6 A German company: VW
6.1 German Culture in comparison to the Chinese
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
19
6 A German company: VW
When reading about how the idea of VW entering into China came up, one wonders about how much of it only happened due to luck. Martin Posth, formerly responsible for the VWs operation with SAIC, describes in his book “1000 days in Shanghai” how the Chinese Machine Minister one day just stood in front of the VW headquarters on Wolfsburg and said “I am the Chinese Machine Building Minister and I would like to speak to someone in charge at Volkswagen” (Posth, 2006, p.4). The Minister and his entourage had come to Germany to take a close look at the automobile industry there. They knew only Mercedes Benz so therefore they came to Stuttgart, where the Mercedes headquarter is located, and expected to see the streets flooded with Mercedes Benz. But instead they saw Beetles and Golfs all over the streets. So after inquiring about where the headquarters of this VW brand, which produced all these cars, is, the minister decided to take a detour to Wolfsburg together with his whole retinue.
As Martin Posth writes “This episode gives us a foretaste of the kind of pragmatism that the Chinese show no matter what task faces them.” (Posth, 2006, p.4). But it was not only the sheer volume of VWs on the German streets that intrigued the Chinese, it was also the practicality and relatively cheaper price of the VW cars. The VW cars seemed to match better to the requirements and demands of future Chinese car owners. VW on its side however, never had a choice. For them it was entering China with SAIC or not at all, as the Chinese government dictated the foreigners with whom they had to partner up.
In order to be able to understand the obstacles and difficulties SVW had to overcome, one first has to take a close look at the German culture in comparison to the Chinese and VW as a company.
6.1 German Culture in comparison to the Chinese
As before when describing the Chinese culture, once again Hofstede’s five dimensions will be applied.
Power Distance: Here, Germany displays a rather low index of 35, actually much lower than the world average of 55. This means that German companies tend to consult their subordinates about ideas, manage democratically and treat everyone as equal. This also expresses itself in a narrower range of salaries. However, German work culture still is very ordered and bureaucratic, which matches well with the Chinese way of doing things, even though China has scored a high 80 in Power Distance. The main difference causing the most trouble between German and Chinese companies in regard to this dimension, might be the
‧
fact that Chinese senior management might have a hard time accepting ideas not coming from their own ranks. Also, as power is generally exercised from above in China, whereas in Germany a rather independent work attitude is expected, a German manager in China might be surprised by how clearly he or she will need to instruct the Chinese subordinates.
Individualism vs. Collectivism: Whilst the world average is at 43, Germany scores at 67 and therefore shows a very high tendency to individualism. This is in line with Hofstede’s finding that wealthier countries tend to have a higher individualistic score. This means, that values such as individuality, self-determination and independence are highly valued. However, whilst individualism is highly valued on a private basis, in the workplace things are often decided by committees and decisions are made jointly. China on the other hand with a low 20 is one of the most collectivistic countries in the world. This also materializes in the fact that Chinese companies tend to build long-term relationships as a ways of “group building”
and forming a bonding relationship. In a work environment, where the two cultures have to work together, it is important for the German participants to try not to stand out from the crowd. Very different from the German culture, where individualistic ideas and individual fulfillment is seen as desirable, when working with China, it is important to blend in with the group and avoid any action that might draw attention to oneself as an individual.
Masculinity vs. Femininity: The world average here is a score of 50, whilst both – China and Germany do score a 66, meaning that they are very compatible in this dimension. The high masculinity score in both countries expresses that money, material possessions and recognition are highly valued. Both countries are still male dominated but it must be mentioned that this is slowly changing in Germany and this might lead to a change in the masculinity score. Even though officially in China, men and women have the same rights, this is not the case when one looks at the reality. Therefore one must say that even though on the outside the two countries look similar in respect to this dimension, the similarity might become undone soon, leading to even bigger obstacles as there has been some similarity before. Female managers operating in China will have to be prepared to be confronted with some kind of sexism, as the Chinese counterpart will assume that the real decision power lies with their male colleagues.
Uncertainty Avoidance Index: The world average for the uncertainty avoidance index is 64.
Therefore Germany with an uncertainty avoidance index of 65 is pretty much average, whilst
‧
China with an index of 30 is clearly more into allowing individuals to manage their own risk.
Germans are prone to a need for security. Therefore they insist on written rules and detailed code of conducts. Carful planning and adherence to those plans and rules are a must in the German business world. Through this, Germans try to reduce the risk of uncertainty to a minimum. This is completely opposite to the Chinese way of doing business. The Chinese are not afraid of an unforeseen future and are welcoming of bending rules and changing plans as new situations emerge. This difference in how tasks are approached, can lead to misunderstandings in situations where Germans have to deal with Chinese business people.
The German side has to be aware of the fact that contracts and rules are guidelines but by no means are a strict code of conduct. Meetings and schedules are frequently changed. This can be very distressing for German businessmen if they are not aware of the cultural difference.
Long-term (normative) vs. short-term (pragmatic) orientation: Germany and China score very similar her with 83 and 87 respectively. However, still there is a big difference in how the two countries deal with their partners. Germans like efficiency so therefore their high long term orientation number stems more from the fact that a long term orientation is often more efficient. Despite the high long-term orientation score, they are still very pragmatic oriented and rely on facts when doing business. The results in a directness that might be mistaken as hurtful or cold especially by Asian cultures, who tend to prefer stable, strong, reliable and personal long term relationships, which are built not on facts but on mutual trust that has been developed over a long period of time. This long-term, normative orientation means that the Chinese take their time to develop mutual trust, whilst Germans rely on the bare fact, contracts and rules. This difference can be annoying for German business people when dealing with Chinese, as it takes very long until things really take off, which goes totally against the efficiency Germans like and demand.
Indulgence vs. Restraint: Here the German score is 40, whilst the Chinese score 24. This means that Germans are restraint, as their score is only 40 however, not as restraint as the Chinese. The two countries are similar in this. Comparing China or Germany with the US in this aspect would give a different picture. The US scores a high 68 in indulgence and that means that the Americans have a much stronger sense of “work hard play hard”, which goes against the Chinese restrictiveness. One needs to keep that in mind when talking about the success or failure of US American JVs in China.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
22
The comparison of the Chinese and the German culture here already gives a sense about where problems in JVs can occur and that the source of them is often due to differences in the two cultures.
Martin Posth writes about the difficulties to overcome those cultural differences when working together with the Chinese in the SVW JV. For example in the early stages of the opening up to the world, the communistic mindset was still very prevalent and strong, so the workers were the “kings”
as one of Mr Posth’s colleagues describes them. In the early stages that let to a lack of authority of managers (M. Posth, 2006, p.49). In his book Martin Posth also expresses his frustration about the cultural differences when he writes: “We couldn’t just push a button and have the Chinese workers march in the right direction” (Posth, 2006, p.58).
The Graph illustrates the differences some more:
Figure 4 Hofstede comparison of China and Germany
One can conclude here that, even though China and Germany are very different in certain aspects, in some others they are quite close and definitely the German work culture fits better to China than for example the American work culture, because despite the fact that differences are existing, they are still not as extensive as they could be and in some aspects the two cultures actually are quite matching.
Having looked into the specifics of German culture, the paper will now focus on the German partner company of the German Chinese JV: Volkswagen (VW).
‧
Europe and together with Toyota and GM it is one of the largest worldwide. The Volkswagen AG is the parent company not only of Volkswagen (VW) but also of Audi, Seat, Skoda and some more premium brands such a Bentley, Lamborghini, Bugatti, Ducati and Porsche.The history of the VW AG is closely linked to the Third Reich, as Adolf Hitler was the one who in 1934 demanded that a car should be developed that would be affordable (less than 1000 Reichsmark), has four seats, is fuel efficient and able to hold a speed of 100km/h, which was needed if one wanted to use it on the new and modern German “Autobahn” (Highway). Ferdinand Porsche, later the founder and main engineer of Porsche AG, was asked to develop a model and that was how VWs most famous model – the VW Beetle was born (Hawranek, 2009).
The VW AG was finally founded on May 28th 1937. Later on, in 1972, the VW Beetle broke the record of the Ford Motor Company’s Model T of 15.007.034 cars sold.
In 1964, VW acquired what later became known as Audi.
In 1982, Dr. Carl Horst Hahn became chairman of VW and stayed it until 1993. By that time, VW had operations in Brazil and Mexico, where it had helped to built up the automobile industry and therefore was already an international company. However, up to that point, VW had no direct operations in Asia (it had licensed its Santana to the Japanese Nissan but was not directly involved in the production. Only later, after the China JV had already been established, the operations in Japan also grew) and therefore when the Chinese Minister of Machines came to the VW headquarter in Wolfsburg and suggested a cooperation, it was quite a big decision for the company weather to risk this or not. Especially since the Chinese Market at that time had only just opened up to the world and was still very underdeveloped.
However, Dr. Carl Hahn approved the JV with SAIC and not only that but through his constant support of the China operations he is mainly responsible for the founding and success of it. In addition to that, its operations in China became extremely important for VW as means of income. As one Chinese planner in G.T. Chin’s “China’s Automotive Modernization” says:
“We believe that China, in fact, has saved VW. VW had lost out to the Japanese on the U.S. market.
Their decision to come to China turned out to be really beneficial for them. They have made huge earnings in China. We can see this in the fact that the largest share of VW’s profits, globally, came from its China investments. “ (Chin, 2010, p.74).