The Changan Ford Joint Venture

The Changan – Ford Joint Venture has been very successful for both parties, although it is not without problems. What does the case demonstrate about many of the strengths and weaknesses of international Joint ventures? Cultural issues are a main weakness for international Joint ventures, causing problems, which could lead to the companies failure. However, much strength also evolves from such a business arrangement. In 2001 Car manufactures Ford and Changan joined forces.

The American based, Ford, found itself being immersed in the Asian market as a severe recession brought destruction to a lot of American companies during 2008-09. This Joint ventures brought plenty of advantages to both businesses as China had been fairly unhurt by the recession due to the high demand for quality cars. The main strength of the Joint venture was the successfulness of the individual company. Ford ‘was a global leader in the automobile industry’, (Johnson et al, Exploring strategy, text and cases. ) with over 100 factories worldwide.

Changan on the other hand where more localised than Ford. They had over 100 years of business experience and 3 factories in the People’s Republic of China. With the knowledge Changan had on Chinas business world and the sound portfolio Ford owned, the two companies looked set to be successful. This joint venture illustrates the importance and the advantages that come with joining two companies together. With one company having extensive knowledge of the local market makes it much easier for the other to fit in.

The ‘outsider’ provides sound experience of global success, which boosts the joint ventures public image. However, it soon came visible that the reasons for success where also causing major problems within the Joint venture. The two companies came from very different cultural backgrounds; with different values which where likely to cause conflict. One such weakness was how each company viewed the individual employee. American culture embraces individualism, where the Ford managers would tend to work in isolation only helping the others when asked.

Changan managers saw the US mangers as selfish as the Chinese emphasis harmony in the work place. This would mean decisions where made as a group or an entire company, taking much longer to come to a conclusion than the Americans. This caused a lot of problems, as neither company could understand why the other worked this way. It was a big problem for the Joint venture as the two companies would join together their mangers, but with such cultural differences, decisions where hard to make. This could be a common weakness for any Joint venture.

Without complete understanding and an attitude to change and adapt as needed, the venture is more or less doomed before starting. Another weakness that took hold of Changan-Ford was the managerial hierarchy. The Chinese ‘subscribe to a high power distance approach to management: people readily accept the authority of organisational leadership and bureaucracy’ (Johnson et al, Exploring strategy, text and cases. ). Americans however have the ‘right’ to challenge decisions made, to point out mistakes and voice criticisms.

Again this caused conflict, as some employees would challenge the Chinese managers, to which they would not react politely. If a Joint venture is to succeed, a balanced management strategy would need to be in place, without this, innocent employees may insult their bosses and vice versa. To succeed in a Joint venture, both parties need to be willing to adapt their selves to reach a compromise both companies are happy with, in many areas of the business. Without such a compromise it becomes impossible for the Joint venture to be successful.