Jan27-12_WilliamWei

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Transcript Jan27-12_WilliamWei

Transferring Human Resource Management Practices:
A Case of Chinese Company’s Investment in Italy
William Xiaojun Wei
Institute of Asia Pacific Studies, Grant MacEwan University, Alberta, Canada
(Research Collaboration with Jingqi Zhu, Cardiff University)
Source: 2009 Statistical Bulletin of China’s Outward Foreign Direct Investment
Three Stages of China OFDI:
(1)1982-1991:The beginning stage of China OFDI
(2)1992-2001:Unstable development stage
(3)2002-Now: Steadily, rapidly and exponential development stage
(Zhou,2009)
Stage 1
Stage 2
Stage 3
China’s OFDI Stock by Sectors(2007)
Source: 2007 Statistical Bulletin of China’s Outward Foreign Direct Investment
FDI Strategies by CMNEs: Toward Home Country Effects
Source: Luo (2011)
Home Country Environment
Competitive Pressure
OFDI Strategies of
DMNCs
OFDI Strategies (Firm-Level)
Home Country Operations
Inward Internationalization
Investment Strategies
(Province) Economic Growth
Business (Stage)
Development
Operational strategies
Institutional Hardship
Innovation Orientation
Integration Strategies
Political Support
Geo-Diversification
6
1. Haier: manufacturing overseas
6. CNOOC: Resources Acquisition
2. Lenovo: buying the boat to sail
7. Strategic Equity Participation
3. TCL: Branding approach
8. Overseas Contracting Business
4. Huawei: from rural to urban
9. Wenzhouness Model
5. Changhong: OEM Model
10. Global IPO Approach
(Wu and Wang, 2008)
Literature review
Globalization of MNCs
Chinese MNC and HRM
Latercomer perspective
Culture approach
Hybrid HRM
National Business System (NBS)
Role of government
Micro-level aspect
Culture legacy
SSD Framework
System–Society-Dominance Framework in Chinese
Context
Research questions

How do Chinese HRM practices be transferred
to the subsidiaries?

What’s the gap between the planned HR
strategy in Chinese HQ and the real situation in
reality?

What factors shape the transfer process? How
and Why it happens?
Research Design 1
CHINESE CONTEXT
SYSTEM
Political Economy
Shared underlying properties
FIRM LEVEL
Interest group and Power
Social actors
SOCIETY
DOMINANCE
Variety of Capitalism
National business system
Diffusion of Best Practices
Research Design 2
Highlight the
differences among
the firms

Sector contrast

Forms of ownership:
State-owned VS
Private

Routes of entrance:
M&A VS Organic
expansion
 Semi-structured
interviews
 Company
documents
Analysis
 Media
reports
Research design 3

Who?






Both HQ and subsidiaries
Senior manager
HRM manager
Expatriate employees
Shop-floor employees
STEP 2:
•Interviews in
subsidiaries
•attitude of local
employees
•Real situation in
transfer
STEP 3:
•Gaps
•Follow-up
interviews
Why?



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Emphasis on the importance
of context
Procedural character
Enacted character
Worker response
STEP 1:
•Interviews in
Chinese HQ
•Planned HR
strategy
•Documentary
analysis
The acquisition
In 2005 the Qianjiang (QJ) group, leader in producing and selling
motorcycles in China, acquired the Italian Benelli company to expand
its business in the western market.
The two companies made contact for the first time in June 2005.
They were looking for an agreement that matched their relative
strengths. Benelli had a trademark, knowledge of Western
markets, as well as projection skills, while QJ had highefficiency plants and low production costs.
In September a deal was reached with the founding of Benelli
QJ srl. Industrial activities began in October 2005.
The integration
The industry
Benelli’s company is part of the motorcycle industry, which includes companies involved in
manufacturing motorcycles and related equipment, parts, accessories.
Global trends
Several key competitors in the motorcycle industry share the majority of worldwide sales.
The industry could be described as global and highly competitive. Price, design, and engine
performance are the key elements in customer choice.
In Italy, the industry is very competitive, with Japanese manufacturers having the biggest
market share. Benelli has a small market share, operating in a niche segment.
China is the largest motorcycle market in the world and accounts for 59.1 % of market
volume in the Asia-Pacific.
Qianjiang Motorcycle Co. (QJ Group): the acquirer
large scale state-owned group producing and selling motorcycles:
annual output in China: 1 million units
In 2007, produced 1.2268 million finished motorcycles, among
which 1.2031 million were sold
The total assets of QJ: 3.6 billion RMB, with a total investment of
260 million RMB.
Fast international expansion to markets such as Indonesia, Taiwan
Austria and Italy
Benelli: the acquired company
Benelli was founded in 1911 in Pesaro
(Center Italy – Marche Region) as a
family firm.
In the 1930s the company was praised
throughout Italy and Europe for its
capacity for development and
production of motorcycles as well as
for winning national and international
racing competitions.
Benelli: strenghts and problems of the company
Strengths
 R&D Department: technical skills in projecting motorbike
 Production plant: two assembling lines ready to start, and
professional workers already trained
 Brand: history and tradition
 Great appreciation of Benelli’s product by the specialist
press
Problems faced by the company before the acquisition
 high production costs and sales prices
 financial stress
 strategic mistakes in production choices
 weak commercial network
Strategic goals of the acquisition
 to capitalize on Benelli’s professionalism and knowledge, in order to
offer high-quality products in segments that had not yet been
penetrated by the QJ Group
 to re-launch the Benelli brand (a well-known and recognized brand
in terms of quality and sporting competition) by leveraging its
history and tradition
 to use Benelli’s products/spare-parts in China, so as to increase the
quality of domestically manufactured products and to further
diversify production to new categories of clients
 to become more and more competitive to face the leading Japanese
companies in the motorbike market
The post acquisition activities
Operations relating to administration, production, and R&D were
maintained in Pesaro (Italy).
The main changes relates to production operations. Innovations
includes an expansion of in-house operations, such as the 3-cylinder
engine assembly that previously had been outsourced. The original
workforce of 45 in 2005 has increased to 100 employees.
Currently, two production lines are operating: one for engine
production/assembly and one for motorcycle production/assembly.
The sales director and the parts quality manager are both Chinese, as
was the managing director (a 40-year-old woman). The previous Italian
technical director is vice managing director.
The new industrial plan
The industrial plan involves manufacturing new products within four
years.
Motorcycle production had already increased from only 3 models prior
to the company’s acquisition, to 9 in 2007, and to 10 in 2008. Each
motorcycle model is different, with three new engines.
Motorcycles are designed in the Technical Department in Pesaro.
Designs and prototypes are then transferred to the QJ Technical
Department, where the Chinese, in cooperation with the Italian
Technical Department, take care of the industrial development of the
project. Once the industrial plan for the product is completed,
production begins in Italy.
Positive changes perceived by Benelli’s people
 efficiency-building efforts to reduce some avoidable costs that had
been exploding with the previous owners, leading to huge losses;
 more rationality in company decision making. The previous owner
loved motorcycles and sometimes made decisions that were driven
by a passion for motorcycles rather than by market needs;
 a new way of managing human resources (more decision-making
power and more responsibility to the staff, including the young
people and women; teamwork approach through periodical meetings
and encouraging suggestions and ideas “from the bottom to the top)
Key issues faced by QJ after the acquisition
 cultural differences between the Chinese and the Italians are emerging, in terms of
behavior, management practice and business approach. Problems stem not only
from differing organizational cultures, but also from the differing working
environments in China and Italy.
 there is the need to improve cross-cultural understanding between the
Chinese and the Italian managers/employees

There also is the issue of QJ’s strategy outpacing its ability to execute its
strategy and the availability of a team of expatriate people specifically
trained on global operations.
 The focus on efficiency, to be price competitive, put in shadow investments on
sales activities.
 there is the need to improve the worldwide strength of the brand as well
as the effectiveness of the sales network and of post sales assistance and
customer care
Main Findings and Further Research
Main Findings:
 Systemic Effects
 Societal Effects
 Dominance Effects
 Corporate Strategy
 Corporate Relationship
Further Research
Main Findings and Further Research
Main Findings:
 Systemic Effects
 Societal Effects
 Dominance Effects
 Corporate Strategy
 Corporate Relationship
Further Research
Main Findings and Further Research
Main Findings:
 Systemic Effects
 Societal Effects
 Dominance Effects
 Corporate Strategy
 Corporate Relationship
Further Research