The Beavers's Failure to Break the Cultural Boundary

This is a thought-provoking case, especially for the MNC¡¯s management teams both at the headquarters and at the regional markets. When the world is ever increasingly globalized, every company embracing an international ambition must learn to balance internationalization and localization, as what is advocated in the slogan of ¡°global vision with local mind¡±.

The beaver is a unique animal. A group of beavers can boast the most excellent dam construction team in nature, for they are not only diligent and smart, they also know how to work as a team. Their success relies on the commitment of the individual team member, but more importantly, on the effective communication and mutual trust among different members. The beavers are not keen on anarchism. They don¡¯t act on their own, neither do they interfere with their workmates. They win by collective effort and individual talent.

30 years ago, OBI¡¯s founder Manfred Maus, a shop clerk in a German hardware store was inspired by the beaver¡¯s behavior. Through the franchise model of business expansion, he gave plenty of trust to those who worked with him. Hence the legend of OBI was created out of the combination of brilliant ideas and excellent team work, in an environment where the talent of team members was given a full play. OBI became one of the most widely known construction material retailers, ranked No.1 in Germany, No. 2 in Europe and No. 4 in the global market.

A careful reading of the case will disclose the remaining OBI heritage. The fact that Dr. Li Fengjiang was given the job of the entrepreneurial CEO of OBI China shows that the corporate culture of OBI emphasized entrepreneurship and that the company was willing to provide more authority and power to every talented internal ¡°entrepreneur¡±. Li took it seriously and acted upon it. He almost succeeded. Undoubtedly, Li took many initiatives to make OBI more prepared for the local market, such as the well-considered products proportions and mix based on market researches, the reasonable procurement model consisting of centralized, regional and city channels, the region-centered strategy of delegating the purchasing and expanding functions to regional centers so as to better address the differentiated markets, the diversified patterns of opening new store, and the establishment of the OBI management school to train qualified local staff with professional skills and conversant with OBI culture. All these localized practices proved very rewarding in the local market: it took OBI China merely 3 years to start earning profits and become a formidable force in China¡¯s construction material retailing industry, which also promoted OBI¡¯s global competence.

However, Li seemed to be overwhelmed by his achievement of indigenization strategy. He ignored a fundamental fact that he was still an entrepreneurial CEO in the field of China within the framework of OBI, i.e., an ¡°internal entrepreneur¡±. OBI, as a giant construction material retailer in the global market, prefers centralized control to expansion through franchise; the latter was nothing but a practical measure to solve funding problems in OBI¡¯s earlier years. Failing to see this, Li delegated too much power to the regions. True indeed that Li won the trust of the founder, Maus, as well as that of the Board. Yet, this trust was seriously challenged when Li cancelled the service terms of the German expatriates who could not adjust themselves to the China context and performed poorly during the first year in OBI China. Li didn¡¯t even bother to fight a way out shoulder by shoulder with this expatriate team. He simply sent them home, believing that the complicated local supply chain system was too difficult for them to handle. Ten years before, OBI recruited Li ? the young Chinese PhD from the University of Cologne; they patiently trained him and assigned him the responsibility to open up the China market, and went as far as promoting him to the membership of OBI¡¯s global supervisory committee. But ten years later, they were enraged to find the China branch totally out of control. Nearly overnight, Li had to quit the job for ¡°personal reasons¡±, leaving the whole China team and Chinese partners in a great shock and loss. It directly put an end to Li¡¯s ten-year promising career in OBI, and indirectly resulted in a serious setback to the career development of all Chinese staff in OBI China. Also, those suffering from Li¡¯s resignation included OBI China¡¯s Chinese partners whose business plans had to be halted. From the perspective of social responsibility, Li¡¯s behavior could be counted as delinquency.

The miscommunication never happens bilaterally. The top management in OBI international headquarters made as many mistakes as Li. Expanding the business to the China market was a critical step beyond Europe. If European cultures are more homogeneous than heterogeneous, then it is vice versa with the relations between the German culture and Chinese culture. Even though having studied and worked in Germany for over ten years, Li Fengjiang remained a typical Chinese with a tendency to seek more flexibility and autonomy, as well as emphasizing the outcome rather than the process. But obviously, OBI top management, grown in German soil, failed to identify this discrepancy and was reluctant to respect the local culture. What they intended to uphold in the China market was still the German characteristics of centralized control with neat hierarchy in the style of an army. They didn¡¯t bother to attempt to understand the autonomous way of Chinese management team which was out of positive intention. Instead, they arrogantly boasted 36-year German experience and awkwardly brought in an expatriate team. Despite the local context, they copied and pasted the German model and abandoned the local procurement and management which better suited the local consuming habits. These practices were intended to correct Li¡¯s mistakes, but virtually served to add more to them. Finally, the OBI¡¯s Chinese partners terminated the co-operation and a large number of outstanding Chinese staff chose to leave OBI. Most ironically, B&Q, OBI¡¯s biggest rival, emphasized in its announcement when acquiring OBI¡¯s business in China, that ¡°2,000 OBI staff and the management team, which had been well trained over the last 5-6 years, is a very important asset attracting [B&Q] to complete this transaction¡±.

Today¡¯s China is increasingly integrated into global business world. Both for Chinese companies ambitious to go global and for the MNCs prepared to step into the China market, it is advisable for them to remember an old Chinese saying: ¡°Who wins people¡¯s heart will win the world.¡± Business world is a battlefield where those who want to win have to pay serious attention to local cultures so as to genuinely understand their colleagues, their customers and their business partners. Then a viable solution acceptable to all parties can be found. The key weapon in cross-cultural management is none other than respect and communication. How much have you grasped it?

The author is CEIBS MBA 98 student, now working as the branding consultant of Interbrand.