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The Wuhan ERIC Joint Venture

Stanley Yong’s request for a transfer


back to the Indiana, US headquarters of ERIC was one of the first American
the Performance Polymer Division of companies to venture into China. The
ERIC had been approved. Three years high demand for specialty chemicals in
earlier, Stanley, a Hong Kong-born US China was derived from its rapidly
citizen, had been appointed as the expanding industrial capacity. To date,
general manager of the Wuhan ERIC ERIC has invested UD$250 million in
Polymer (WEP) joint-venture (JV) plant four JVs employing about 1450 people
in Wuhan, Hubei Province, China, after in the country. A key HR policy for ERIC
leading the team that negotiated the JV. in China was that the company should
Just one year ago, Stanley was given be regarded as local, and not one that
added responsibilities as the division is run by expatriates. As such, ERIC
general manager of the China Region worked hard to get as many position as
for Performance Polymers Division. possible filled by Chinese persons.
While Stanley enjoyed the challenges Although several key positions in the
he faced to get the Chinese JV up and JVs were still held by foreigners,
running, a return to Indiana was the cultivating a strong management team
best for his family. Stanley went to of native Chinese was a high priority.
China alone – he and his wife decided
that it was in the best interest of his The Wuhan ERIC Polymer Co Ltd JV
two schooling-age kids that the family
stayed in the US. Since his transfer date To expand its production in China,
was still a few months away, Stanley Performance Polymer had joined with
would take time to prepare his unit for Wuhan Plastic Factory to form WEP. A
the eminent change: “I worked too hard leading Chinese state-owned enterprise
to let this waste away,” he thought. He and the biggest hard-plastics producers
thus saw his main task would be to in the Wuhan region, Wuhan Plastics
nominate a successor. The human employed approximately 1,800 people.
resource department sent six resumes Unlike the other state-owned
for consideration and as he was enterprises, the company has achieved
studying the resumes (and jotting notes international recognition for producing
– see summary in Exhibit 1), Stanley high quality products. About 50 percent
wondered which one would soon be of its products were exported to the
occupying the chair in which he neighboring nations and its greatest
presently sat. achievement to date (according to the
management) was receiving the ISO
ERIC Inc 9002 certification.
ERIC, based in Ohio, developed and
produced specialty chemicals. The Through the JV, ERIC hopes to exploit
company’s four divisions, Performance the fast-growing market for high-quality
Polymer, Additive, Textile Dyers and resins and hardeners in the Asia Pacific
Pigments, had sales in 80 countries, region and to establish the first
manufacturing plants in 21, research multination polymer plant in China.
and development facilities in six and a Wuhan Plastics objectives were, in the
total of revenue of US$5.1 billion in order of importance, to access modern
2001. The Performance Polymer manufacturing knowledge, to access
Division’s US1.6 billion in revenue Western management skills and to get
comprised 33 percent of the company’s foreign exchange. On paper, the
total. Wuhan-ERIC JV was a 50-50 JV. In terms
of resources investments however, ERIC
contribution amounted to about 65 In both phases, Stanley interacted
percent and Wuhan 35 percent. weekly with the JV partner and
Critically, the WEP plant provided no government officials. Through a close
cost advantage. Higher labor costs in relationship with the Wuhan Plastics
the US were offset by higher directors and infrastructure manager,
productivity. If anything, the WEP plant Stanley sought to solidify their
costs more to set-up because it used commitment to provide utilities for the
the more advanced computer system. plant. Stanley’s most frequent
interactions were with the Wuhan
Like the other division in ERIC, municipality Vice mayors for foreign
Performance Polymers Division focused trade and Economic relations,
on delivering high quality products managers from the Environmental
rapidly and reliably. Contrasted with the Agency, state bank managers, custom
bulk chemicals, the division officers and Planning Bureau directors.
manufactured relatively small batches, In a week, he attended as least one
often tailored to a customer’s needs social function, including dinner with
and charges a premium. Nonetheless, partners and government officials and
like the other divisions in ERIC, opening ceremonies for ERIC’s JV as
Performance Polymers Division was well as those of other multinationals.
committed to cost leadership through Stanley also attended both monthly
improvements that lowered costs and meetings with managers of other
improved quality. The WEP plant was foreign JVs to exchange information and
held to the same world-class standard business promotion functions in which
as its other sisters in the Performance the government used WEP’s success in
Polymers Division. Partly due of China to woo other investors. WEP’s
government requirements, WEP story was the most “popular” success
sourced much of its raw material story because of its state-of-the-art
locally. manufacturing technology. Last but not
least, Stanley frequently hosted dinners
Stanley’s Responsibilities and outings where he entertained top
Chinese leaders (at least once a
Stanley’s activities at the plant evolved month) and visiting ERIC executives
through two phases. During the first (every three to four months).
phase, he monitored plant construction,
obtained environmental and import Stanley – the Divisional Manager of
permits, sought taxation relief, tacked China Region
financial concerns such as foreign Stanley’s appointment as the division
exchange procedures and payments to general manager of the China Region
suppliers, selected and trained key staff for Performance Polymers Division
and coordinated activities between added more responsibilities and duties
Chinese and American engineers. In the to his already full plate. His “new”
post start-up phase, Stanley responsibilities included:
concentrated on developing and • motivating the marketing and
building his management team. His sales staff, setting sales targets,
primary objective was to build a strong visiting customers with
corporate culture that integrated salesperson and ensuring
Chinese and American values in the responsive customer services;
pursuit of excellence. He also oversaw • establishing divisional production
the plant operations and responded to objective and apportioning
safety issues.
responsibilities to the plants in Chinese managers qualified to operate
China and Taiwan; in Western enterprises and fierce
• monitoring financial indicators competition for the services of the
(profitability, cash flow and asset available few. Although some of WEP
management) and managers had increased their skills,
• overseeing employment planning Stanley believed that the local talents
for the division, encouraging have not yet adopted enough of the
management development and Western management orientation
resolving personnel problems. essential for effective corporate
management.
In addition, his ambassadorial duties On the issue of increasing competition,
greatly increased, as did his Stanley believed that the new manager
responsibilities for government needed to look into cost containment,
relations and negotiations for new JVs. “de-bottlenecking” processes, and more
Mindful of the Chinese practice of aggressive marketing and sales
"renqin," meaning the exchange of programmes to increase sales. Yet
favors between people or "rubbing each another important issue was fine-tuning
other's back," he tried to respond to the organization and continuing staff
requests for assistance. Initially, even development.
with these new responsibilities, Stanley
devoted more time to WEP. Once he As expected, most of the WEP
was satisfied that his management employees worried about what would
team was ready to take on more happen after Stanley left. Alison Deng,
responsibilities, he shifted his focus on the deputy general manager expressed
his divisional duties. As such, Stanley the beliefs of many:
spent a lot of time travelling. Aside from
the one to two weeks per month spent We are especially worried to see a
at WEP, he was travelling within China, non-Chinese expatriate being sent
Hong Kong and Taiwan (meeting from Indiana to be in charge of this
customers and managers in Shanghai, operation. Verbal communication is
Guangzhou, Beijing and Hong Kong) essential here. A manager who can
and returned to Indiana three times a only speak English would be able to
year to meet HQs executives. In communicate effectively with the
addition, he travelled frequently to Chinese subordinates. We have to
Xiantan, Hunan Province to shepherd wait and see but I am not optimistic
negotiations for another JV. about the new general manager.

Nominating a Successor While suffering from his daily stress


headache, Stanley leaned back in his
This was not going to be easy. And the chair. Upon reviewing the resumes, he
future responsibilities of whoever would wondered who would be the best
replace Stanley would be even greater. candidate for the job. "This is my third
As China was regarded as a critical baby - I need good strong hands," he
market for ERIC, the division manager told himself. As he unscrewed the cap
and divisional manager would need to from a bottle of aspirins, he wondered if
become even more involved in JV he should leave a new bottle on his
negotiations and plant constructions. desk as a welcoming gift for his
Moreover, with the rapid expansion successor.
plan, the new boss would have to
address a few strategic concerns. Two
vital concerns were ongoing shortage of