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The Joint Venture

Organization :
The Chinese Model

Team -
Phoenix
Joint Venture
Agenda
• History and background of the Blue Sword
• Its work culture
• Need for the venture capital
• Failure of the venture capital
• Steps that should have taken to avoid the failure of the venture
capital
• HRM related issues (like recruitment, rewards and motivational
issues)
• Success of the other joint ventures (Post-Interbrew)
• Recommendation to the Blue sword for its international
operation
• Conclusion and references
Some facts about wine in China
• Today China is the fifth largest wine consumer and quickly

gaining on German for the No. 4 spot.

• the Chinese go for quantity not quality and they often raise

nutrient-robbing peanuts in their vineyards.

• About 40 percent of China’s wine production is in Shandong

province between Bohair Bay and the Yellow Sea.

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Histor y and Backg r ound of the
Blue Swor d Gr oup
• Founded in 1986 & was an independent company with no
government interference
• After taking over a small bankrupt beer company it become one
of the leading beer and drink producer in the southwest of
the china with annual capacity of 60,000
• 30 kinds of product in 4 broad category with beer as major
product followed by the soft drink, food, packing, medicine,
printing and international trade and commerce
• Almost all of the production system and management skill were
adopted from US, Europe and Japan
• It has a work force of about 2800 employees

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Work culture of the Blue
Sword
• Quite different from other state owned enterprise (SOE)
• The management system is more marketing-oriented
•High level of employee commitment and loyalty
•Manager have complete authorities
•Sword treat market as the battlefield, it
continually develops new products as per the
market need, changing the existing ones and
withdrawing the certain products as per the
market need
•provides opportunity of self-development to the employee by sending
them to the universities for degree and training program and promotes
them after they finish their studies.
•Overall work culture of the Blue Sword is more dependent upon the long
term relation of the employee and employer
Why need joint venture?
• The growing market competition and for the aim of going
global blue sword was lacking money
• To overcome this problem, management of the blue sword
decide to form an alliance with an international company,
this would also help international companies to enter the
Chinese market
• So after consulting with the French investment bank Blue
Sword agreed to form an alliance with the company called
Belgian Interbrew S.A.

http://www.sabmiller.com/index.asp?
Belgian Mer ger and its
Failur e
Merger comes to an end within a year because of the following

reasons :
Ø Who was controlling the merger was not clear.
Ø Human resource management.
Ø Interference from the Local government
Ø The aim was totally different
Ø Blue Sword sought to advance the quality of the product and keen to
export the product to the global market, where as
the
Ø Interbrew wanted to focus on the domestic low and medium level
market.
Ø China is long term value oriented country and on the basis of this,
Chinese wanted to compete in the international market, but on
the other hand Interbrew was more influenced by western
societies and hence was focusing on the short term aim of making
profit
Ø when the expatriate manager from Belgium had taken charge at the
plant level, they got very high salary with perks like house and
car, and their dominate nature created several problem among the
Chinese local managers and the employee working under them.
Chinese manger were felling insecure in terms of their growth in
the organization http
at ://the higher level
jacksonville.bizjournals.com/jacksonville/stories/2000/08/28/smal
Contd …
• Major problems that are leading towards the failure of the
joint venture in china consist of the human recourse
administration, especially in the area of performance
management, motivation and staff withholding
•The policy of recruiting new Chinese manager
• publicly and redefining the other HR policies
• like pension, housing etc also created the
chaos among the Chinese mangers and employee
of the Blue Sword.
•Government interference also played an
important part in the failure of the merger,
after evaluating the assets of the Blue sword
according to the new law, they find that the
Interbrew level of investment was quite low,
and considerable change in the employee
policy and the condition for future
development forced Interbrew to terminate the
merger, which only last for less than a year

http://findarticles.com/p/articles/mi_qa3674/is_199904/ai_n8840
484/
Steps that could have saved
the Belgian merger
This failure could have been a success if following points
should have kept in mind during the time of merger:
Ø Blue Sword had grown by taking over a bankrupt company, and
had different work culture than any other State Owned
Enterprise (SOEs); Interbrew should have done a thorough
research on the culture values of the Blue Sword.
Ø Both the companies have different view of merger, and they
have not shared their intention of why we are going for the
merger properly
Ø Proper study of the employee management, like employee
retention, motivation, policies for expatriate managers like
their power, salary, perks should be such that it should not
dominate the Chinese managers, hiring policies and study of
other traditional HR practises would have help a lot to take
the merger forward.
Ø Knowledge of the level of interference from the government, and
changing policies that could affect the merger.
Reasons for the success of the other
mergers (Post-Interbrew)

• State firms were now paying more


attention on training and
performance-based rewards.
• China’s business situation is
experiencing an extensive
transform with the adoption of
western style HRM practices.
• Improvement in the new labor law,
there was more flexibility for the
western companies to impose their
HR policies.

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Recommendations
• Most of the merger failed because of cultural differences, Blue
Sword should explain this to its international team, and try to
avoid the cultural difference.
• Who is taking the responsibility should also be very lucid, and
the questions like why we are doing this merger should be well
communicated among the merging companies
• Power and responsibility of expatiate managers must be clear,
and the managers should spend more time with the local
employees to understand the work culture of the company.
• Proper communication of the integration and every steps of the
merger should be made clear to everyone associated with the
merging organizations
Conclusions
• Failure and success of the merger depends upon the culture of
the merging companies.
• Mergers and joint venture in china was mainly dependent on the
employees integration rather than technical integration.
• The collectivistic nature of the Chinese are now changing to
more individualistic and as a result of this, the difficulty of
implementing the standard HR policies of the western
companies over the local Chinese companies is decreasing.
• Performance based award system for the employees are more
common in china now.
Thank You

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