Critical Analysis - Shui Fabrics



Critical Analysis - Shui Fabrics

Shui Fabrics' ROI: Different Perspectives

Case Overview

Shui Fabrics is an enterprise equally shared by Shanghai Fabric Limited and Rocky River Industries. The former company is based in Ohio, USA. Shui Fabrics has been operational for ten years in China. The company produces dye and coat fabrics for sale to both Chinese and international sportswear manufacturers. Shui Fabrics has started to show positive bottom line in the last three years of business. This is a result attained after eliminating numerous obstacles including bureaucratic red tape and periods of negative profitability.

Shui Fabrics American connection, Rocky River Industries, has attained decrease in labor costs due to Shui's operations. Further access to potentially huge Chinese market through Shui operations was a much needed diversification for Rocky River. In face of all these benefits, Management at Rocky River was not happy with the progress of the Chinese joint venture. The main objections of Shui's operations were regarding its low ROI, surfacing at 5%. The expectations for Shui envisioned an ROI of 20%, at this point in time. Paul Danvers, Rocky River's president, was of the view that:

Greater efficiency through incorporation of sophisticated technology would allow Shui to reduce its sizeable workforce and lead to greater ROI;

He also rejected the idea of incorporating more workers to increase the operational efficiencies and production at Shui;

Paul gave Betzell an ultimatum to improve performance or Shui could face shut down.

A 5% ROI at Shui Fabrics is a cause of concern for both Ray Betzell, general manager and Chiu Wai, the deputy general manager. Management philosophies of both these professionals would differ in view of GLOBE project value dimensions. This is because Betzell is American and Wai is Chinese.

GLOBE project value dimensions explore different nation's prevalent organizational and national culture on five essential value dimensions. These value dimensions are: long term orientation, uncertainty avoidance, masculinity, individualism and power distance (Hofstede, 1991). Following below is an illustration of comparison between China and USA with regards to the five value dimensions.

(Hofstede Centre, 2013)

The above graph illustrates that Chinese and American culture differs in three of the five dimension values. These dimensions are that of power distance, individualism and long term orientation. As such Wai and Bretzell would differ in their management practices in three of these dimension values.

Power distance (PDI) concept accentuates “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally” (House et.al, 2004). In China, PDI is high compared to USA. This is because the national culture is such that people accept inequalities. The subordinate-superior relationship is polarized and people generally do not defend power abuses by superiors. USA's PDI is low (see graph above). This accentuate that the society does not expect nor accept that power should be distributed unequally. As such Bretzell, even though more focused towards rightsizing would surely argue the impact of downsizing on the workforce, whereas the Chinese workforce and the deputy manager may ...