Consolidated Engineering Co. Goes to China

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Consolidated Engineering Co. Goes to China: Case

Consolidated Engineering Co. Goes to China1
Travis Maples and Penelope B. Prime
(Published in Readings and Cases in International Management: A Cross-Cultural Perspective, by David C. Thomas: Sage, 2003)

“Do I have to satisfy every set of eyes in China?” After more than a year since the contract had been signed, this was how Vice President of Operations and Project Manager, Travis Maples, felt about the deal that maybe wasn’t. He had worked hard to find a business opportunity to open the doors to China for his company, Consolidated Engineering, but now wondered if it was worth it. He knew that he could still walk away from this deal, sell the equipment somewhere else, and go on. Many companies had given too much away to do business in China, and he was not going to be one of them. The Company Consolidated Engineering Company (CEC) was one of a number of major firms worldwide that produced heat processing equipment for metals to be used primarily in engines, automotive parts, and other aluminum casting components. They produced three major product categories: 1) A continuous heat treating system; 2) ovens & furnaces; and 3) coil coating products. CEC had their own research and development division, and held 33 patents worldwide. Their major customers included Mercedes Benz, Ford, Honda, GM, Chrysler, Jaguar, VW, Kaiser, Alcoa, and Reynolds Aluminum. CEC was a privately held company established in 1959, and did approximately $35 million worth of sales in 1998. Their projects ranged from a quarter of a million dollars to 11 million or more. CEC Mission 2000 To achieve a consistent 25% growth rate by maximizing positive customer experience through continuous improvement and innovation of the highest quality thermal processing equipment and services.

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We would like to thank Volker Knoblock and Matt Westendorf for their help in preparing this case.

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Consolidated Engineering Co. Goes to China: Case

Based on their historical development, CEC established a goal of 25% annual sales growth in the 1990s and beyond. To achieve this target, management believed they needed to deal extensively with four key foreign markets: Germany, England, Mexico and China. They were doing business in the first three markets, but as of 1997 had not yet sought any sales in China. Approximately 30% of their sales were to the U.S. market. As a result of the growth in the usage of aluminum, because of its weight advantages, nearly all new foundry facilities constructed in the world in recent years had been for the purpose of manufacturing aluminum castings. These have been state-of-theart facilities, using the latest in proven technologies. This growth of advanced technology usage in the foundry industry has been the source of CEC’s greatest growth opportunities. There also had been a movement by the large automobile manufacturers to standardize engines and this standardization had created facility expansions all over the world. Mexico has been the country of choice for the North American manufacturers and Asia for the growing Pacific market.

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Consolidated Engineering Co. Goes to China: Case

Equipment Manufacturers
Foundry

Users of Equipment User of Production Item

Foundry System Manufacturers

Equipment

Aluminum Casting Industry
Trends: Growth in Automotive Market Geographic Growth Process Technologies

Engine Blocks & Cylinder Heads

Automotive Industry

Trends: Single-Process Suppliers Multi-Process Suppliers New Technologies

The organization of CEC also had contributed greatly to its growth and ability to take advantage of sales opportunities. Due to the extensive experience of the upper management sales staff, they were given a lot of freedom in developing new markets and customers. Operations worked closely with all sales managers to assist in their sales efforts. It was the responsibility of the Sales Manager to keep the President informed as to...
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