A Large Toy Company from Canada

Introduction:

A large toy company from Canada has for the last five years outsourced its production to a Taiwanese firm due to the large amount of human labor that is required in the manufacturing processes. The wages in Taiwan was initially very low but costs have escalated and the company is afraid that they will soon loose to competitors if they cannot find a way to decrease their expenses. Labor cost is presently 45% of the production expense. We have been asked to counsel the Canadian toy company in their attempt to relocate their production to China who is considered to have the least expensive workforce in the world. The questions set to us are the framework of this paper and we will deal with each separately. We will start by pointing out the cultural differences between Canada and China and give specific suggestions as to how to do business with the Chinese. Whether it is strategically wise to let the Chinese handle the production alone will be the next issue dealt with. Lastly we will consider the likelihood of the Canadians ending their present arrangement with the Taiwanese manufacturer.

Question 1:

Differences in culture make us prone to evaluate and interpret the same facts and experiences differently leading to frustrations and or conflicts. A negotiation is therefore more likely to succeed when the people involved understand the reasons for these clear differences. Keep in mind that cultures are changing with time and that individuals may be a part of more than one culture. A well-known pioneer in organizational and cross-cultural studies, a Dutch researcher by name Geert Hofstede, has provided us with a systematic cultural comparison based on findings from one large MNC, IBM. Hofstedes findings show that the major differences between the Chinese and Canadians are their strength of social hierarchy and their collectivistic approach. Their collectivist tendencies makes the Chinese uncomfortable with direct individual praise and their need for consensus makes the decision making process a time consuming one. The negotiating team will seldom include the top manager who has the final word, which also contributes to a longer time schedule from what Canadians are used to. Another Dutch researcher, Fons Trompenaars, has together with his colleague, Charles Hampden-Turner, compared nations based on 7 dimensions. Their research shows that Chinese compared to other Asian countries are emotional in their interaction and display of affections, yet they are less expressive than Canadians. The study makes it clear that the Chinese need to build good relationships with their business partners and place much value on connections to authorities and influential people. Respecting a persons title, age and background connections is a prerequisite to build good and long lasting relationships. Promotions are based on seniority rather than achievement and they invest

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