Trouble in Paradise

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International Marketing Management Prof. Fuß
Case Study „Trouble in Paradise“
Presented by: Manuel Colpo, Marco Melchers, Robin Menzel, Stephan Poerschke, Alexander Remy

Agenda
Situation Analysis Problems Valuation Options techniques Recommendations

Trouble in Paradise

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Agenda
Situation Analysis Problems Valuation Options techniques Recommendations

Trouble in Paradise

3

Zhong Lian - a shining success story (?)
• Knitting company in China • Joint venture (50/50) between Sozhou First Textile Company and Heartland Spindle Company • 3 acquisitions of money losing companies • Profitable in a slump market • 2.300 employees (1995: 400) • No own national brand • Success mainly based on expansion and quality management

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An equally divided joint venture
Bill Windler

Heartland Spindle Co.
(50%)

CEO

Zhong Lian Knitting Company
Sozhou First Textile Co.
(50%)
Trouble in Paradise

Mike Graves
General Manager

Qinlin Li
Dep. General Manager

5

Agenda
Situation Analysis Stakeholder SWOT Problems Valuation Options techniques Recommendations

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One company – two visions?
Mike Graves, GM • 4th GM in 10 years • 20 years int. experience • Language barrier • Motivation based on the payments from Heartland • Pressure from both sides • Merely reacting Qinlin Li, deputy GM • Top executive on the chinese side • Happy with current profits • Good reputation with politicians and officials • Clear vision – 4th acquisition – National brand

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Different ways of doing business
Bill Windler, CEO Heartland • Unhappy with the numbers
– „4% ROI is pathetic“

Chinese politicians & officials • Different values
– Long-term employment – Stability

• High margin vision
– Raise of ROI to 20%

• Repositioning in the US
– Become a high-end retailer

• Important for doing business in China

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Agenda
Situation Analysis Stakeholder SWOT Problems Valuation Options techniques Recommendations

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SWOT
Strengths
• Annual profit of 5-6% • Well known in China (operate over 10 years) • Political support • Chinese employees are intelligent and willing to work hard

Weaknesses
• Chinese managers are afraid of taking responsibilities • Weak communication (internal and external) • Current equipment not sufficient to produce high quality products • Low automation

Opportunities
• New acquisition (+ 40% production capacity, + 1200 employees) • Establishing national brand (long term success)

Threats
• Politicians expect company to generate jobs • Chinese partner is forcing to expand • New company with old and shabby machines, some employees seem to have nothing to do • Heartland expects much higher margins • Slump of the textile industry

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Agenda
Situation Analysis Problems Valuation Options techniques Recommendations

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There are four main problems of the joint venture
1. No clear strategic orientation and procedures
→No clear strategic vision of Heartland Spindle in China →No coordinated and consistent joint venture strategy

2. Different ways of doing business in USA and China
→Contrast between the American and Chinese visions →Different definitions of success (profit ↔ employment)

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There are four main problems of the joint venture
3. Those who don’t act, make no mistakes
→No acceptance of responsibility and no willingness to change of the Chinese workers →No knowledge management in the Chinese company

4. Inadequate Communication
→Between Heartland Spindle and the joint venture →Between Mike and Qinlin Li

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Agenda
Situation Analysis Problems Valuation Options techniques Recommendations

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There are several opportunities to act
To solve the differences between Mike’s opinion and Bill’s vision...
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