Individualism/Collectivism - Time-Orientation

Whereas western individualism identifies with the JV, the collectivist orientation implies not only identification with the company but extends the reference group to society at large. The benefits of the JV with its limited life cycle and the long-term benefits of the macro-system are interconnected, which raises the issue of conflicting loyalties towards the Joint Venture, the former HMC danwei and the country at large. Absence of identification with the JV and competing loyalties form a vicious circle. It may be transformed into a virtuous circle through trust building.

Evolution of Trust

The evolution of trust can be effected, according to Blomquist’s model of operationalising trust, through moral responsibility and positive intentions or, according to Johnson, J and Cullen, J B (2002, p.342) on the following three bases of trust: ‘motivational investment, risk and interdependence’. Through the lens of Bennets IDM model transposed to the interfacing of organizational cultures, the employees are still at the ethnocentric stage.

Trust and Collectivism

Research evidence suggests that collectivism and general trust correlate negatively. Collectivism needs more specific referents for the evolution of trust. Hence, to underpin communication policy, trust building and trade-offs need specific referents and substantiation by concrete measures. HSE/HR are areas for implementing specific measures with high visibility.

Structures

Organizational Models

Host country and parent company organizational models (Hofstede 1980, p. 316) coincide in person-vested authority. The parent company also leads by rules-based authority and empowers middle management. Lack of management education, impairment of mianzi and guanxi resist the alignment. Supporting cultural standards are: The vertical collectivist society considers ‘hierarchy as a given’ Triandis, 2002, p. 25.) Adding a new echelon of real power fulfills the Confucian precepts according to which ‘he’ reins, when everybody is in the right place and in the right role. It is also culturally enforceable by the high PDI strategic apex.

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