Copyright Jim Kayalar 2013

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The Challenges of Succeeding in International Business An Asian Case Study

Jim Kayalar, DBA (ABD), MBA Morale was high at the Florida based construction & contracting company. They had just been invited to join a consortium of companies that had pre-qualified for a big public works tender in the Near East. The lucrative offer had come via e-mail. After concluding the initial round of correspondence with their counterparts in Naimistan, a two man team made up of a senior engineer and a business development executive flew to Naimistan to meet up with their potential partners and sign the consortium agreement. The cross Atlantic trip had gone well, and they had been well received by their hosts at the airport, taken to their hotel and were pleased to see that a well planned itinerary awaited them. Two mid- level managers took them out to dinner that night, and a jovial relationship was established. The next day, still dazzled by the late night and effects of jet lag the Florida team met with the senior executives of the consortium and gave a strong power point presentation as to their capabilities, past business performance and key deliverables. Everyone was all smiles at lunch, and things were very cordial in the afternoon during the contract negotiations. The US team emailed the tentative consortium agreement for final approval to their Florida offices late in the afternoon and were treated to a special evening of entertainment and fine dining "Asian" style by the corporate execs. Nothing was off limits they were told. They could have any and all forms of entertainment that night, whatever their hearts and minds pleased. Next morning, they had received confirmation from the legal department at corporate headquarters that the agreement was acceptable and that they could go ahead and sign. The agreement was signed, pictures were taken and small gifts were exchanged. After having generated so much good will in such a good time, it was decided that the new consortium partners should visit the government office which was organizing the tender in order to introduce the U.S company. You had to build relationships before you could do business they were told. Up until that time, the whole process had been extremely professional. The meeting with the local government authorities went ahead as planned, but it was not possible to gauge the results of the meeting from the U.S. company's point of view. They had also received some conflicting news from the government officials. The pre-qualification for tender that had been won by their new business partners had apparently been cancelled and the process would start over again.

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Their new partners assured them that this was a normal occurrence for this part of the world. Other disturbing news started to trickle down as comments of the need to make facilitation payments arose. The U.S team automatically countered with their need to abide by the Corrupt Foreign Practices Act, but their hosts assured them that it would be they who would take care of things, not the American's, but that the American's should know that such a arrangements existed and were a part of everyday life if you wanted to do business in this part of the world. The trip was concluded with a lavish good bye dinner and further entertainment, "Asian" style. The team was in a jovial mood when they arrived back in Florida and were congratulated by the CEO for their accomplishment. Their Asian counterparts meanwhile prepared for the new pre-qualification process and asked for intensive documentation. A joint project team was established for the project and earnest work commenced to supply their consortium partners with the necessary materials to win the pre-qualification bid. At the same time hints that certain facilitation expenses were being made to government authorities were being relayed to the American company over the phone. But, never in writing. After a while, these vague remarks became very much clearer as their foreign partners started to talk numbers. The US stance was the same. We cannot be involved, we don't want to know about it. Two months after the signing of the consortium agreement, the new pre-qualification bid was held, and their consortium failed to qualify. Their Asian counterparts blamed them in part for not assisting them in paying up the facilitation fees, and claimed that they would have won had the size of the payment been larger! They vowed to have the pre-qualification tender cancelled and the process renewed once again. Surprisingly within two weeks they had actually managed to do just that and the tender process was restarted. This was apparently a business tactic that was used frequently to disrupt and delay the tendering process. But by this time, the American company had lost faith in their partners having allocated resources freely against the promise of lucrative rewards and had decided to withdraw from the project. The Asian partners accused the American's of being short sighted, inflexible, and shallow. The American's accused the Asian's with being untruthful, slow, and not results oriented. Both sides threatened each other with law suits and asked for damages. Lawyers wrote letters back and forth, but even they had problems communicating. Both sides refrained from going to court because the cost of litigation would have been too expensive, but wrote letters of complaint to their respective embassies. The culture gap between the companies had played an important role in how this project went bad. Communicating across cultures can be extremely difficult. What the beginning is for one
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culture can well be the end for another. If you enjoyed this case study please review some of the other cases by Jim Kayalar which come with instructive teaching notes.

Academic Publications by Jim Kayalar

Jim Kayalar's Academic Publications distributed in North America by Aspen Institute, Harvard Business Review & Ivey Publishing. In Europe by CCMP France & ECCH United Kingdom. In Asia by National Chengchi University, Taiwan. 1. Mount Rundle Hotel Banff: A service delivery failure in the Mount Rundle Hotel escalates into a full-fledged confrontation between hotel management and the customer. The hotel general manager has an inward focus and is more intent on managing internal company systems and processes than catering to customer needs. The delay in responding effectively to the service failure leads to the involvement of the Better Business Bureau of Alberta, the Banff Lake Louise Tourism Development Board and the Banff mayor's office. Read More: 2. Regal Carnation Hotel, Guam:In the spring of 2007, a vacationer is upset by the poor hotel experience he has had on the island of Guam. At the onset, the reasons for the bad experience seem to point to seemingly minor issues: bad management, poor service and old rooms. The value of the case lies in the analysis of the symptoms and arriving at the root causes of the problem, particularly the profit maximization strategy of the hotel's owners in a mature industry. The case uses a different method of analysis, starting with micro indicators and moving to macro indicators: the analysis of symptoms, arriving at root causes, determining company strategy and finally assessing the company's position using the Product Life Cycle Model. Read More: Now Featured on Harvard Business School Hospitality Curriculum: Read More: 3. Guam Visitors' Bureau:The general manager of the Guam Visitors' Bureau, a destination marketing organization, faces the challenge of running the island's tourism industry. There are strong interest groups, who have structured the competitive field in Guam, and the island's mature industry faces everincreasing competition from rival destinations. The general manager must formulate a realistic strategy that acknowledges the internal and external constraints his organization faces and safeguards the competitive position of Guam. Read More: Now Featured on Harvard Business School Hospitality Curriculum: Read More:

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4. Pro Clean Tennessee: The owner of a carpet cleaning operation in Tennessee is urgently looking for solutions, after his business expansion project has failed. The owner has emulated the business model of a well-established competitor, hoping that what has worked for his competitor would also work for him. The business is churning cash fast as a result of the additional cost of personnel and equipment and could face bankruptcy in the near future. Read More: Special Citation: Pro Clean, Tennessee chosen by Harvard Business Publishing, Teaching Materials Newsletter 2009, in the field of Competitive Strategy & Entrepreneurship. Read More:

5. MIA, Philippines: The newly appointed country director of MIA Philippines, a non-profit organization with a mandate to alleviate poverty in developing countries, is faced with the challenge of designing and managing a development assistance project that would establish a go-to-market supply chain for a remote Filipino fishing village. The country director has to enter a new country, launch the project, deal with the constraints of a foreign culture, manage the expectations of major stakeholders whilst trying to manage a multi-cultural team and conclude the project on time. The value of the case lies in the realistic assessment of stakeholders' motivation, their capabilities and assets, and project constraints during the design and implementation stages. Value chain analysis, value added analysis and stakeholder analysis are used to assess the applicability of project design, impact and long term success. Read More:

6. Otoyol Motor Company: Otoyol Motor Company, a large commercial vehicle manufacturer, is on the verge of being liquidated by its shareholders. Despite all efforts to maintain its competitive position, the company has been caught in a downward spiral. Erosion of its first mover advantages, shifts in industry core competencies and changes in consumer preferences have depreciated the company's value proposition and deteriorated its market share. Utilizing empirical data, this case illustrates the evolution of the commercial vehicle industry in Turkey, changes in industry conditions, and competitive strategies employed by the incumbent and its Japanese rivals in various life cycle stages. Puppy dog ploy, market penetration, product strategy, long term market share acquisition stratagems employed by challengers, and the incumbent's counter moves are chronicled. Read More:

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7. Bon Star Hotel: A management consultant is dispatched to a Central Asian Republic to conduct an operational analysis of an underperforming hotel. Initially the objective of the assignment is to turn around the business. The scope of the intervention, however, changes dramatically as the consultant finds himself in the midst of a high stakes stakeholder standoff with numerous parties vying for ownership of the business. Based on an actual consulting assignment, the case will present insight into the management consulting profession, relay a realistic account of the onsite operational analysis and business audit process, and impart the challenges managers and entrepreneurs confront in international business settings. Read More (English): Read More (Chinese):

8. The Generics Pharmacy: The price of pharmaceuticals in the Philippines is second only to Japan in Asia and one of the highest in the world despite the Philippines being a less developed country and nearly half of its population living on US$2 a day. The case illustrates how The Generics Pharmacy a local pharmaceutical company challenged the existing industry business model and became the largest pharmaceutical retailer in the country within a period of only three years. Under the strategic leadership of CEO Benjamin Liuson, The Generics Pharmacy succeeded in formulating a superior value proposal by focusing on the supply and demand side constructs at the bottom of the pyramid and bringing affordable high quality medicines within reach of low income individuals. Superior leadership, management and strategic initiative succeeded in integrating and balancing tenets of corporate social responsibility, entrepreneurial foresight and resource based strategy to catapult the company into a leadership position. Read More (English): Read More (Chinese):

9. We Are So Sorry: Sedang Premier Resort: North American and European branded hotel chains in their quest to maximize shareholder wealth have recently shed ownership of assets and freed up capital to focus on their core businesses with the help of strenuous contracts. The ensuing pursuit of further business development has expedited the internationalization process and a new business model of franchising the brand/value proposition in international locations has evolved. Globally accepted brands hold the promise of global quality. It is widely believed that Western brands deliver more value than brands from emerging nations, such that they can charge global prices to global customers. Service delivery failure is encountered frequently in the accommodation and food services industry. Such failures can act as an important performance measurement criteria. Managers are taught how to recover from service delivery
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failure and address loyalty issues of existing customers. They fear losing them as the cost of acquiring new customers may exceed the cost of keeping existing customers. The case illustrates how a globally branded North American hotel chain disregarded the basic tenets of maintaining the global brand promise, ignored generally accepted North American customer service standards, failed to instigate delivery failure recovery and leveraged firm specific capabilities to maximize shareholder wealth. The reaction of the local counterpart, the reaction to countermand the imbalance in the ensuing business relationship and adaptation of the value proposition are told from the perspective of a vacationing couple that experienced the diluted brand firsthand. Read More:

10. Wujiang Motor Company: Wujiang Motor Company a large cash flush Chinese commercial vehicle manufacturer is getting ready to realize its first overseas acquisition in Europe. WMC is assessing the purchase of Hispano Commercial SA, a shuttered commercial vehicle operation in Spain in its quest to expand its overseas operations in light of the surplus manufacturing capacity in its domestic market. WMC plans to break into the European automotive market and use Spain as a stepping stone to launch its foray into the American market place. The case can be best used in a strategic management, mergers and acquisitions or operational analysis class.

11. The Fish Whisperer: This case depicts the start-up and business development challenges faced by a streetwise entrepreneur who has invented a unique fishing rod. The capabilities necessary to invent, prototype and bring to market a limited quantity of product versus the challenges of larger scale product commercialization and managing a growing business are illustrated chronologically. The case primarily addresses why some entrepreneurial ventures succeed and grow to become large-scale corporations whereas others stay small and insignificant and why a majority of entrepreneurial initiatives eventually fail. Indigenous constructs such as entrepreneur and organization specific factors and exogenous constructs such as industry, location and time specific factors that may predetermine the outcome of an entrepreneurial venture are illustrated. A business plan, which has attracted angel investment, is presented for critical assessment. The background storyline subtly depicts that all businesses, regardless of size, face resource constraints and trade-offs and that managers must continuously adapt and upgrade their business models, competencies and management style to match the evolving threshold market standards. Read More:

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12. Green Hills Hospital - Leading Change Management: Performance measurement research indicates that most organizations actually destroy rather than create value as a result of their operations. The new global competitive order requires that organizations adapt, change and restructure business models quicker and with less mistakes than ever before in order to maximize value for shareholders. Most organizational change initiatives only deliver subpar results necessitating yet further rounds of restructuring initiatives which destroy yet further value and negatively impact the organization. Private healthcare has become a lucrative business and the Hippocratic oath "Primum non nocere" (First do no harm) may be eroding to be gradually subjugated to "Primum lucrum" (First make profit). The case presents a change initiative at a large healthcare facility that aims to maximize shareholder value by introducing lean healthcare. Whereas change management performance can be measured in financial terms, what happens when a mishandled change initiative starts to endanger the lives of patients and change starts to kill? Read More:

Books Marketing Strategy: Standardization and Practices in the Commercial Vehicles Industry Adaptation

The globalization of markets has disrupted the existing status quo, delineated the first mover advantage of incumbents and their entrenchment strategies. Changes to the auto industry have been especially drastic in the traditional North America and European markets where the very existence of industry icons, such as General Motors, Ford and Chrysler have come into question. Japanese manufacturers with their seemingly unbeatable innovative approaches to time-to market, process and product design have achieved superior performance standards and taken global leadership. A new era of competition is on the auto industry dictating the way value is created for customers and shareholders. Incumbent firms with decades of heritage and legacy must adapt to the new competition or be faced with a grim future of gradual decline. This book utilizing a resource based perspective analyzes how competition between American, European and Japanese companies evolves historically in emerging market settings, illustrating competitive marketing strategies and the use of standardization and adaptation practices in the pursuit of competitive advantage.

Now Available on Amazon

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Visit my blog at: http://www.provisium .com

Jim Kayalar, DBA(ABD), MBA is a C-Level executive, management consultant, Professor of business and Internationally published author with over 25 years of business expereince in 28 countries and has over a dozen publications distributed by Aspen Institute, Harvard Business Review, Ivey Publishing, CCMP France, ECCH England, National Chengchi University Taiwan and numerous other publishing houses. Contact Us: Web: http://www.provisium.com Email: info@provisium.com Linkedin: http://www.linkedin.com/in/jimkayalar Facebook: www.facebook.com/jim.kayalar

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