fiat & nanjing failure in joint-venture in china

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CROSS CULTURE

                        


CONTENTS

Introduction        3

Differences of culture        4

Differences of management        8

Problems: why the joint-venture failed        10

Solutions and conclusion        13

References        14


Introduction:

FIAT is an Italian automobile manufacturer. It is the acronym of Fabbrica Italiana Automobili Torino which means Italian Motor Factory of Turin. This company is controlled by Agnelli family and has been created in 1899.

FIAT S.p.A. group controls the brands Fiat auto, , , , et , ,  and .

But since 2000, FIAT faces some changes in particular in 2004 with the death of Umberto Agnelli and in 2003 it suffered an operating loss of 979 billion Euros and more than one trillion in 2004. This year was the worst in the century of existence of the company. The situation rights itself in 2005 since its breakdown with General Motors 2004. Moreover, FIAT becomes successful thanks to the creation of two new models:  and . This permitted a positive benefit and first dividends for five years.

In 2007, the market shares of FIAT group were increasing in particular in the automobile sector with 32% in Italy, and 9% in Europe.

In 1995, FIAT tried to break into the Chinese market which is very important. Indeed it is the first host country of foreign investments, so China is an inescapable market. FIAT made an attempt to introduce there with a joint-venture with a local firm: NANJING. Between 1958 and 1979, NANJING stayed almost in monopoly position in China, which testifies the fact that NANJING is a very big company as well as FIAT.

We could believe that such an association will be a success. Yet, the joint-venture has failed.

The aim of this report is to analyse the cultural reasons and difference why this may have failed.

Unknown author. (2008). Fiat. Available: http://fr.wikipedia.org/wiki/Fiat. Last accessed 04 December 2008.


Differences of culture

To explain this failure, we could firstly lean over the differences of culture. Indeed, the western and the eastern cultures are very dissimilar, so we can expect to a cultural shock because they are divided on everything: religion, artefact and behaviour, relation to individual etc.

First of all before talking about the cultural differences, we can say that geographically, the two countries are situated in two different continents: Europe and Asia. Italy is in Europe and belongs to European Union populated of 60 billion of inhabitants. On the other hand, we have China, 32 times bigger than Italy in surface area and Chinese people are 22 times larger than Italian people.

The way of living can thus be explained by the religion which is the basis. Italy is a catholic country whereas the main religion in China is Confucianism. These two religions are completely different regarding to the relations between people. In Italy (and Western in general), the individual comes first and has the priority. It is even a fundamental fact in the western society. In China and more precisely in the Confucianist philosophy, the group is more important. Chinese people have the sense of solidarity whereas in Italy, everyone is focused on themselves. In Confucianism, relationships are central and based on duty, loyalty and sincerity. We oppose collectivism of China and individualism of Italy.

Linked to that, the two cultures differ regarding to the traditions and behaviours. For instance, in Italy it is a popular custom to celebrate the saints. Every day is dedicated to a saint, this is what we call the saint’s day. In China this custom does not exist but there are a lot of examples which do not exist in the Western society. For example, a gift means a request of help. If the person accepts the present, it commits him to help the other. This may illustrate what has been said before with the collectivism. In Italy, people exchange presents for Christmas, birthdays it is common then.

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The shock of cultures between China and Europe is flagrant in the communication style. In fact, Chinese people are more reserved in their relationships than Italian. For example to wave at a friend or a member of a family, they shake their hands or even it is normal to kiss each other. Not for Chinese because the physical contact is acceptable with difficulty and they need a larger personal space than Italian. The shake of hands is only common in business world.

The communication style is direct in Italy and indirect in China. In Italy, people talk all the time ...

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