Case 74 Taming the Dragon: Cummins in China

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Case 7-4 Taming the Dragon Cummins in China

• Carley Hughes, Alyse Hunsucker, Aaron Krause,
  Anthony Zefiretto.

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(No Transcript)
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History of Cummins

• Founded in 1919 by William Glanton W.G. Irwin
  and Clessie Lyle Cummins.
• Secured manufacturing rights for a diesel engine
  from a Dutch inventor.
• Growth in US. Trucking industry.
• Strong leader in the market until 1980.

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• Results of Deregulation of the US. Trucking
  industry in 1980
• Market share fell from 62 to 23
• Cummins Response to Market share loss
• Newage (power generators)
• Holset (turbo chargers)
• FleetGuard (Filters)

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Company Info.

• Three Divisions
• Automotive Segment
• Power Segment
• Industry Equipment Segment
  
  

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Approach to China

• In 1975 regulations prevented Cummins from
  forming a JV
• Entered China through a Licensing approach
• Later formed JV with their licensing partners.
• 1993 1st JV
• (CCEC) Chongqing Cummins Engine Co.

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Critical Issues

• Streamlining Chongqing Cummins Joint Venture.
• Improve Distribution and Service Organization in
  China.
• Staffing the Organization.

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Porters 5 Forces

• New entry
• Risk and effects of China joining the WTO
• Increase in foreign interest in China
• import/export perks for Foreign companies
• Rivalry among competitors
• - The degree of rivalry between companies is
  currently low as Cummins is the first in the
  diesel industry to infiltrate China.

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Porters 5 Forces Cont.

• The bargaining power of buyers
• Currently low, however as a larger variety of
  products and companies are introduced into the
  market, the buying power will increase.

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Porters 5 Forces Cont

• The bargaining power of suppliers
• Currently under the control of Cummins
  because they currently are involved in a joint
  venture with their suppliers giving them a very
  large amount of bargaining power.
• The threat of substitute products is currently
  low, because the number of competitors is
  relatively limited.

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SWOT

• Strengths
• Weakness
• Opportunities
• Threats

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Geert Hofstede Ranking
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Behaviors

• China
• Personal Contact must be avoided at all cost
• Avoid all things that involve touching the mouth
• Do not point when speaking
• Do not discuss business at meals
• Gifts are acceptable, the best gift is a banquet

• United States
• Do not chew on toothpick in public
• Business conversation may very likely take place
  during meals
• Be careful with gift giving it may be viewed as a
  bribe
• If you are in line wait for your turn

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Possible Solution

• Chinese abolishing CNHTC
• Form a new joint venture.
• Continue without another partner.
• Hiring a consulting firm.

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Suggested Solution

• Hiring a consulting firm
• Help rebuild the company while they look for a
  new joint venture.
• Joint venture with a solid history and
  reputation.
• Work to accomplish all goals in Six-Sigma.

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Possible Solutions

• Inefficiency with parts distributed out of
  Singapore
• Build a stand alone service division.
• Fine tune issues in Singapore.

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Suggested Solution

• Create a stand alone service division
• Help align better with Chinas Market.
• Complying with Chinas regulations.

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Possible Solutions

• Finding a replacement for Steven Chapmans old
  position
• Bringing in the gentleman from Korea.
• Hiring someone with experience from an outside
  company.
• Promoting from within despite lack of individuals
  qualified.

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Suggested Solution

• Replacing Chapmans old position
• Hire an outside manager with experience.
• Have them work closely with Chapman.
• Look for this new manager to be innovative,
  determined, and a visionary.

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Reaching The 1 Billion Dollar Goal.

• The goal may seem steep, but we think that it is
  obtainable.
• It is going to take a lot of time and effort.
• We believe that the new manger will be the key
  deciding factor in whether the goal is reached or
  not.

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Reaching The 1 Billion Dollar Goal.

• If the new manager turns out to be a bad hire
  Cummins will come nowhere near this goal.
• With or without reaching this goal Cummins is
  going to see many new opportunities in the
  future.

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Reaching The 1 Billion Dollar Goal.

• In 2004 Cummins reached the 1 billion dollar goal
  a year ahead of schedule.