De La Salle University

Master of Business Administration

Ethics, Family, and Work-Life Harmony

CASE ANALYSIS
THE NEW MARKET OPPORTUNITY

Submitted by:
Cartagena, Liwayway
Jose, Michael Victor

Submitted to :
Prof. Pia Manalastas

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Table of Contents

I. BACKGROUND OF THE CASE ....................................................................................... - 2 -

Introduction.......................................................................................................................... - 2 -
Facts ..................................................................................................................................... - 2 -
II. CASE ANALYSIS............................................................................................................... - 3 -
Statement of the Problem ................................................................................................. - 3 -
Objectives of the Case ...................................................................................................... - 3 -
Areas for Consideration .................................................................................................... - 3 -
Decision Criteria and Weights .......................................................................................... - 4 -
Alternative Course of Actions ........................................................................................... - 5 -
ACA #1: Continue plans without further provisions .................................................. - 5 -
ACA #2: Continue plans with future provisions ......................................................... - 6 -
ACA #3: Revise plans to be more environmentally-friendly and less risky ........... - 7 -
Evaluation of ACAs ............................................................................................................ - 8 -
Recommendation ............................................................................................................... - 8 -
Implementation Plan .......................................................................................................... - 9 -
III. REFERENCE .................................................................................................................... - 9 -

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I. BACKGROUND OF THE CASE
Introduction

China or the People’s Republic of China (PRC) is the world’s most populous country with a
government that adapts a form of communism. It prides itself in making disciplined and fast-
acting decisions, which have only resulted to a booming economy. The combination of its
sheer population and constant growth instantly makes China a major player in the world
market. A population of 1.2 billion and almost double-digit annual economic growth rates had
been reported by 1994. What happens when China decides to enter the automobile industry to
suffice its people’s growing need for vehicles? How will it affect it affect the rest of the world?

Facts

According to a news article of the San Jose Mercury News, the government of China had
invited the world’s leading auto manufacturers to submit plans for a car designed for the
Chinese people. Due to its booming economy, its rising middle class, and its massive, the
country estimates between 200 to 300 million of new vehicles would be required by its people
in the next forty years. The invited companies, such as General Motors and Ford, simply find
this opportunity irresistible. The specification requirements provided for each car were as
follows:

 Target price of less than $5,000.00

 Accommodates 3 passengers: a typical Chinese family size including a single child
 Able to endure poorly-maintained roads
 Composed of parts made within China
 Joint-venture (JV) agreements between Chinese and foreign companies

China’s call to the auto manufacturers, however, had not gone without opposition.
Environmentalists were concerned that the combination of the country’s growing demand for
cars would greatly affect the world’s supply of oil. Along with that notion, more people with
automobiles meant that more carbon dioxide (CO2) would be released in the atmosphere
worsening the greenhouse effect. Environment-friendly solutions such as the lower-emission
cars and electric cars had been considered but then declined because either the solution
would entail unjustifiable costs to the Chinese government or would be irrelevant due to the
number of expected vehicles. Other countries’ government officials, on the other hand, were

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worried about the non-environmental implications of the move: increased oil prices by greatly
increasing fuel demand, risk-laden partnerships with oil-producing countries such as Iran, and
the potential for conflict with other countries for oil contested reserves.

II. CASE ANALYSIS

The approaches of the analysis of this case are based on the perspectives of Chinese
Government considering their behavior, ethics, and culture taking into account the case facts.

Statement of the Problem

How can China meet the needs of its people for automobiles while considering its economy,
the environment, and other countries’ concerns?

Objectives of the Case

The principal objectives of the case are:

 Identify the significant issues embedded in China’s proposed domestic car
manufacturing plans
 Diagnose China’s responsiveness and ethics towards its people, environment, and
other countries
 Establish a sound recommendation with regards to the direction of the government for
auto manufacturing with consideration to the issues presented

Areas for Consideration

 Increase in oil consumption. The study was based in part on the fact that China, with its
large population, was using relatively low levels of energy. Assuming plans push
through and per person consumption level of oil reaches to a modest level like that of
South Korea’s, China would be consuming twice the amount of oil the United States,
the world’s leading oil consumer. They would have to import all its oil from the same
countries that other nations rely on which will create large political, economic, and
military imbalance. Rising demand for Middle East oil would push oil price up sharply
which would send major shock on economies around the world.
 High Military Risks. There are concerns that China would start trading weapons for oil
exchange with Middle East countries, heightening the risks of major military

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 confrontations in the region. Increasing demands seem likely to increase the potential
for conflicts among nations competing for limited resources. In fact, many of the nations
affected were said to be increasing military capability because of it.
 Environmental Sustainability. Satisfying the needs of the Chinese people would only
mean more fuel-burning cars. Since China has the biggest population in the world, it
would do significant damage by releasing more CO2 into the atmosphere possibly
affecting the whole world down the road.
 Costs. While the economy of China as a whole is going strong, it is also conscious of
the costs that come with having to establish its automobile industry. Just as pollution is
greatly multiplied by the population, the corresponding costs associated in creating and
providing automobiles to the people will be expensive. The cost requirements set by
the government caters to the average person in China.

Decision Criteria and Weights

Decision Criteria Definition Weights Rationale

This criterion refers to 20 The best solution chosen may
Adherence to the original not be 100% compliant due to
Original requirements set by the other external factors such as
Requirements Chinese government environmental and global
for the proposed risks.
vehicle.
This refers to the 20 Life, livelihoods, culture and
Environment consideration in the society, are fundamental
Friendliness preservation of the aspects of human existence –
environment. their maintenance and
enhancement are required.
This criterion includes 20 Oil fuel is a scarce global
Aversion to Global the aversion of political, resource. Once China enters
Risks economic, military risks the market as buyer, other
described in the case. countries might be negatively
affected mainly through
increased prices, illegal
trading, and oil reserve
disputes.
This refers to the 20 China had invited automobile
Effectiveness and impact of solution to companies to address an
Timeliness of the Chinese people important need. While the car
Solution for China and the length of time industry would take years to
that it takes for the JV mature, the sooner the JV can
to deliver to the people. deliver would mean more
benefits to the country
through jobs and better
transportation.

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Alternative Course of Actions

The Alternative Courses of Action (ACA) are confined within the walls of the decision
criteria vis-à-vis the objectives of the case in respect to the problem statement. Each ACA is
tested and run using the Markkula Framework to assess the ethical position of the proposition.

ACA #1: Continue plans without further provisions

The utilization of China’s natural resources and cheap labor by the JV will help
lower the cost of cars. This ACA will likely be the fastest and most cost-effective
solution for the country. However, future concerns of environmentalists and other
countries’ governments will be left hanging.

An economy car design will entail benefit both to Chinese

and investors because this can bring-in efficient product
Utilitarian
that is advantageous in terms of cost, functionality and
competitions. Many Chinese people will have the benefit of
better transportation immediately, so this course should
provide the most benefit to most people in the near future.
The Chinese people should have the liberty to choose the
most affordable and quality car for their needs. In order for
Rights & Duties them to have this right, the government should open up the
country’s automobile industry.
In a vacuum, a Chinese person should have the same
Justice & Fairness ability to own a vehicle just as, let’s say, a French or an
American does.
In line with the virtue of justice, providing affordable car
Virtue options will uplift the quality of lives of Chinese.
Environmental issues and global risks due to drastic
Care increase in oil demand may change this notion, however.
Ethics of care to increasing employment rate, the intention
of the government to enter into this business shows
concern to their people in terms of manpower and
resources maximization.

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ACA #2: Continue plans with future provisions

ACA #2 is similar to ACA #1 except that it will take into consideration the issues
raised by environmentalists, critics, and other countries. More environmentally-
friendly solutions may be too expensive now, but may be justifiable to pursue in the
future. Plans need to proceed as planned to cater to the country’s booming
economy. Examples of provisions to be implemented may include implementing a
one vehicle per family policy, strict vehicle emission control standards, and
transition plans to greener automobile technologies.

Because of China’s massive population, a lot more people

will benefit immediately. In the distant future, however, an
Utilitarian
increase in volume of cars that will utilize petrol will entail
damage to environment and affect the world economy only
in the distant future. Provisions will be made to appease
concerns of parties outside China.
While the Chinese government has the duty to further
Rights & Duties improve its economy by establishing the automobile
manufacturing industry, it also has the duty to make
responsible decisions as the 1st most populous and 5th
largest country in the world.
This is a big challenge to the Chinese government to come
Justice & Fairness up with the best plan to cater their own requirements as
well as the preservation of the environment. The concept
of eco-competitiveness needs to be embedded in its
decisions. Long term projection and effects relative to the
environment should always be used, so future generations
of China and other nations can benefit.
The virtues of concern to environment, caring, and
Virtue peacefulness are being showcased for this ACA. Since
China is accommodating its own needs while taking note of
others’ concerns, it is showing its care for others’ welfare
and their value for international peace. This also shows
creativity of Chinese government in coming up with

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 alternative solution
Care to environment will be beneficial to all; The desire to
Care come-up with an efficient car design in terms of size and
cost while setting provisions for the future should be
lessens the long–term effect of accumulated gas emission
that it will entail.

ACA #3: Revise plans to be more environmentally-friendly and less risky

With China’s massive population, any mistake made in relation to the

environment will be multiplied exponentially. If the country does not get it right from
the start, it may have a hard time fixing its mistakes later on. No available solution is
perfect, but the best choices for the environment should be made. The greener
alternatives presented mean less oil required for China. Hence, this solution
presents the least global economical and political risks for other countries. The
government should either mandate the use of green automobile technologies such
as catalytic converters, upgrade its refineries to make low-lead gasoline, or build an
electrical power system to support an “electric car” initiative.

The Chinese government might have a tendency to trade-

Utilitarian
off on items on an area where they are strong: military. In a
sense, this ACA may be viewed as “the greatest good”
solution because it emphasizes global safety and stability
while providing an adequate but inefficient solution to
China’s needs.
It is the right for everyone to be protected by their
Rights & Duties respective government at all times. Anything that may lead
to a firearms trade-off must be a red flag, and global
authorities must intervene and set guidelines.
It is just and fair to come up with adequate guidelines,
Justice & Fairness develops policies, plans, and procedures that will protect
the security of all human beings.
Traditional concept of security emphasizes territorial
Virtue integrity and national sovereignty as primary values to be

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 protected by the government. By pursuing green solutions
from the start that requires less oil, China prolongs peace
with other nations. A smaller oil demand means a lower
chance of military risks described in the case.
The common good is displayed in countries marshalling
Care moves that may affect international balance in politics and
economy.

Evaluation of ACAs

Revise plans to
Continue plans Continue plans
be more
without further with future
environmentally-
provisions provisions
friendly

Decision Criteria Wt Score Score Score

Adherence to
Original
40% 40 36 15
Requirements

Environment
Friendliness 20% 6 13 20

Aversion to Global
Risks 20% 5 14 19

Effectiveness and
Timeliness of
20% 19 16 8
Solution to China

TOTAL 100% 70 79 62

Recommendation

ACA #2. We recommend that the Chinese government push through their intention to invite
international car manufacturers to come-up with an efficient design concept that will maximize

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the usage of their local human and raw material resources. At the same time, they shall
consider options of other energy resources in lieu of petrol by setting future provisions to
implement greener automobile technologies as soon as they hit the mainstream market. This
solution is designed to ultimately preserve their environment the best way the country can
within reasonable means while satisfying the demands of the people to promote further
economic development in China.

Implementation Plan

1. Continue with invitation with foreign companies and collect their design proposals.
2. Meet with environmentalists and other countries to hear their concerns and work out
possible provisions. This step might take time, but our goal here is different parties
should agree on set stipulations and solutions.
3. The government must be strict in choosing the best design where green environment
will not be compromised. They will need a more streamlined approach for analysing
carbon emissions that will collaborate to compliance in preserving the environment.
4. Create new policies and provisions based on agreements on #2 and implement them
when able. Examples may include a “one car per family” policy and requirement of
certain devices that would reduce pollution to be installed on manufactured cars. Future
provisions should be set in place too for technologies that have not been fully
developed yet.
5. Create control mechanisms (e.g. a global panel or committee that shall provide regular
assessments to ensure protection of the people globally. The panel itself could be
trusted to make a sober judgment of the available facts, inasmuch as it would not want
to be held responsible for a war not justified by the evidence. Implementing strict
emission standards is another one).

III. REFERENCE

China. Retrieved from

https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

The New Market Opportunity. Retrieved from

http://wps.prenhall.com/wps/media/objects/2468/2527609/case8.pdf

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