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Fiat’s joint ventures –
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Nanjing- The first joint venture that car maker started was between Fiat and Nanjing. The Italian- Chinese joint-venture was established in 1999 and was based in Nanjing which 300 km. west of Shanghai. Nanjing Fiat Auto built the Fiat Palio, Fiat Palio Weekend, Fiat Siena and Fiat Perla cars. The Nanjing Automobile (Group) Corporation is a state-owned enterprise with a history that dates from 1947 making it the oldest of the Chinese automobile manufacturers. In 2005, Nanjing bought the British carmaker MG Rover. In 2006, the Italian carmaker sold just 31,310 automobiles in China, down 13% from 2005. Fiat bosses accused that the Chinese Partner diverted its resources away from the joint-venture. After 8 years working together, the Nanjing and Fiat’s joint-venture fell apart.
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Chery Automobile- In 2007, Chery Automobile signed a memorandum of understanding with Italy's Fiat to form a joint venture to make cars under both badges for the local market. The 50-50 venture, had to be located in the eastern city of Wuhu, Chery's home base. It was planned to build and market cars under the Fiat, Alfa Romeo and Chery badges in 2009, with an annual production of 175,000 units.The cars are intended for the China market. Unfortunately, the Chery spokesman Jin Yibo announced in March 2009 that the joint venture would not happen due to the economic recession. The strange thing is that China’s auto sales took a huge hit in 2009. The land of the Great Wall actually sold more cars and trucks in January and February than United States. No date has been given for Fiat and Chery to begin building vehicles for China.
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Guangzhou Automobile- In 2009, Fiat signed a contract with Guangzhou Automobile Group, the 50:50 agreement will produce 140, 000 cars per year from 2011. The partners will invest 400 million Euros and build and build a 700, 000 sq m production plant in Changsha in Hunan province. Fiat needs to learn from its previous mistakes, in order to make this joint-venture successful.
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Cultural Clash- It is misunderstandings and disagreements between cultures.
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Culture Shock is the difficulty people have adjusting to a new culture that differs markedly from their own. The shock of moving to a foreign country consists four phases.
- Honeymoon phase- During this period the differences between the old and new culture are seen in a romantic light, wonderful and new. Fiat and all of its Chinese joint ventures (with Nanjing, Chery and Guangzhou) successfully passed this phase.
- Negotiation phase- After some time, usually three months, differences between the old and new culture become apparent and may create anxiety. Fiat and Nanjing passed this phase, but Fiat and Chery could not get there. Fiat and Guangzhou are still in their honey moon phase.
- Adjustment phase- Usually after six to twelve months, one of the companies grows accustomed to the new culture and develops routines. This company knows what to expect in most situations and the host country no longer feel all that new. Fiat and Nanjing managed to pass this phase, too.
- Mastery phase- The assignees are able to participate fully and comfortably in the host culture. Fiat and Nanjing could not pass the last phase of the cultural shock that’s why they fell apart.
Source: Susan C. Scheider and Jean-Louis Barsoux (2nd edition 2003). Managing Across Cultures. Essex: Prentice Hall. 52The daily behavior and actions of people that signal acceptable behavior.
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Johnson & Scholes cultural web-
- One of the most essential studies which attempted to establish the impact of culture differences on management was conducted by Geert Hofstede. As a result of this survey, Hofstede identified four dimensions on which countries differed: power distance, uncertainty avoidance, individualism/collectivism and masculinity.
Source:
From the table and the graph we can see that Italy is individualist and China collectivist country. Italy is masculine society which means that people are self-confident as they really know what they are capable to do and want to prove it. From the uncertainty avoidance we can see that Italian people do not like to be threatened by uncertain situations. Chinese are more confident in the future and are less worried than Italians. The power distance in China is extremely marked; power and hierarchy are accepted and totally conventional. Italians are more reticent facing power; Chinese are silent and accept orders coming from the top. Italians will say what they think and even criticize if thy want to.
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The ‘cultural union’ model of Trompenaars and Hamden-Turner- Fons Trompenaars and Charles Hamden-Turner have developed a theoretical framework which attempts t explain cultural difference in terms of fundamental challenges that humans face when organizing social communities. While Hofstede talks about cultural difference in terms of a sort of psycho-emotional programming, Trompenaars and Hampden-Turner attempt to identify the varying internal logics used by different cultural groups to explain their value choices.
According to Trompenaars and Hamden-Turner framework, China and Italy are in totally different value dimensions.
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Possible Problems: After talking about the cultural concepts and differences in the management and in the cultures, let us talk about the real problems that the joint ventures met.
- The two countries do not have the same organizational structures of work. In order to make the joint ventures successful, it is necessary the two businesses come to an agreement. Due to the different in the structure, Fiat-Najing had some serious communication problems.
- Due to the communication issues, an ethical problem appeared. Fiat made an advert with the Buddhist actor Richard Gere, in Tibet. The actor has been active in the movement free Tibet, Chinese accused Fiat with political overtones. The advert provoked an angry response in China; therefore Fiat Group had to make a formal apology to the Chinese government and its people for any offence.
That could have been avoided if there were better organisation charts.
- There are some problems with the management style, too. Chinese companies have long-term objectives but Italians are interested in the immediate interests. For Chinese, this kind of style is unserious, unsuccessful and can be even offended.
- Especially with the Nanjing joint venture, Fiat changed its president four times and replaced its sales and marketing chief seven times. The management styles were changed very frequently so it created confusion and uncertainty for the staff.
- One of the biggest problems was the lack of confidence in the partner. Fiat was afraid that the Chinese partners will steal their models. That’s why only four models were produced in China. Xinyoung or trust is really essential for Chinese. Without it, it cannot work. Guanxi relations are essential part of the Chinese business life, too. Guanxi is translated as ‘personnel connection’ and refers to the existence of direct particularistic ties between one individual and others.
Due to all these problems, Fiat’s joint ventures were unsuccessful for now. The way to resolve these problems is different in China and Italy. There are three strategies for managing cultural differences: First, ignore- Nanjing and Fiat were ignoring for a lot of time the cultural difference, that’s why they fell apart. Second, Minimize and third, Utilize- in order to make a successful joint venture in China, Fiat needs to use the second and third strategy.
Recommendation for the joint venture-
- Fiat has to change their management in order to do that, the company can find really useful Kurt Lewin’s 3 stages of change model.
- The organisation structure needs to be changed. As they both high context society, they should divide the power and take decisions together. That’s why we have an example of organizational chart:
In this kind of organizational chart all departments has an equal power but at the same time there is a higher power and a lot of communication between departments. That would be convenient not only for Italians, but also for Chinese.
- The most important is that the two companies need to trust each other or to make Guanxi.
- In order to do all of these changes, Fiat could use the competencies for managing abroad model:
Conclusion:
Fiat is an Italian manufacturer, with year of experience in the car manufacturing. The company already has its way to do things. But in order to become successful company in China, it needs to change some of its ways of doing things. Chinese culture is totally different, that should not be ignored. Company’s culture is essential, too. Fiat learned that after failing with two joint ventures: Nanjing and Chery. Guangzhou is their last chance to do the things in the right way. Using our advices, Fiat and Guangzhou can overcome the cultural differences and become an successful joint venture for many years.
Reference:
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Ciferri., L.C.,2007, Fiat may join with Chery or SAIC, Automotive News Europe Ciferri, [e-journal], 12(9)pg:6-6.Available through: EBSCOhost Business Source Premier database [Accessed 10 November 2010].
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