HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM: ANALYSIS

Abstract
Liu Peijin is the president of Almond China, a subsidiary of the German company
Almond Chemical. Almond China's joint venture with Chongqing No. 2 Chemical
Company, which is currently failing to thrive, involves a clash of views regarding
business ethics. The Chongqing executives are chafing under European standards that
preclude gifts and commissions-incentives routinely employed by Almond's competitors;
and a huge sale for the joint venture may be at stake. Liu is thinking of Almond's
reputation and its future business dealings in China and he needs to decide what would
be the best for the company.
This Harvard University case study explores the many issues that may arise while doing
business across borders and is a prime example of issues that arise when conducting
international business.

Problems, solutions and its risks

Many issues arise when the business is been conducted abroad, different countries are
targeted and there are many differences in the culture which cause many problems for
the foreign countries. Similarly, problems arose with the joint venture between Almond
Chemical, a German based company and Chongqing, local company in China. The
German based company was trying to expand its reach in China and wanted to gain a
perfect position in the market

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

It is possible to identify four (4) kind of problems in this case that will be solve in this
writing.
The first one and the major problem was that the culture was proving to be an obstacle
in the joint venture between the German based company and China. The cultural
differences were causing issues for the joint venture in terms of generating sales and
profits hence, declining in their performance.
In Chinese culture, the business decisions were made quite smoothly and effectively.
The business decisions were made on behalf of the network connections or relations. It
was a trend in the Chinese market that the company having good connections with a
vendor than another company, the company good connections with a vendor was
supposed to win the deal. This was the normal culture of Chinese business. There was
a small amount of bribe involvement necessary for doing business smoothly.
It was a normal way of doing business in China, to play golf together, presenting gifts to
the clients and giving the purchase manager of the other company some percentage of
the business deal. The Germans realized that this was totally against their entire culture
and their values. The German company was destined to do business in a formal and in
a straight path manner. All the decisions were, according to the German standards and
policies. Considering the Chinese culture of doing business, it was totally against the
corporate culture of Almond Chemical. Hence, it was a vital problem that whether the
Chinese culture of doing business was perceived or staying with the true German
culture of doing business.

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

The solution for this issue may be to try to apply Smith and Bergs model. Twice a year,
both parts, Chinese and Germans representatives of the company, should make a
meeting and describe situations in which they learned something of value and a
situation that inhibits learning for them. Then, they would have to discover unique
cultural contributions and making a list of them. Finally write down the rules they found
more important to work together.
This solution could be an excellent one if they find valuable things and start to work in
order to them, but could also be a huge risk if they discover that the differences are
bigger that the things that unit their cultures and refuse to work on them. This could
cause that the joint venture to separate from Almond.

Another problem in this case was about communication and standards. The author
said that Chen had a tendency to develop very strong opinions but keep them to himself
until the board met.
If we base our analysis on Lewin theory, we could found that Chen is acting both ways
as an aggressor and a negator, speaking inappropriately and being too critical about Liu
rules.
Germans were quite formal and disciplined even in communication issues. They had
standards for everything and made them compulsory in their business environment. In
case of Chongqing, the Germans had built the production facilities according to their
standard and culture. The production facility created in Chongqing included all the
safety equipment such as helmets, shoes, protective clothing which was directly
3

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

imported from Europe. These were safety measures, which German company took for
the safety of workers working in the production facility in Chongqing.
According to the Germans, the safety tools and equipment are very necessary for the
workers in production facilities as anything can happen in the production facility and to
avoid any incidents and injuries Germans took care of the safety measure necessary in
production plants.
However, according to the Chinese, these safety measures were totally wasteful and
frivolous. The cost that incurred in the installment of these safety measures and import
of the protective clothing was considered to be wastage of the money by the Chinese.
They took this in negative way regarding the company. Chinese thought that these
safety measures were luxurious expenditures.
The solution for this situation should be to create standardized processes that allows
the company to outperform the competition. Liu has to learn the role of standardized
processes in beating the competition. He was right to fight for higher safety standards.
To resolve this specific conflict, Liu needs to identify other areas of compromise. For
example, if the joint ventures products are for export, the high German standards
should be upheld. Nevertheless, if the products are for domestic sale only, guidelines
that comply with Chinese law may suffice. On the other hand, if SAP is too expensive,
the joint venture can implement cost-effective software as long as it is compatible with
the global Almond system.
His position requires him to serve as a liaison and interpreter for the two sides. He can
help both parties to the joint venture better understand their differences of opinion. As a
4

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

Chinese national, he should clearly explain to Schulman what is behind the Chinese
sides thinking, while making it explicit to the Chinese what underlies headquarters
insistence on German practices.
Both the Chinese and the foreign managers need to be more open-minded about the
other sides perspective. Their problems will not be solved if everyone focuses on what
his side stands to gain. The two sides should figure out together what is best for the
venture as a whole, over the long term. They should communicate openly (without
hidden agenda) but respectfully.
The only risk about this solution is that communication and standardizing take time and
people in the company could lost their motivation while they get the objective.

The third problem is about team working. Based on Lencioni, we can find in Lins team
certain kind of dysfunctions that represent some problems. There is absence of trust
between the team members.
Liu should apply Synergistic model and there are two or more different ways, and
effectiveness depends on the situation, a creative combination is useful. This minimize
the negative impact while using the advantages. This help team members develop
methods/systems of communication (Feedback, medium and time of communication,
Disagreement, Brainstorming), help them to develop shared ground rules for working
together and apart (Meetings, Deadlines, Information)
Therefore, we must also base our solution according to Cummings and Bromileys
definition of trust. They said that a person trusts a group when that person believes that
5

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

the group ''makes a good-faith effort to behave in accordance with any commitments
both explicit or implicit; is honest in whatever negotiations preceded such commitments
and; does not take excessive advantage of another even when the opportunity is
available
There are no risks about this solution. Trust is the most valuable thing that a team can
find. Once they trust each other, they will respect and work positively.

The final problem is about ethic. During a business meeting in the boardroom, the
members of the executive board for the German company discuss many issues that are
arising concerning the progress of negotiations with China. In the Chinese culture, it is
common business protocol to be involved in bribery. It is normal for the people trying to
conduct business to go play golf together, buy the client some sort of gift, or giving the
client some percentage of the profit gained by the business deal. The German company
feels that this goes against their ethical culture.
What this implies, of course, is that ethics in China can cost money. The smart way to
approach this problem is to budget internally for these shortfalls, and count them on the
ledger as a long-term investment in corporate reputation.
Devising an operations strategy that is suitable for and successful in the Chinese
market is difficult. There is no room for compromise on ethics.
Concerning ethics, the risk is that the company may lose some clients because of their
refusal to give kickbacks. However, we also know that ethics can be good for business.

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

Almond should focus on gaining target customers, such as large international firms, that
share its values, and not go after companies that insist on bribes and commissions.
Almond needs to lead the way by setting the standards for safety and ethics. A company
may achieve short-term success if it bows to hidden rules, but in the long term, it will
eventually fail. The business environment in China is very different from what it was 30
years ago, and it will continue to evolve. Over the next years, we can expect to see
more regulation and the development of new criteria for doing business in China. It will
pay to be ahead of that curve.
Both sides are right in these debates. The Chinese should not be faulted for their pursuit
of profits, and the Germans should not be faulted for standing up for their values. Both
profits and values matter. The key is to find a solution that compromises neither.
Liu must be sure that the Chongqing venture does not gain short-term benefits at the
expense of its long-term reputation.
If Liu remembers that he must persuade the Chinese side with emotion and the German
side with reason, his job of mediating a resolution will be far easier.
If a companys commitment to their values or their compliance with regulations is
intermittent or applied selectively, it erodes their ethical standing. The constancy of
ethical behavior reflects the practice of ethics without borders
Conceding to the Chinese ways of doing business could cause legal issues in the local
area where the company is based at. It could also cause a noticeable inconsistency
within the German companys network which could lead to them losing client from within
their home country.
7

HBR CASE STUDY: CULTURE CLASH IN THE BOARDROOM:

ANALYSIS

As stated in the case, the joint venture seems to be causing the company more money
as every day goes by. Maybe the company should be focusing on whether the joint
venture was the right move for both companies before they try to tackle any other
issues.
In conclusion, the leader of this case, therefore need to equip themselves with an
understanding of the flaws in arguments against borderless ethics to effectively deflect
them. In addition, for those leaders who make the choice to follow an approach of ethics
without borders, they need to recognize that the responsibility for living by that approach
will be demanding and will warrant their on-going support and commitment - and that it
will be a rewarding route to follow.