ATG (A): A Chinese Miracle? A Sino-Japanese-Euro Joint Venture

Case (A) describes the creation and development of a joint venture (ATG) in China between a Japanese (Teikoku Piston Ring Co Ltd), a European (T&N plc) and a Chinese State-Owned Enterprise (SOE, APR) company. The JV is set up fast to benefit from central government tax breaks. However, moving into China and turning the SOE into a profitable concern presents some unforeseen challenges over and above the usual ones of a demotivated workforce and run-down machinery. The case follows the problems that emerge within ATG, notably those concerning quality, disappointing sales and lack of marketing expertise. There are also serious managerial differences that arise between the two MNC managers at the top who have different views on key investment issues. In addition the workers resent the new strict regime introduced by the Japanese General Manager and are suspicious of ATG’s new profit agenda. Despite these problems ATG is profitable within a year.

The case deals with the most common difficulties encountered by companies attempting to transform Chinese SOEs that have operated under a planned economy so that they can succeed in the world of market, consumers and competitors. However, it differs from other cases concerned with these issues as it presents three very different cultural dimensions. The case can be used in MBA and executive programs on international management, Asian business, change management and emerging markets. The objective is to understand the challenges of transforming Chinese state-owned enterprises through a joint venture. Case (B) continues the story of the ATG joint venture described in case A. It charts the human resource and organisational changes that take place, and the resolution of various problems linked to the way the joint venture was set up, and the conflicting cultural differences between the partners. As a result, ATG emerges as a success, with expanding production and sales that make it number one in the Chinese piston ring market. Pedagogical Objectives: The case demonstrates how the problems and conflicts that can emerge following the setting up of a joint venture organisational, operational, human resource and financial need to be identified, tackled and resolved by all the partners before the new company can grow successfully, a process that can take several years.