AnalysisofAccuFormManagementReconcileCultureGapinGlobalization“EthicalleadershipfortheNewGeneration〞NHK-250FUDANUniversityMarch,2007ExecutiveSummary

Anaccidentthat5childrenwerehospitalisedforarashcausedbyunqualifiedclothesbrokeout,whichdisclosedaseriesofbusinessscandalofAccuForm.Asjointventure,AccuFormisthecombinationofaGermancoatingproducerandaHongKongOEM,whileplacingitsR&DcenterinChinamainland.Kim,thegeneralmanagerofAccuForm,foundtheobviousdifferencesinbusinesspracticesbetweenChinaandtheWest,yetfailedtotackletheissue.Asaresultoflackingregulatedbusinessstandard,Chingcommittedmoneylaundering,misappropriationofcompanyassets,illegalrebatesandbrides.Actionsareimperativetodealwiththepressingproblem,notonlytomeettheemergencybutalsoconductsomeunderlyingadjustmentsconcerningbusinesspracticeinvolvingculturegap.March,2007AgendaCompany

profileandcaseoverviewKeepproblemanalysisRecommendedresolutionsAppendixMarch,2007CoatingIndustryProfile82%ofAmericanswantedmoreperformanceclothEuropeanfirmsproduced>31%oftheworld’schemicalsThegrowthofChina’sapparelmarketwasupto19.6%MarketplayerswereexpandingoperationsinAsiaPacific,esp.inChina.Industrystandardshouldbestrictlycarriedout.Theuseofprecisequantitiesandmixturesofchemicalpropertiesinthecoatingproductionwasimportant.Theresidueofchemicalsubstancescouldirritateskin.Theharmtoenvironmentcausedbyirresponsiblehandlingofchemicalwasteshouldbetakenseriously.March,2007CompanyProfileGeneratingprofitsoverrideanythingcharacterizedasinternalcontrolsystemCompany’sVisionEnhanceproductperformancePlaceastrictqualityassurancesystemManufacturingbasewithlowcost-UsecheaplaborinmainlandChinaMarketPositionLeadingsupplierofadvancedcoating-Holdadvantageinhigh-techandR&DDevelopsuppliersandcustomersbyGuanxi

networkBusinessPracticeTreatISOstandardaswindowdressingTurnblindeyestoenvironmentcommitmentaCorporateSocialResponsibilityCreaseFree(HKOEMofclothing)Dynocoat(Germancoatingproducer)DealwithliteralrulesflexiblyLackofbusinessethicscultivationCorporateCultureIntellectualPropertyEmphasizetheintellectualpropertyprotectionRelationshipMarketingKeepsafetystandardtominimizenegativeimpactsontheenvironmentEnforcestrictcodesofconducttoensureprofessionalintegrityNeglecttheprotectionoftrademarkJointventurewith(1)foreignmanager,inchargeofR&Dandcoatingproduction;(2)localstaff,takingcareofmarketingandpurchasingactivities.AccuFormMarch,2007CaseOverviewMr.ChingR&DmanagerMakepurchasingdecisionTakechargewastedisposalBehaviorsBuildCoralWearUsetheauthoritytoaccesscorporateresourcesandover-utilizethemachineAcceptreferralmoneyfromsmallsuppliersatthecostofbuyingpotentiallyinferiormaterialfromthemShipuntestedcoatingstoCoralWearwheretheywereappliedtothefinishedgarments,whichwerefinallysoldbywholesalerCounterfeit“AccuForm〞brandbyintentmisspellingandsellthegarmentbydistributionnetworkDiagnoseApplyR&DincentivetoAccuForminspiteofculturaldifference;Over-decentralizationyetlacksupervisionEffectofChinesepersonaltie;interferewithotherdepartmentBlurredauthorityandworkdivisionLeadtotheoutbreakofallergiesonchildrenanddisreputeAccuFormMarch,2007CompanyprofileandcaseoverviewKeepproblemanalysisRecommendedresolutionsAppendixAgendaMarch,2007TypologicalProspectFailuretotakedirectmeasurestooffsetandelude

theeffectsofGuanXiandperformunderethicalcodeofconductinthebusinessenvironmentinChinaKeyProblemGenuinedilemmaThisreferstotwoormorevalidethicrequirementsorlegitimateinterestsconflictandconsensusdonotexistastohowitshouldberesolved.MorallaxityThisreferstoonebelievetodoanimportantmoralgoalatsometime,yetneednotperformanyparticularactionatthemomentComplianceproblemThisreferstooneknowsundoubtedlywhattodo,butperformancemaybeinhibitedbypressureswhichruncountertomoralityNo-problemproblemThisreferstooneknowswhatthemoralgoalisandhasthewillandabilitytopursueitTypologyMarch,2007Kim’smanagementlaxityFailuretorecognizesomeculturaldifferenceGiveminimaldirectionorsupervision–staffareexpectedtobeself-disciplinedFailuretosettledownthedifference-Setupcompanyperformance-orientedtarget—expectedtoshowhisownmanagerialcapabilitiesWronglydisregardinformalrelationship-guanxi-AdmittheinformalguanxibyrecruitingnewcolleaguesinChinafromChingasproductionlinesupervisorAlaterecognitionofalingeringself-illusionthatonewoulddotomorrowwhatoneneglectedtoday.Hedidn’ttakeneededprecautionsAccuFormcouldnotsurviveMorallaxityofKimMoralJudgment:Ethicalmanagementisnotchangedinaccordancewithdifferentculture.MoralMotivation:Heisnotpreparedtorecognizetimelytheculturaldifferenceandpostponethefulfillmentoftheduty.March,2007MoralproblemofothersMoralJudgment

Hasaclearknowledgeofthelocallaw

whichAlldictatethesameaction

MoralMotivationForMr.Ching:Fortheaccomplice:ComplianceproblemGenuinedilemma13Workers:Tobedismissedortobeexposed?2linesupervisors:MaintainGuanxiortobeexposed?

Onlyhisself-interestNeglectofculturereconcilementandleakysupervisionsystemThrowlocalstaff,underChinesecultureaffection,intothemoralplight;fosterillegalbehaviorsTimelyadjustmentandethicalmanagementdevelopmentisimperativeMarch,2007KimfailstoincorporatetheculturedifferenceintohiscorporategovernanceEmphasisonethicalstandardinWestleadstoKimtakesitforgrantedthatstaffwouldstrictlyconducttheethicalcode.ThosetogetherleadstolapseholeofAccuForm’sflawmanagementandcrisisofethicalmanagementDefinitelyAccuFormsufferedalotmorethanwhatitgainedfrommisbehaviorandevencorruptionrootedinguanxi.Fromalong-termperspective,theimportanceofguanxiindoingbusinessinChinaisdoomedtofade,butnotinthepresent.Whilenon-Chinesewesternershaveexcusesnottoconformtointricateethicsofrelationshipintheguanxigame,theyshouldn’toverlookitspoweriftheyeyetheChinesemarketexpansion.Asglobalcompaniesdevisecomprehensiveethicalpoliciesandapplycompany-widerulestoChineseoperation,therealchallengeistheawarenessoftheimportanceofbeingappreciativetoChineseculture.AccuForm’scaseisatypicalexampleofnon-appreciativeapproach,forwhichallpartiespaiddearly.CultureanalysisMarch,2007AgendaCompanyprofileandcaseoverviewKeepproblemanalysisRecommendedresolutionsAppendixMarch,2007Short-rangeStrategyAuthoritiesdecentralizationSupervisionmechanismRotationsystem

DesignatedifferentsupervisorforR&D,productionlineandwastedisposalsectors,LettheBoardofdirectorsdecidefromthepotentialrawmaterialsuppliersputforwardbyR&Dmanager

Kimcouldformasupervisioncommitteecomprisedofofficersofdifferentsectorsandholdregulardiscussionsandannualmeetingsonexistingorpotentialproblemsofallsectors

Exchangepeopleofhighlevelsfromdifferentdepartmentsintermsoftheirpositionstoprohibitthepossiblewrongfulutilizationofsuperior-inferiorrelationshipsMarch,2007CommunicateethicalexpectationsandrequirementsindailyandinformalmeetingswithemployeesofalllevelsLetworkersknowwhatisrequiredforthemtosurviveandhowtheyaredoingintermsofethicsEstablishacommitteeofindependentnon-executivedirectorsonitsBoardofDirectorsTakemeasuresincludingevaluationsofthecompliancesystem,stafftraining&funding,IssueanannualreportoftheirethicsaccomplishmentsandthechallengesAccuFormfacedPostthecompany’svision,valuesandcodesofconductontheirwebsitesforpublicviewingConductregulartrainingsforemployeesontheirethicalresponsibilitiesandteachthemhowtotranslatethepledgeintospecificactionsProvidenecessaryandwell-developedsupportandguidancetothemConductofficialandtransparentrecruitingjobrecruitingprocessinthepublicOrganizepanelsofinterviewersfromalllevelsandallsectorsHirehigh-levelemployeesaftersanctionoftheBoardofDirectorsNotes:MBWARecruitment