Mohammed Shafiq Hanif

100134260
5HR503 Managing the Global
Workforce (2013/2014)
Michelin in China Case Study
Assignment
Tutor Kevin Watson
Word count 2200
Outline the difficulties identified by the Human Resources
Director of Michelin China concerning the integration of the
Michelin Personnel Management Philosophy in the new company.
What actions could Michelin have considered to address these
difficulties? Ensure that you justify your suggestions

Contents
Introduction and background......................................................................3
Difficulties faced by HRM Michelin China....................................................4
Culture......................................................................................................4
Power distance......................................................................................4
Uncertainty avoidance..........................................................................4
Communication........................................................................................5
The concept of face...............................................................................6
Guanxi...................................................................................................6
Recommendation........................................................................................7
Culture......................................................................................................7
Communication........................................................................................7
Conclusion...................................................................................................8
References...................................................................................................9

Introduction and background

This assignment will focus on Michelins joint venture with a Chinese
company called Shanghai Tyre and Rubber which occurred in 2001, their
management philosophy towards their Chinese staff and to protect their
investment of $200 million. Also to ensure the original companies
distribution channels, and the expansion of the 5% market share Shanghai
Tyre and Rubber held at that time. This merger was done to maximise
Michelins potential profit by expanding into China as there tyre market
was expected to treble within the next three years. (Zhaolin, Z. 2005)
Due to the competitive nature of businesses in China, Michelin needed
local connections and knowledge which would come from the nationals
throughout their employment ladder. This brought about issues with
integration concerning their management philosophy. This philosophy is
based off their five key values of Michelin which are;
1.
2.
3.
4.
5.

Respect
Respect
Respect
Respect
Respect

for
for
for
for
for

customers
people
shareholders
the environment
facts

The aspects of their management philosophy can be summed up by;

1. Individual career management
2. Training and development
3. Management of current and future staffing levels and competency
development
4. Management of labour relations
5. Development of tools to assist in personnel management. (THELINK,
2005)

Michelin being an international organisation already knew to employ

people that were familiar with the western management styles and
practices to limit integration problems with their Chinese national
employees. This was done with Michelin employing expatriate and
managers from other international organisations within China to limit
potential problems due to cultural differences that would affect production
efficiency. This would be a hurdle that the management had to overcome
as 90% of their employees are from the original company, and had the
original companys mindset, interpersonal relationships, cultures and
practices. (Zhaolin, Z. 2005)

Difficulties faced by HRM Michelin China

Culture
As mentioned above 90% of the staff members that Michelin inherited
where Chinese nationals from the previous company. This put a lot of
emphasis on organisational culture and how it would affect the new
management practices. This culture can be classified using Deal and
Kennedy cultural model as being the process culture. (Daniel, R. 1990)
It is important to note that the Chinese nationals recognised these new
management philosophies and there were no difficulty for them in
accepting these, the issues that arose were in the implementation of
these new philosophies through a new soft management approach.
(THELINK, 2005)

Culture plays an important part in any business as it affects the

organisations productivity and performance. It is defined as an accepted
code of attitudes, norms, values and way of thinking within an
organisation (Business Dictionary. 1999).
There were many aspect of the current culture that slowed the
implementation of the new management system, these can be analysed
with some of Hofstadters cultural dimensions (1980). It is important to
note that Geert Hofstede has his critics and his work is not perfect.
The dimensions that will be used are below;
Power distance this is the willingness to expect and accept un-equal
division of power.
Chinese nationals are used to and accept a high power distance which is
reflected with the common top down hard approach for management
structures within China. China scores 80 within Hofstedes power distance
chart which means they expect power to be distributed unequally; this is a
negative aspect as it leads to unequal promotion opportunities such as
age over ability and no accountability within the people holding higher
positions (THELINK, 2005). Further research shows that these structures
create an environment of hostility where everyone plays it safe and
creativity or new ways of doing things are avoided. Also there is no
communication to management due to fear so the management think
everything is ok (Archer, J. 2008. This created a problem for Michelin as they
could not implement their career management system because of this
current high power distance structure, this was due to the career
management division not having a clear place within the organisations

hierarchical structure and therefore was not respected as an authority by

the Chinese staff. Its purpose was misunderstood and was perceived as a
negative aspect. (THELINK, 2005)
Uncertainty avoidance how societies, organisations etc deal with the
unknown.
China has a low score on uncertainty avoidance according to Geert
Hofstede but other sources state the opposite. This can see this with their
high power distance score and the Chinese reliance and acceptance for
rules, regulations and more specifically within the case study with their
misunderstanding of the career development and their methods of
communication which will be addressed further on ( Kim, J. 2004). There are
numerous aspects of Chinas high uncertainty avoidance that clash with
Michelins implementation of their management philosophy, this can also
be seen with the many laws the Chinese government apply such as
parking regulations. For Michelin this means that they would need
management structures that are set in stone and to guide the Chinese
staff through changes, although this can be seen as a negative from
Michelins point of view, they should already have the management tools
to do this as their native country of France has a high uncertainty
avoidance score.

Communication
Communication is a key part in any business in any country,
communication is different in some ways in China. Communication is not
just about oral language but body and facial expressions, different actions
can be perceived in different ways (Hall, E. 1959). Chinese language and
communication is based on confusion era values that date back over
2500, this brings about many barriers to communication. These values
are;

Moral cultivation
Importance of interpersonal relations
Family and group orientation
Ethnographic bonding
Respect for age and hierarchy
Conflict avoidance and harmony
The concept of face (Nadu, T. 2011)

One of Michelins main goals should have been to communicate

effectively with their Chinese staff and used more co-decision making, but
research shows that they neglected the role of Chinese management.
Chinese communication is highly contextualised and non verbal, this is

important as frowning at some can be taken as insulting (Reil, B. 2009).

Being a foreign company the Chinese management should have been on
the frontline as they are their representatives in China and have a better
understanding of their economy and business culture. (THELINK, 2005)
Because of the way business is done in China due to their strong culture,
there is an emphasis on oral, written and body language. Business in
general has strict acceptable guidelines that people need to adhere to be
accepted and for business to move forward. Some of these will be
discussed later on. Research shows that Chinese business people dont
want to do business with people that they dont know so intermediaries
are crucial if Michelin wanted to capitalise on the purchase of Shanghai
Tyre by expanding their market share from 5%, they would also have
needed a greater understanding on the importance of communication.
Without going into too much detail for example business meeting need to
be set up two months in advance with written letters. They also have a set
code to which order people are seated and to their positions according to
hierarchy.
The concept of face
The social concept of face is an important part of communication as it
represents honour, respect and good reputation within Chinese business
culture, this is due to a collectivist culture that puts emphasis on bonding
and interpersonal relations. Within the culture it is critical that you do not
lose face. The concept of face contains four aspects;
1. Jiang-mian-zi: this is when face is increased through others, i.e.
someone complementing you to an associate.
2. Gei-mian-zi: involves the giving of face to others through showing
respect.
3. Liu-mian-zi: this is developed by avoiding mistakes and showing
wisdom in action.
Diu-mian-zi: this is when one's actions or deeds have been exposed to
people. (Essential, K. 2013).
This concept of face is deeply rooted in China, it is empathised because of
history but is deep rooted in business. For example one can lose face via
handling anothers business card improperly or smiling at the wrong time.
Michelin should have emphasised Shanghai Tyres management structure
as they would have known this and had current contacts or even acted as
middle men for future business. This is importance as Chinese businesses
are past and long term orientated, which related to trustworthiness and
how the company is viewed. Because of this Chinese staff goes to great
lengths to avoid conflict, which leads the problems already mentioned and
more. Within the article provided by THELINK 2005 it mentions that an

expatriate manager was direct and instantaneous with his feedback and
because this is not normal behaviour other staff members were offended,
this in turn will have a knock on effect of the staff treating the manager
differently even though the expatriate didnt know his actions caused
offence.
Guanxi
Another social concept that is emphasised in the business environment in
China Guanxi, this is a mutual understanding between two or more
people, in essence it is give and take within certain relationships.
Research shows one rule to Guanxi which is those who dont return the
favour gets kicked out of the Guanxi network. This further emphasises
strong links with the national staff that Michelin inherited as they could
have made business easier for them if they were involved more.

Recommendation

Culture
Ruano-Borbalan (2002) identifies four categories of value systems within
different societies, China being more traditional and France being more
rational.
For Michelin to be more successful at the start of their venture, and to
have taken less time in the implementation of their management
philosophy and corporate values they should have understood that
Chinese values are deep rooted within society and are independent to
western influences and values.
To do this they could have amended their philosophy to better suit the
working environment in China, for example emphasising a collective work
force and training and not trying to force individualism (Price, R. 2008).
The emphasis should have been on national sales, targets or something
that the national workers can focus on to get results, research shows
Shanghai Tyre was successful before they were brought out so the
emphasis should have been on getting more market share with the help
Michelins better technology.
As Chinas high power distance can lead to unequal opportunities based on
assumptions and bias Michelin could have used this acquisition to their
advantage and put competent people within the management structure.
As China have a high power distance score, it would have been beneficial
to Michelin to use currently trusted managers such as Mr Fang Xuan who
has wide spread influence within the organisation and local government
and is seen more as a leader. Michelin could have used this to their
advantage as part of their integration process.
They could have made him the point of contact for national staff for their
career management. Also because of the lack of respect and confusion for
personnel management it should have been placed within the hierarchy of
the business so there is no confusion to as who has priority over staff
(THELINK, 2005).
The workers would have seen one of their own leading the charge and
would have gone along with it as he is in trusted position, they could have
used the national managers better, they could have put them on the front
line as they are already used to doing business in china.

Michelin could have also put in a monochromic time system that was
distinguished by Hall and Hall (1990) to help with the uncertainty
avoidance within Chinese business culture. This time system uses the high
power distance to its advantage by distributing detailed information,
making schedules and linear tasks and using strict deadlines.

Communication
As states previously the national managers where neglected and in one
case there was a misunderstanding, Michelin should train the new
managers to understand how communication works and to affect positive
change without offending anyone. Another issued was with the one to one
career management interviews, to solve this problem they could have had
the workers write down how they developed and review this in the
meeting making it less uncomfortable. They could have trained their
managers better in cross cultural management or hired a professional like
Nancy J Adler who has worked with private companies with cultural
integration matters in China and France before.

Conclusion
This report has summarised the problems faced by Michelin when trying to
implement western management philosophies onto a Chinese national
work force.
Also it has identified some strategic decisions that Michelin made such as
neglecting the national managers and the negative aspects of that.
Recommendations have been made concerning a better integration
process for Michelin. In summery the problem that Michelin faced where
due to a strong Chinese culture which has an emphasis on respect for
authority, social harmony and conflict avoidance among other things.
Michelin also had realised that it would be too difficult to change the
deeply engrained cultural values as at the end of the case study it says
the process was about the Michelin or China, it was about establishing the
Michelin china way.

References
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Available: http://forty.co/is-your-companys-power-structure-killing-yourdesigns. Last accessed 19th March 2014.
Daniel, R (1990). Corporate culture and organizational effectiveness.
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Wiley & Sons. 267
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http://www.businessdictionary.com/definition/organizational-culture.html.
Last accessed 19th March 2014.
Essential, K. (2013). China - Language, Culture, Customs and Etiquette .
Available: http://www.kwintessential.co.uk/resources/globaletiquette/china-country-profile.html. Last accessed 8th April 2014
Hall, E (1959). T h e S i l e n t L a n g u a g e. New York: D o u b l e d a y &
C o m p a n y. 55
Hofstede, G. (1980). National Cultural Dimentions . Available: http://geerthofstede.com/dimensions.html. Last accessed 19 March 2014.
Nandu, T. (2011). A Paradigm that can be Emulated by Growing Economies
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Kim, J. (2012). Power Distance and Uncertainty Avoidance in China.
Available: http://jasonkim29.wordpress.com/2012/10/09/power-distanceand-uncertainty-avoidance-in-china-2/. Last accessed 1st April 2014
Michelin Corporate . (2010). stratagy . Available:
http://www.michelin.com/corporate/group/performance-responsibility?
l=en. Last accessed 11/03/2014.
Reil, B. (2009). The Cultural Context In China. Available:
http://www.international-mobility.com/uk/interculturel/china.php. Last
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THELINK. (2005). Michelin China. Available:
http://www.ceibs.edu/link/latest/images/20051012/1736.pdf. Last accessed
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Zhaolin, Z. (2005). When Tendancy Is Clear, Changes Must Be Made.
Available: http://www.ceibs.edu/link/latest/images/20051012/1739.pdf.
Last accessed 11/03/2014.

Price, R (2008). Cross Cultural Managment . London: Pearsons Eduction

Limited . 11.