ASIAN CASE RESEARCH JOURNAL, VOL.

7, ISSUE 2, 167172 (2003)

ACRJ
Gentran Machinery, Inc. (B)
This case was prepared
by Dr C. Carl Pegels of
the School of Management,
SUNY at Buffalo as a basis
for class discussion rather
than to illustrate either effective or ineffective handling of
an administrative or business
situation.
This case has been prepared
with information provided
by individuals in the organization on which this case
is based. However, all
names, places, and locations
in this case are fictitious to
ensure the anonymity of the
organization.
Please address all correspondence to: Dr C. Carl Pegels,
School
of
Management,
SUNY at Buffalo, Buffalo,
NY 14260-4000, USA. Email: cpegels@acsu.buffalo.edu.

INTRODUCTION
William Stevenson had just completed a ten-day visit to GM
China, a joint venture in China by GM Pacific and Hangzhou
Heavy Machinery located in Hangzhou, China.
GM Pacific was headquartered in Hong Kong and was
the Pacific Rim subsidiary of Gentran Machinery, Inc., headquartered in Philadelphia, Pennsylvania, USA.
Stevenson had completed a report outlining the organizational and operating problems of the GM China joint
venture that he had observed (See Gentran Machinery, inc.
(A).). The report shown below is Stevensons report outlining
his recommendations to Gentran Machinery management.
TO:

Mr. James Thompson, President, GM Pacific,

Hong Kong
FROM:
William Stevenson, Executive Assistant, JV
Operations
DATE:
September 20, 1998
SUBJECT: Recommendations Joint Venture GM China
The report consists of two main areas: general recommendations and overall summary. The details follow below.
I. General Recommendations
A. General managers position, power, and
authority in the JV
1. A meeting between the General Manager and the Board of
Directors should be convened in order to discuss and

2003 by World Scientific Publishing Co.

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specify the position, power, and authority of the GM

China General Manager.
2. It is of vital importance to the JV that the general manager
be given the clear mandate to make all decisions relating
to the tactical operation of the JV.
3. The members of the Board of Directors should assume
roles similar to those of a Western Board of Directors and
should only involve themselves in the business at that
level.
4. All managers of the JV, both American and Chinese,
should be made subservient to the chain of command system, which will result from this process.
B. Organizational design
1. Review organizational structure and the inherent capabilities of that organization.
2. Restructure the design and density of the organization
based on: (a) the needs of the business, and (b) the availability of required managerial talent.
3. Educate in-depth the JV management group on competitive strategy, business plan, and short and long-term
direction of the business.
C. Responsibility system
1. Clean-up and finalize the organization.
2. Clarify organizational design.
3. Write a very specific job description outlining responsibilities and authority.
4. Educate people on this system
5. Chinese top managers must champion and support this
progress.
D. Reward and appraisal system
1. Once the new organization and responsibility system are
in place, a new reward system must be implemented.

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2. The reward system has to be coordinated with the implementation of the responsibility system.
3. An education system and process must accompany the
implementation of the reward system.
4. A formalized, annualized, managerial appraisal system
must be implemented and utilized by the entire management group.

E. Incompetent managers and workforce

1. An organized evaluation and review of each managers
performance and qualifications relative to the needs of
business should be carried out.
2. The Main Factory should be asked to take back those current JV people who do not fit into the JVs organizational
plans.

F. American managers
GM Pacific should suggest the following to enhance Jack
Bartletts positions:
1. Create a written business plan delineating the changes
necessary to make the JV successful.
2. Provide much stronger physical leadership of the JV, utilizing the mandate provided by the Board of Directors.
Two options are available to solve the situation:
a. Direct Jim Olenuk to accept his position in the organization and explain to him why it is important for him
to work with and support Wang Peng. (I believe that
Jim Olenuk should take the initiative and deal positively with Wang Peng.)
b. Move Jim Olenuk to a position reporting directly to the
General Manager with a responsibility for consulting
with the manufacturing organization.

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3. Two options are available for dealing with the Hamel

situation:
a. Counsel Ray Hamel and attempt to improve his performance.
b. Replace Ray Hamel.

G. Chinese managers
1. An education program to provide English language training should be implemented.
2. Additional competent translators should either be recruited or trained.
3. A program outlining the business plan including the necessary changes should be provided to the entire Chinese
management group.
4. More Chinese managers should be allowed to visit Western manufacturing facilities and other JVs in China.

H. Interaction with American managers

1. Help create an environment of trust by providing understandable education on the mission, objectives, and plan
for the JV.
2. Create scheduled meetings designed to facilitate the transference of key information within the management group.
3. Through counseling, train and make Chinese managers
aware of communication problems with American managers. Develop a plan to overcome these obstacles.

II. Summary
The American and Chinese managers shared several key
concerns:
1. Communication /language/culture barriers.
2. The need for strong leadership and a specific business
plan.

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3. The need for a Western style responsibility system.

4. The need for a more appropriate reward system.
It is my general perception, at least superficially, that
both the American and Chinese management share most of
the same goals and aspirations for the JV.
When one factors the reality of expectation into the
Chinese equation, certain conclusions become evident:
1. The Chinese business culture has had over forty years to
create the JV managers thinking.
2. The Chinese middle managers have virtually no managerial experience, although they are, for the most part, technically competent from a Chinese perspective.
3. The American managers have no experience dealing with
the entire Chinese business/cultural experience.
4. The JV is on a relatively even pace with other Chinese
JVs.
5. The Gentran Machinery JV is only six months old.
Upon analyzing these conclusions, certain facts become important in viewing the relative success of the JV:
1. It is difficult, at this stage of its development, to measure
the progress of GM China by standard Western criteria.
2. We understand the necessary managerial development to
move a traditional Chinese business to a Western type
system.
3. Culture change is not a short-term process and it really is
too soon to make in-depth evaluations of success.
The GM China JV in my view has terrific potential. I
do believe that significant U.S. support is necessary to speed
up the transition to a more modern and competitive organization. Education is the key ingredient in this change. It is
my view that ongoing education in the areas of business
plan, language, and management will be the foundation
from which the JV will grow and prosper.

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Exhibit 1. Organization Chart Gentran Machinery China Joint Venture

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Chairman of the Board

Dong Hong

Board of Directors
Zhu Bin
Dong Hong
James Thompson
Jack Bartlett

President
James Thompson

General Manager
Jack Bartlett

Asst. Gen. Mgr.

Operations &
Engineering

Asst. Gen. Mgr.

Sales, Marketing
Accounting and Personnel

Wang Peng

Qian Hua

Mgr. Of Mfg.
Operations
Jim Olenuk

Manufacturing
Manager
Zhang Yan

Mgr. Of Eng.

Mgr. Of Mfg.
Engineering
Zong Bin

Jin Deli

Controller

Controller

Chen Ping

Richard Hamel

Marketing
Manager
Deng Li

Personnel
Manager
Li Ping

Sales
Manager
Liu Hong