Hong Kong China Business

1. Hong Kong China Business Problem-based Learning : Question 2 (Group X)

2. Our situation: ~ An American company producing electrical components for motor vehicles ~ Joint Venture with Shanghai Automotive Industry Corporation(SAIC)

3. Our Partner : SAIC ~ A Government owned company ~ One of the China’s largest automotive firm ~ 50 plants in the Shanghai area ~ Makes passengers cars , tractors, motorcycles, trucks, buses & automotive parts ~ JV with, Shanghai General Motors,makes bricks for Chinese market ~ JV with Volkswager, makes Santana, the best selling car in Shanghai ~ other operations including car leasing, auto parts wholesale &retail & financing

4. Current Issues: ~ Has developed a new product line ~ A system for monitoring the wear on tyres and reporting to the driver via on the car’s instrument panel ~ Produced in the US factory for 18 months ~ Using specially designed machinery

5. Current Issues: ~ Has developed a new product line ~ A system for monitoring the wear on tyres and reporting to the driver via on the car’s instrument panel ~ Produced in the US factory for 18 months ~ Using specially designed machinery 1. Whether to transfer the new product to the company’s Chinese production site. 2. If transfer, what kind of technology transfer activities that will be needed.

6. Easy Access to market ~ can sell to the retailers directly and hence can develop a closer relationship with the retailers

7. Lower Production Cost Short term: ~ high initial cost: the settings, training cost Long term: ~ lower cost:Cheap labor, cheap materials

8. SAIC has cooperated with GM before Competitiveness • Through EJV with SAIC, transfer technology can obtain different advantages • Firm-level: • Financial Strength • Expertise • Production capability • Experience • Technology SAIC has a net profit over RMB$5000m for the past four years SAIC emphases on the training of technician & engineers SAIC has 50 plants in Shanghai

9. Expensive !! Cheaper !! Competitiveness • Product-level: Not transfer technology: – Imported products Transfer technology: –China-made products • Transfer technology can increase competitiveness

10. Types of Knowledge • In China, Intellectual property law is not comprehensive • However, nature of technology is tacit and unique • More unique the knowledge, the more difficult it is for competitors to copy the technology and to offer the same product • Our new product has been produced in the US factory for 18 months, using specially designed machinery with US workforce learning how to use it and minimize the defects in the manufacturing process • It shows our products is very unique with continued human learning  It is not easy to copy

11. Types of Knowledge • Form a long term collaboration with SAIC • SAIC will not allowed technology leakage Example: Advanced Machine Tools (AMT) and Beijing Hi-Tech (BHT) AMT – technology (design, training & the supply of components) BHT – technological capabilities • Joint Venture has a positive value to both company • Form a long-term Collaborative agreement

12. The Kind of technology transfer activities Hardware resources transfer • 1. Specially designed fixtures, machinery and equipment transfer from US factory • in the initial stage • Special raw material, part and components have to be produced or transferred continuously • Some of the basic assembly tools and equipment can be provided by the existing joint venture company

13. The Kind of technology transfer activities Software resources transfer • Specially designed computer software, programmer, etc. for this new production

14. The Kind of technology transfer activities Other resources transfer • 1. Blue Prints for the production • Product design • Specify the know-how about the product design to Chinese engineers • Maybe possible to raise improvement or modification for the product from Chinese engineers opinion • => knowledge may also be generated and accumulated from within the new production facility as a direct result of training and expansion in later days.

15. The Kind of technology transfer activities Other resources transfer • 2. Other documented Specification • Including process arrangement, process standards, operational manuals etc. for all productive activities • =>Led to relatively advanced- level production, management and administration • =>provides the prerequisites and potential for increases in production capability and production variety

16. The Kind of technology transfer activities Other resources transfer • 3. Quality control Practices transfer • Ensure the production quality in Chinese production site can reach the required standard. • By transfer the quality control practices, can also insert western style management to the company.

17. The Kind of technology transfer activities Other resources transfer • 3. Quality control Practices transfer • According to our findings : • Real case: Joint Venture between China and Volkswagen of Germany • Since 1980s, transfer “Quality, Quantity and Maintenance system (QQM), Quality control Circle (QC), to control the production system •  Quality control practices should be transferred • Source: Lui Wai, Technology transfer, technological capability and late entry into the international automobile industry : a case study of Shanghai-Volkswagen automotive corporation in China, England : Document Supply Centre, British Library, 1992.

18. The Kind of technology transfer activities • 4. Information and skills for running the new facilities • => ie. production, management and administration • =>during adjustment and testing phase at each process • =>explicit training both at China partner factor and US factory

19. The Kind of technology transfer activities • 5. Transfer of US workers to China • US engineers work side-by-side with Chinese engineers and workers on production lines, esp. during the initial production stage • =>contained information and skills transferred and training under-taken at local and US

20. The Kind of technology transfer activities • Impact of Transfer of US workers to China • =>transfer of this technique has led to significant development in overall operation capabilities • =>led to some organizational improvement in production, management and QC

21. The Kind of technology transfer activities • 6. Training at China • US sends US experts to give lectures at universities and to find the best students for future recruitment in China • Initial Stage: technical training of lower level operating skills for immediate production requirement

22. The Kind of technology transfer activities • 6. Training at China • Later Stage: development of more senior managerial and technical personnel • => including emphasis on development maintenance and service skills for the company ‘s most complex production and testing equipment

23. The Kind of technology transfer activities • 7. Training in US • employees sent to US for training of various techniques, ranging from enterprise management to product design and financial administration • =>contributed in building up the human resource for changing in product technology • ~> Quantity content was limited • ~> needs active participation , involvement and learning by the technology importer.

24. The Kind of technology transfer activities • Other issue consideration • Internal Governance • Highly specialized task • Restrict on the rotation of employee on different task • Chinese employee not able to learn the whole process of production •  avoid risk of knowing of entire skills (protect US firm)

25. Linkages with suppliers • Make efforts to help generate technical change in the local supplying industry • =>Directly: ie. Providing technical assistance and cooperation to local suppliers. • => Indirectly:ie. Putting Chinese suppliers in contact with US suppliers and experts

26. Suggestion on how US company can perform better base on the experience learnt from the failure of SVW • Make significant efforts in selecting employees • Individual income of employees to be linked to plant or group performance and not corporate performance • Training for experienced employees to be increased

27. Conclusion • Summary the kind of technology transfer activities

28. References: ~ www.hoovers.com ~ Agmon and Von Glinow, 1991, Technology Transfer in International Business ~ D.J.Bennett,K.Vaidya, X.Wang and F.Zhu ‘Technology Transfer and Chinese Government Policy: Opportunities and Implications for Business’ Technology Management: Strategies &Application3, 1997, pp.95-108 ~ Bosworth, Derek and Yang, Del.2000. Intellectual property law, technology flow and licensing opportunities in the People’s Republic of China. International Business Review,9,453-477

29. ~ De Bruijn, Eric J. and Jia, Xianfeng, 1993. Transferring Technology to China by Means of Joint Ventures. Research Technology Management, 36 (1), Jan-Feb,17-22 • ~ S.Leung, J.Tse, M. Williams, J.zhong and H. Davies, ‘The Legal Framework for Technology development and Technology Import in China’ International Journal of Technology management21,12,2001pp.42-60 • ~ McGaughey, Sara L., Liesch, Peter W and Poulson, Duncan. 2002. An Unconventional Approach to Intellectual Property Protection: The Case of an Australian Firm Transferring Shipbuilding Technologies to China. Journal of World Business,35 (1),1-20 ~ Lui Wai, Technology transfer, technological capability and late entry into the international automobile industry : a case study of Shanghai-Volkswagen automotive corporation in China, England : Document Supply Centre, British Library, 1992.

30. Done By • Chan Po Yan 0033874d • Chan Yin Ting 00295162d • Ho Hiu Nuen 00295227d • Wu Kar Yee 00916560d • Wong Wing Lam 00201434D • Or Shek Chung 00302965D