Why Choose France for Producing Green Cars - Assignment Example

International Strategy Why choose France? France was among the first countries to start up ties with China. Though most of the European and American companies are focusing on hybrid and electric car technology, France has more aggressive stand on this aspect in the present scenario. Last year French government launched a “battle of the electric car” plan by which they will invest 1.5 billion Euros on infrastructure for the 2 million electric and hybrid cards they want on road by 2020 (Boehm 2009). They plan to make France a world leader in energy and car technology. They want to produce the best cars which are energy efficient and also have very low Carbon dioxide emission. This project covers all aspects of producing green cars. Starting with research, production of green cars and production of batteries the government wants to produce a network of battery charging stations throughout France. The government plans to provide 900 million Euros of the total investment announced in the form of state loans. By 2030 the green fuel car sector in France is projected to hold 27% of the market share and will be worth 15 billion Euros as per the ecology ministry projections (Boehm 2009). Thus, looking at these ambitious plans of the French government, France is the best country to collaborate with for hybrid car technology. Cultural and Institutional difference between China and France China and France are completely opposite to each other as far as the cultural and institutional aspects are concerned. This difference is reflected in their management style also. Starting with the demographics, the population of China is more than 1.3 billion while that of France is around 63 million. Because of high population the Chinese government has made laws to restrict the growth and also generate a population which is hardworking and devoted. Thus, all people in China voluntarily seek for employment as unemployment is seen as a social stigma. In contrast to this, French people enjoy the social security provided by their government. Hence, they are more secure as far as unemployment benefits are concerned. This reflects in their way of working as they are not always driven by the need to keep their jobs. The basic difference between the two countries lies in their government set up. China is a socialist republic while France is a capitalist and democratic country. If we look at their religious and social setup, we can see that Chinese people are more religion oriented and also believe in taking care of old. Because of the vastness of population, there are many religions in China. The old generation of China is the responsibility of the younger and stronger generation who take the responsibility of taking care of them. This is quite a contrast to French people. They are less religion oriented and believe in doing things as they want. The old people are not considered a responsibility of the younger lot and are usually confined to old age homes after a particular age when they cannot take care of themselves. The French children also have more independence as compared to the Chinese children who have to obey their parents all the time. Thus, the Chinese social setup is more hierarchical and built around values like hard work and respect of elders and religion while the French setup is more of free ideas, more balanced personal and work life and not concentrated around religion and customs. Education is an aspect where Chinese are behind French. The Chinese government has now started laying emphasis on education and implementing schemes to increase the literacy rate. France has a good education system with compulsory education till the age of 15. Hence, there is 100% literacy here. In fact French people enjoy studying complicated subjects with the aim of landing into lucrative job (planetema.net). The culture also reflects in the Chinese management style. As the culture is more relationship oriented most of the managers tend to concentrate around building relationships. With this aim in mind, the subordinates prefer to meet their superiors at non official places for example visiting their home. This provides a warm environment where the official pressure of achieving targets is not there. Hence, it becomes easier to influence the boss. With the presence of families around, there is more personal touch and the indifference of the official environment is not there. Another trend the managers usually follow is working for longer hours. The work does not usually end in the office. In the evenings the officials might be seen visiting homes of people related to their work to seek favors. These could be government officials or their own office colleagues. They also spend time in entertaining officials who can be useful for their business. Thus, the business also extends into leisure where they might plan business trips with people related with the official works. The organization structure in most organizations is very bureaucratic with complete emphasis on the code of conduct. This kind of behavior basically emanates from China’s bureaucratic history. All this is in sharp contrast to the French managerial culture which we will discuss in ensuing sections. Another factor that impacts the way managers work in organizations is the frequency of the need to communicate with government agencies. Because of the strict controls by the government, there is a lot of information exchange that needs to be done with the government agencies. As per a study Boisot and Zing, where they studied a sample of mails received by senior managers in Chinese state enterprises, 30% of the mails were from government agencies in contrast to just 6% received by their American counterparts which also represent the western world as a whole (Ward and Tang 2003). Another contradictory habit in relation to attending the mails is the reluctance of the Chinese managers to reply to them. They prefer communicating to their superiors through personal contact. Thus, they waste around 4 times more time than their American counterparts in direct personal contact with their superior, a takes which could have been completed on mail (Ward and Tang 2003). French which are more like Americans in this aspect do not prefer to waste time in this manner. Another reason why the Chinese do not reply to mails is their reluctance to commit in writing. They feel intimidated and insecure on giving commitment in black and white. This again stems from their cultural background. The Chinese managers are also not very open to delegating work down the line due to lack of trust on subordinates. Senior managers also feel that their subordinates lack the requisite skills to handle work and hence are incompetent to deliver what is expected of them once they are delegated a responsibility. Therefore senior managers make it a point to be part of all meetings and discussions and they do not believe in the minutes of the meeting. In the first place there is no formal system of capturing the minutes and even if this is done, it is not seen to be a very reliable source of what happened in the meeting. They rely more on unscheduled and informal meetings (Ward and Tang 2003). Thus we can see that Chinese culture is more hierarchical and believes in achieving the final business target through social niceties rather than through a structured approach. Though the French differ from the Chinese in most aspects, there are still some common meeting grounds. One striking character of French is there preference for individuality and disliking for conformist behavior. This is in sharp contrast to the Chinese culture. French are more influenced by early Roman and Mediterranean culture and show autocratic behavior, give lot of importance to style and manners, are pessimistic in their views and are creative and traditional. Because of their individualistic character they are not very good team players but do well in individual and creative tasks. They also do not like complying with the rules. They are very demanding towards their subordinates. Because of their pessimistic bend of mind they too are distrustful of others like the Chinese. However, they like to enjoy life and are not very serious kinds. Even though they are traditional people, they have accepted foreigners well. From the business aspect French government is very helpful in providing detailed information about doing business in France through its various offices in Paris (French Chambers de Commerce) and other cities. Unemployment is a major problem in France which is at the rate of 10-11% (Hall and Hall 1997). The French people are very averse to taking risk and especially not very willing to invest in plant and machinery or other capital investment. They would rather invest profits in real estate than on machinery. This is a handicap for them as it will eventually slow their future growth prospects. Besides having a low risk aptitude, they also are distrustful of others, be it French or a foreigner. Thus, any new proposition by an unknown person is scrutinized in great detail before a decision is taken on it (Hall and Hall 1997). The French do not stick to their decisions and have a habit of changing them at the last minute. Thus, the policy of getting written commitments from them works well in doing business. This habit of committing in writing is not inbuilt in the Chinese. Hence, this can affect business ties in the long run. The French like the Chinese expect formal behavior in the office and do not like any gestures of over familiarity or disrespect. They usually have long meetings which do not always end up in decisions. They also do not always stick to the agenda and also discuss issues which may not be part of the agenda items. As discussed earlier, most of the French employees are well educated. Most managerial level staff is not only professionally well trained but also has a good understanding of art and literature. Most multinationals face problems with the French from the team player aspect of work. As they are very individualistic, they tend to hide information from others. At clerical level the staff is not expected to be perfect. They need to be directed by their supervisors and hence result in an autocratic work environment. Managing French staff is difficult, but human relationships and positive motivation works well with them. As French are very suspicious by nature, their business dealings are characterized by delays in deliveries due to inspections etc. Looking at the two cultures and discussing their differences and similarities it is vital that we train our employees to adapt to the differences. Before we go ahead with the collaboration with any French company it is vital that we build our current processes around their institutional and cultural set up and train our present employees accordingly. Some of the cultural norms like hierarchies and social nuances need to be built in our present structure which might be missing. The delegation of work also needs to be based on the mindset of people. For example, French people are more individualistic and creative; hence they will turn out to be good R&D partners. However, since they are very indecisive and are prone to changing decisions at the last moment, the best thing to deal with this situation would be to start all the business dealings in writing. This is where we need to train our Chinese employees to be more meticulous and depend more on written communication with their Chinese counterparts. We also need to ensure that when we integrate with the French they are also taught about the Chinese cultural nuances. Organizational Structure and IP protection strategy Intellectual Property protection is an important factor in today’s competitive business environment as the overall Return on Investment (ROI) of an organization is highly dependent on intellectual property research through R&D. This is because this helps organizations create product differentiation and also customer satisfaction and eventually brand loyalty. Product innovations are a key to today’s marketing strategies and these innovations can only be achieved through R&D on technology, supply chain management, training methodologies or business methodologies. Hence, IP management is an important aspect of any business. The IP management process can be seen as consisting of the following components (Sople 2006). IP development will require employee motivation through rewards and recognition. A good way of ensuring steady flow of viable ideas would be to develop an organization structure with distinct departments for innovation, feasibility and commercial viability study, scrutiny of the ideas and checking of their originality, testing and finally development of the product. With this structure the organizational innovation gets a direction and will always be an important aspect of the company as these departments will work as independent revenue or cost centers. Since ours is an industrial product, we need to have a separate training department to ensure all the staff members are up to date all technical aspects of the product and industry. It is very important for firms to keep a watch over its competitors and see what they are developing. For this the organization needs to develop market intelligence. They also need to keep an eye on what the various research organizations across the globe are developing. There might be certain parallel technologies which might create entry barriers for our current technologies. Hence, we can take necessary steps to counter such competition. This market intelligence will not only help the organization keep track of events that are impacting our business and hence be ready for the competition, but also make sure that our current technologies are not being used by anyone else. In case of such infringement the culprits can be taken to task under the patent laws. To be able to succeed in the market it is important that we protect our IP. But we also need to share our IP to be able to produce viable commercial solutions. This can be done through licensing the IP and setting a royal program. Another option could be selling the IP to the production company for a fee. The company can also share the profits and losses by embarking on joint R&D efforts (Sople 2006). IP protection can be done either through applying for patent rights or through insurance. Patenting your technology requires monetary investments which can be an expensive process. However, for high end manufacturing technologies it is advisable to go for patenting. Now a day, insurance cover is also available for safeguarding the IPs. However, this cover needs to be taken before the IP rights are registered and any infringement has taken place. The insurance helps to cover the cost of litigation arising out of any IPR infringement. We also need to apply appropriate marketing strategies to ward off any parallel technology competition to the product. We also need to protect our IP through a proper policy formation for both internal usage as well as external usage. For internal purposes we need to ensure that all the employees are aware of importance of IP protection and also the consequences of violating the protection policies. There should be clear documentation of such policies and how heir violations can impact an employee’s career. These should be signed by the employee so that he cannot act ignorant on this aspect. The system of capturing new ideas and developing them further should be well documented with dates etc. These processes should be certified by respected authorities like ISO etc. The documentation of data capture procedures as well as experimental results should also come under this certification ambit. There should be a separate training department which can train the employees to interpret and analyze the techno-legal information available in the IP document (Sople 2006). Nondisclosure agreements should be used not only with the employees but also with anyone with whom the IP information has been shared. This could be the R&D partner or the investor. This signing formality should be done before the information sharing happens. This kind of agreement puts responsibility on the signing party to take prior consent of the IP holder before disclosing the information related to the IP to any other third party. If not followed, legal proceedings can be initiated against the offender of the agreement. A well established IP protection department consisting of legal experts relating to this area of information should be set up within the organization. These legal experts can also be used as ombudsmen for referring any internal violations of patent protection. To ensure innovation within an organization it is important to maintain a flat organization structure. This helps easy communication and proactive actions because of low or nil bureaucracy. The employees are more independent in such organizations to take quick decisions. The communication within a flat organization is simple and informal. The employees need to be very responsive to the external environment and adaptive to the rapid changes. They need to be team players and self motivated. Thus the organization structure and culture of organization needs to be very informal and motivating enough to encourage innovation. There could be different IP strategies based on the amount of legal protection that the inventor of the IP is looking for. These could be – basic technology patent, manufacturing process patent, product design patent, appearance patent, new feature patent, establish trade secret patent and trade mark patent (Sople 2006). Besides using patent protection under various heads, companies also resort to various other strategies to outperform their rivals before they copy their ideas. For example Intel kills its own product and comes out with its latest version to outsmart its competitors who have copied the previous versions. This strategy is not an easy one to adopt as it requires a lot of R&D budget and also good resource pool for the same. Some other strategies that companies use to protect patent are 1. Building product under joint branding – This is a strategy involves patenting a new product under the same brand before the expiry of the previous product. For example, Leo Pharma of Denmark had a successful product whose patent was going to expire in 3-4 years time. This product was a drug named Daivonex for treatment of psoriasis. They developed a new drug named Daivober which was required for treatment of acute psoriasis. They patented this drug and got this new patent for 17 years. As a marketing strategy they are now using this identical IP to sell the 2 products in combination. This joint branding gave Daivonex 17 more years of patented use (Sople 2006). 2. Creating barriers in their products so that the customer finds it difficult to switch to a parallel product is a good marketing strategy to conserve IP. For example Novo Nordisk created a unique insulin delivery system and obtained trademark protection. They then created a unique cartridge pen interface and patented it too. So, for refilling the system a cartridge pen needs to be attached to the base delivery device. Since, there is a unique interface of this cartridge pen; competitors cannot produce the refills that can fit the base delivery system. The competitors have to provide a completely different device which involves higher costs (Sople 2006). Thus, the company managed to create a switching barrier for the product. 3. Using patent and trademark as complementary strategy is a successful IP strategy as seen in the case of Aspirin. Aspirin’s patent has already expired, but Bayer has created a strong image around it and got a trademark protection for it too. This way they are still reaping benefits of their initial IP (Sople 2006). We have seen that there are various strategies which companies use for protecting their intellectual property. We can use a combination of these to help protect the battery technology which will be used in the hybrid cars we plan to produce. In fact France ranks 10th in the world ranking for intellectual property protection. Its weighted average score comes to 5.8 on a scale of 1 to 7 with 1 being the weakest (ip-watch.org). Thus, France is one of the safest countries as far as IP protection is concerned. Organizational Structure To ensure innovation within an organization it is important to maintain a flat organization structure. This helps easy communication and proactive actions because of low or nil bureaucracy. The employees are more independent in such organizations to take quick decisions. The communication within a flat organization is simple and informal. The employees need to be very responsive to the external environment and adaptive to the rapid changes. They need to be team players and self motivated. Thus the organization structure and culture of organization needs to be very informal and motivating enough to encourage innovation. It would be good idea to start with a Joint Venture in the ratio of 50:50 to ensure equal sharing of benefits and risks. A separate JV company headquartered in France with members of both the parent company and the R&D Company in its board will help make this an independent venture whose activities will be monitored by both the companies. The departments of this company should be divided into following heads: 1. R&D – This should have the following sub-departments - Product Innovation, Scrutiny and Idea originality check, Feasibility and commercial viability, Testing and Product Development. 2. Legal – This should be focused on IP protection. 3. Administrative and HR 4. Finance and Accounting 5. Marketing, Advertising and Sales 6. Training – Cultural and R&D specific The company will be headed by a CEO, as the head of the management team, who will be answerable to the board of directors. The CEO will be assisted by the CFO and COO in the management of the company. Each department above will have department heads who will be responsible for the functioning of the respective departments. In the beginning, the R&D will consist of individuals from both the companies in equal proportion as knowledge transfer will be required. Hence, there might be ex-patriot population of employees from China to the JV Company in France. Similarly the training department will have a mixture of both parent company and R&D company executives which will help disperse cultural as well as product specific trainings. The M&A and Sales department will require more French locals as they would understand the French market better. The following figure shows the organization structure of the JV firm. The above chart shows the flow of control and information. All department heads report into the CFO & COO who further are answerable to the CEO. The CEO is accountable to the board of the JV. Within the departments the structure is pretty flat with employees at executive and managerial levels. The movement of employees from the parent companies will keep happening but this will ratio of employees among the total will not be more than 25% once the knowledge transfer is complete and systems are setup for the JV to work independently. References Boehm, S 2009, France launches battle of electric cars, viewed on March 24, 2010 http://www.google.com/hostednews/afp/article/ALeqM5hZhuMvZKvJM36Q7zC339ocRVNhGw Hall, ET and Hall, MR 1997, Understanding cultural differences: Germans, French and Americans, 9th Ed., Intercultural Press. Planetema.net 2007, Cultural Differences Between China and France, viewed on March 24, 2010 http://www.planetema.net/~MASCHI/UIBE/cultural_differences_between_china_and_france.pdf ip-watch.org 2009, Survey: US 19th in Global IP Protection, viewed on March 24, 2010 http://www.ip-watch.org/2009/09/13/survey-us-18th-in-global-ip-protection/ Sople, VV 2006, Managing intellectual property: the strategic imperative, PHI Learning Pvt. Ltd. Ward, A and Tang, J 2003, The changing face of Chinese management, Routledge, London. Read More