The management also devised a platform to address employee grievances. It is necessary to conduct such seminars and employee training programs to provide the Chinese employees the cultural orientation to equip them with the skills necessary for working in a global concern. Danfoss management has learnt from its initial experience the importance of understanding and appreciating the cultural differences involved in globalization. The human resource department of the Chinese subsidiary focuses on bridging the gap and promoting a more efficient working platform, which would contribute to the overall profitability of the company. As one of the Supply chain managers at Danfoss put it ' adapt to the Chinese way on the outside and doing things our own way inside the company'. [Jonathan Story]
As discussed above Danfoss has huge market potential in China, which is emerging as a fast growing economy with huge demands for its products. China offers a business proposal, which would be a dream for any business venture. It has a large and expanding market base, it offers cheap land and labor, and the entry of China into the WTO has further facilitated the business operations for foreign companies. By acquiring material locally and by producing the components locally, Danfoss was able to compete both with the local companies as well as make products cheaper for its western customers where there is increasing demand for reducing prices. Furthermore, western markets are more or less saturated in the HVAC product segment and are not as lucrative as the emerging markets such as China, which is poised to grow at a significant pace with huge growth in this segment that Danfoss caters to.
The implications for Danfoss are immense. China offers great promise but it also demands meticulous planning and strategic thinking in order to reap the benefits. The Chinese market is also intensely competitive and therefore a hasty or unplanned venture would only backfire as can be witnessed in the exit of several multinational firms in the HVAC sector in the last couple of years in China. As one of the early birds in the Chinese market, Danfoss has a good foothold and is well poised to realize the Chinese dream. On the other hand, Danfoss also has to deal with a huge outcry in Denmark and its other facilities in Europe as its Chinese expansion has affected the employees and the employment prospects across Europe. China attracts more foreign direct investment than India, Russia and Brazil put together. With Israel being the third largest trading partner of China it is only natural for many Israeli firms to venture into China. [Deloitte] Thus Israeli firms which have plans to enter into China would do well to take Danfoss as an example and study how an effective and well formulated strategy would contribute to stable and steady business prospects in the growing Chinese market economy. In particular, cultural considerations have to be thoroughly understood and cultural orientation is key to better employee contribution. Also, companies should focus on low-end segment as well as they contribute a huge market base.
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Harmony, hierarchy, responsibility are Confucian elements of Chinese culture. Chinese management principles include these Confucian values of mutual obligation, hierarchy and harmony. [Huibert de Man] Danfoss did well to consider these traditional Chinese ideals and applied them effectively. For instance the Danfoss was very intent on maintaining excellent relationship with the Chinese government officials (Guanxi) and made it a point to invite the top officials for every important strategic event. For instance, for the opening of its manufacturing plants Danfoss invited important government officials. This according to Danfoss management 'indicated to the local people and corporates that the government supported the company and its products'. [Vinaya Kumar] Danfoss also made it a point to invite government officials to its plants in Europe....
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