The Star Corporation is a California-based manufacturing firm that is going to do business in mainland China. The company’s contract with the Chinese government calls for it to supply technical know-how and machinery for producing consumer electronics. These products are not state-of-the-art, but they will be more than adequate for the needs of the Chinese consumers. Star has agreed to sell the Chinese its U.S. plant, which was being closed because it no longer was competitive. The Chinese will pay to move all the machinery and equipment to the mainland and install it in a factory that currently is being modified for this purpose. The two then will become partners in the venture. Star will provide the management and technical expertise to run the plant, and the Chinese government will provide the workers and be responsible for paying for all output. Star will receive an annual fee of $1 million and 5 percent of all sales. The Star management is very pleased with the arrangement. Although they are of Chinese descent, they have lived in the United States all their lives and know relatively little about doing business either with or in mainland China. To provide Star with the necessary information and assistance, a native of Beijing, educated there but having lived in California for the past five years, was brought in. The individual told the company the following facts about mainland China:
• Chinese managers do not plan. They usually are told what to do, and they do it. Planning is handled by others and simply passed on to them.
• Chinese managers are not concerned with profit or loss. They simply do their jobs and let the government worry about whether the operation is making money.
• No rewards are given to workers who perform well; everyone is treated the same. If there is no work, the workers are still paid, although they may not be required to come to the factory.
• There is a basic aversion to individual decision making; most decisions are collective efforts.
• The current government of China would like its managers to learn how to run a profit oriented operation and eventually eliminate the need for foreign managerial assistance.
• When outsiders tell the Chinese how to do things, they have to be careful not to insult or offend the Chinese, who often are sensitive about the way they are treated.
1. What selection criteria would you recommend to Star when deciding whom to send to mainland China?
2. What procedures should the company use in making the final selection?
3. What type of repatriation agreement would you recommend the firm use? Be specific regarding some things you would suggest be contained in the agreement.