Perspectives of Kodak in China - Case Study Example

The Kodak Venture in China Some insights from the case study There are a number of issues to be gleaned from and learnt from this case study.Firstlyit provides an insight into the approach taken by multinationals to tap new markets aswell as the various cross cultural issues involved in the setting up of a new company in an international market.Next the aim is to understand the various issues involved in the setting up of a new company in an international market and how the political environment in the host country may affect the operations of an MNC.The case study analysis I have undertaken here understands the strategies adopted by Kodak to expand its operations along with the complexity of a growing market like China.The aim is to understand the HRM issues involved in the growth of a US imaging major company in China and the relevant Human Resource Management issues involved. (Heracleous, L. 2001) China has often been described as the final frontier of Globalization. (Heracleous, L. 2001) At the time of Kodak Chinese venture George Fisher the Chairman of Kodak stated, "to be the leader in the world, you have to be the leader in China."( (Heracleous, L. 2001) .China has indeed got all the ingredients to make an IJV(international joint venture ) a success based upon its vast population, large consumer base and less firm grasp of the brand MNC's power and few branded commodities - a marketer's dream come true.Many writers have described China as an enigma ..With many organizations having already tried and failed". (Heracleous, L. 2001) This is due to a lack of knowledge of the local environment and guanxi (relationships and connections). (see appendix below) The Kodak venture in China was different story as the international company owned by Eastman Kodak struggled to permeate into the Far Eastern Human Resource Management barriers.It is reported that currently Kodak's Chinese revenues are currently more than $300 and it has a 40 percent market share along with 5,500 outlets. (Alon 2001).Where as Kodak benefitted immensely from its focus on the franchises for rapid distribution and focused on brand equity and closer trust and consumer understanding, a strategy of long term investment and less short term costs and a strategy of establishing close relationships with multiple levels of government . (see appendix below) (Alon 2001). From an HRM perspective however Kodak had the following potential challenges in the HRM area in front of it. It is however worth identifying the conceptual framework with in which I will be commenting on the Kodak case study. (Alon 2001).This framework implies the whole organization and planning of the research and identification of the purpose and the methods applied and outcomes derived as result of the organizational framework. This chart shows the framework which served a guideline for the research procedure. In commenting on the Chinese HRM challenges facing Kodak as a Western Company the table below illustrates my approach in explaining the success of Kodak in localizing management strategies in China. (Alon 2001). What is really important is the way Kodak was able to recognize the importance of developing a corporate management culture to effectively work in the Chinese market cannot be overemphasized. With economic growth exceeding 10%, Kodak fast realized that China's enormous domestic market offers huge upside gains for those firms who successfully implement localization techniques to make their ventures more successful. In addition to settling up the methods, procedures, and environment in which to train them, Kodak also has had to devise the means via which to retain them as well, as the Heidrick & Struggles (2006) report cites that the management turnover in China ranges between 15 to 20% according to their survey of 148 executives. This situation has put those managers with the skills and expertise in this area in the position of being able to switch to jobs offering the highest compensation and fringe benefits. This leads the situation, where job switching, occurs on average every fifteen months among the most qualified, which is further compounded by executive head hunters (Heidrick & Struggles, 2006).It was then indeed a challenge for Kodak in finding and retaining top talent, in addition to having in-house procedures, training, expertise, and methodologies in place for a company to develop their own managers represents one of the biggest problems facing companies operating in China. Foreign investment in the country is skyrocketing, thus further exacerbating the drain on the limited supply of qualified managers (Gross and Mancini, 1996). Kodaks recruitment measures included involvement of Chinese managers that have to be indoctrinated in the company's management culture in addition to its procedures, systems, and methodologies. The foregoing represents a problem in that the Chinese educational system is playing catch up in terms of qualified professors in this field (Gross, 1998). The many changes as represented by the country's reforms, and move into a market driven economy created a fifteen year lapse in educational refinement that still carries over until today (Gross, 1998). In addition to the foregoing, the present educational system places more emphasis on the technical area than business management (Gross, 1998). No doubt something Kodak has had to realize in this joint venture is the understanding of the local culture and the historical context.. In China culture represents one of the largest considerations in that this area is the medium that the individuals from two differing systems must mesh into a working solution that benefits both parties. This represents a revealing look into organizational structural components that should be addressed by foreign companies in their approach to the designing of internal procedures to yield effectiveness in their efforts to localize management. (see appendix below) This has significantly involved the need for localization of Management strategy followed by Kodak. The localization of management is a marketing strategy to examine with understanding the implications and considerations for foreign companies which requires a number of critical considerations to operate and establish in China. The roots of the issue are inherent in the understanding of China, as this is core of the management operation. This process requires that the companies like Kodak involved in an understanding the dynamics of the operation should consider understanding the culture of the country as other factors are the rooted within the local context of the country. (see appendix below) The subject of the localization of management in China is most comprehensively covered by Cooke (2005) and provides important contextual background information. The historical development of the country has bearing on the manner in which its inhabitants think. The country was for a long period, dating back to 1949, state controlled, with the "state sector-dominant personnel administrative system of China (Cooke, 2005, p. 19). Over the last 25 years the country has undergone massive political as well as economic reforms that require understanding in what transpired as a foundation for this examination.In the context of Kodak the relevance of the preceding is that the managers of today are the children of those citizens that worked under the state owned, and controlled system, thus their education includes a mixture of the older system, along with newer thinking that has been taught in the country's universities. As pointed out by Cooke (2006, p. 19-20), the state controlled system fixed personnel policy along with how organizations operated via a system of regional, and local labour departments as set forth by the Ministry of Labour. The preceding oversaw blue collar workers, and the Ministry of Personnel governed white collar as well as managerial staff (Cooke, 2005, pp. 19-20). Under the lifetime employment job security scheme, wages were low, but included " a broad range of workplace welfare provisions, including housing, pensions, health care, children's schooling, transportation to and from work, and employment for spouses and school-leaving children, as part of the responsibility of the 'nanny' employer" (Cooke, 2005, p. 20). The importance of the foregoing is that by 1980 75% of all urban Chinese employees were employed in state-owned enterprises (Cooke, 2005, p. 29). The state controlled system also created dependencies on the part of Chinese workers in that performance standards were low, and the enterprises were filled with bureaucracy layers that padded management staffing, adding to costs. In the late 1970's, China began to move toward an open-door policy in a direction aimed at the attraction of foreign investment in order to improve the economy (Cooke, 2005, p. 20). As a result, the state had to undergo some dramatic " changes in its personnel policy, and practices as part of the Economic Reforms and Enterprise Reforms that begun in the early 1980s" (Cooke, 2005, p. 20). Now coming to the cultural factors involved here it is worth noting that when discussing the entry of Kodak into China ,Kodak had already established its representative office in China in 1927 and till the late ninties Kodak was imported into China. (Alon 2001)Therefore through the Chinese Government support in 1998, with the support of the Chinese government, it was able to acquire the domestic film companies to gain a greater share of the Chinese market. Kodak had to be on alert for its HRM policies throughout due to competition from Fuji in the Chinese market. (see appendix below) (Alon 2001). In the case of Kodak it can be seen that western culture differs in fundamental approaches from the Chinese on a broad number of fundamental, psychological, cultural, religious and other areas. The foregoing was an important consideration for Kodak in that the differences in logic, perceptions, values and social processes need to be understood by managers in order to build successful working relationships. (Alon 2001). It is important to understand that the rich history and culture of the Chinese is an ingrained part of the people, their lives, thinking, views, and outlooks (Louie, 1986, pp. 45-51). These cannot be debated, reasoned away or tampered with; instead they must be embraced, understood, valued and seen as a means to an end. Hodge and Louie (1998, p. 49) also refer to the Western binary logic and state that in understanding the workings of the Chinese mind, one must be open to the rich and intricate patterns of differences between the two cultures, Western and Chinese. (see appendix below) There is fundamental difference in approach between Western Culture and the China's localized management based on the psychological, cultural, religious and other aspects of life. These factors affect the functioning and the operation of the people serving the management on the localized level. Theses differences in perception, values and thinking are an inherent part of the social process and have to be integrated and understood by the foreign managers in order to build a successful partnership with China.The path to a market driven system has also resulted in China entering a cultural clash in terms of the country's exposure to Western business practices, investment, management techniques, processes, influences, and exposures. The cultural, economic, and political reforms as represented by the process of moving the country en mass in the direction of a market driven economy resulted in 'Cultural Fever' (Zhang, 1997, p. 35). The preceding gripped professors, government officials, soldiers, workers, and basically all segments of the Chinese society (Zhang, 1997, p. 35). This has been brought forth to illustrate that the interest in Western cultural, philosophical, and managerial principles as well as techniques is there. The move toward a market driven economy has brought the urban, and university segments into close proximity with the Western world on many levels. This latent interest is a key facet upon which localization factors can be built. The interest represents a two way street. Western management has a vested interest in making the process work as a result of their investment positions, competition in the market and the desire to build market share in China blossoming economy. China has its reasons routed in the control of its populace via which the government maintains power. Through improving the living conditions, opportunities and economic status of the country, the Communist Party consolidates its leadership position in the eyes of the people as orchestrating the process. . In China culture represents one of the largest considerations in that this area is the medium that the individuals from two differing systems must mesh into a working solution that benefits both parties. In understanding the meaning of culture, Louie (1986, p. 42) tells us that: "Every culture ... has three fundamental aspects: the technological, the sociological, and the ideological. ... The technological is concerned with tools, materials, techniques and machines. The sociological aspect involves the relationships into which men enter. The ideological aspect comprises beliefs, rituals, art, ethics, religious practices, and myths." . As previously mentioned, Kodak as a foreign firm in n China, has had .to find ways to fit within that environment, while maintaining the overall management, operational, procedural, and competitive considerations in its operations. Thus, culture represents the key ingredient in that process.This assessment is shared by Cooke (2005, p. 1) in that he advises that "Business concepts come and go", however culture is a concept that is present throughout. Cooke (2005, p. 2) also states that there is a link between culture and human values, which has been discussed by Guth and Tagiuri (1965, pp. 125), Haire et al (1966), Benus and Nanus (1985), along with Deal and Kennedy (1988). Hofstede (1980, p. 14) advises that individuals within national as well as business cultures carry with them the mental conditionings of their experiences, beliefs and values as provided by these external forces, in varying degrees. He adds that these are first formulated in one's family, which is similarly influenced by their cultural surroundings (Hofstede, 1980, p. 14). Cultural inputs are provided by one's community, schools, the income status of one's family, meaning their exposures to travel, or the lack of travel as well as their spheres of work, acquaintances and friends, then that individual's own cultural interactions in organizations, to which they bring their past mental conditionings (Hofstede, 1980, p. 14). Per Czinkota (1994, p. 264), culture is "learned, shared and transmitted from one generation to the next ", which is what Hofstede (1980, p. 14), Benus and Nanus (1985), along with Deal and Kennedy (1988) stated in differing ways. Thus, in order to localize management,Kodak seems to have realized that culture represents a foundational building block. In order to accomplish the foregoing, companies must look at their own organization culture and its behavioural norms in order to proceed. (see appendix below) Conclusion It is worth seeing that Kodak's over all success in taking into account the working practice idiosyncrasies in order to successfully operate in the country. Thus Kodak has done what was expected of any successful, a foreign company operating in China by being cognizant that its corporate culture is adapted to fit the circumstances and nuances of the individuals and market it is located in. Appendix Performance Appraisal Practices in Western and Chinese Companies Chinese Western Sources of Appraisal Self-evaluation and democratic sounding of opinions by peers and subordinates in addition to superior Usually immediate manager Evaluation criteria Broad, rather unspecified evaluation criteria related to task but also to 'moral' and ideological behaviour as well as personal characteristics Performance criteria related to specific task objectives Appraisal discussion No appraisal discussion, limited inter-personal feedback Appraisal discussion common, direct feedback on performance Objective setting Top-down (if included) Based on superior-subordinate interaction (Lindholm et al, 1999, p. 102) Chinese and Western Compensation Systems Chinese Western Salary differences Small Large Use of performance-based compensation Fairly common Common Individual performance component (if existing) Uncommon and/or insignificant Common and significant with incentives as a function of the performance of the individual (Lindholm et al, 1999, p. 106) Contexts of Culture in Organizations Sociological context Psychological context Shared ideals; symbolic devices Cultural system of relevancies Through the functions of culture, social systems achieve: Interpretive scheme Personal system of relevancies Within a culture: continuity -- transtemporal stability; control -- contemporaneous stability; integration of individual members; identity of social group. meaning is emergent and intersubjective; individuals negotiate meaning. 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