Case

Background

In 1961, two engineers who had just received their MBA degrees from the University of Michigan decided to capitalize on the exploding revolution in technology by going into business. Andrew Zamora and John Lee combined their expertise in electrical engineering with their new knowledge about management by opening a small factory in Dallas, Texas that produced television sets. Soon the company was producing not only televisions but also toasters, can openers, crock pots, and other small appliances.

One of the founders of the company, John Lee, had concentrated in transisters in engineering school. Lee continued to work in this area and was instrumental in the development of integrated circuits and semi conductors. This work helped make the Oralee Electric Company a success, leading to growth and moderate profits for many years. In 1976, Lee and his partner, Zamora, sold the company for five million dollars to the Matsushita Corporation, an Osaka-based Japanese conglomerate with holdings all over the world. Matsushita kept the name of the company and made Oralee Electric a division of Matsushita. Oralee Electric remained profitable throughout the ‘70’s and early 80’s, but in 1985, due to the economic recession and increasing competition, it began a slow decline in profits and market share. In the fall of 1996, Matsushita sold the company to the Daewoo Corporation, a South Korean chaebol company, for 22 million dollars. This was considered to be a bargain for Daewoo in spite of the problems Oralee Electric was having.

Current Situation

Daewoo, the fourth largest corporation in South Korea with many diverse interests throughout the world, acquired Oralee Electric for the purpose of gaining a foothold in the U.S. market. Daewoo owns two electronics companies in South Korea (Daewoo Electronics Company and Orion Electric, LTD.) and makes parts for several international companies. Although Daewoo has been importing some products, such as TVs and VCRs, name recognition is poor. Acquiring Oralee Electric offered an opportunity to break into the American market with an established company. Daewoo management was excited about the potential for growth.

Oralee Electric became a subsidiary of Daewoo Corporation. Daewoo placed three top-level people in the management of Oralee Electric. Sang-Chull Lee became president of the subsidiary after the acquisition. (The former president was Toshiaki Ohmura, who stayed with Matsushita.) Two other Daewoo corporation executives became Vice-President of Administration and Director of Human Resources, positions created for them. Il Suk Park, the Vice-President of Administration is a careful, exacting person who demands lots of information and evidence for all actions and expenditures. Jin Cheon Kim, the Director of Human Resources, is an idea man, creative, energetic, and often willing to take risks. The new president is also energetic and a workaholic—somewhat slow to make decisions, but once he makes them, doesn’t change his mind easily.

The remaining members of top management at Power Electronics consist of three vice presidents, one the chief financial officer, one in charge of operations, and the third the chief legal officer. The chief financial officer, Bruce Jarin, is notoriously conservative in approving expenditures; Kevin Anderson, the VP of operations, is much less conservative and a strong personality, who can push through most expenditures he believes are necessary for the operation of the two manufacturing facilities. The chief legal officer is Lynn Winters, a perfectionist who demands careful analysis and evidence before agreeing to any company action. Surprisingly, this group of Daewoo executives and Oralee electric executives got along well from the start. The Oralee executives believed that Daewoo would provide a needed rejuvenation of the company, allowing Oralee to share in the exciting developments in digital TV and other technology advances.

Then the Asian economies fell apart. For months, nothing was decided at Oralee Electric. The company continued to produce products, but sales were anemic. However, a few months ago, the entire top management of Oralee Electric met in Seoul with Daewoo’s executives. Daewoo’s creative and daring Chairman Kim led the meeting. At the end of the five-day meeting, Oralee Electric executives flew back to Dallas with a promise of support, commitment, and direction for the company. They were all relieved, but there is much to do to make Oralee secure and ensure its continued profitability.

Problems

At present, Oralee Electric has a number of problems. Morale is low among the employees. Conditions in parts of the factories are sub-par. Medical expenses have been higher than usual. And even though Oralee has been profitable in the past, there is little name recognition. Daewoo has not yet made a decision regarding whether or not to change the name of the company. Management has decided to address these problems over the next few weeks and hopes to enlist the help of their most promising employees.

As part of Daewoo’s commitment to helping Oralee Electric resolve its more pressing problems, a small group of top executives from Seoul are coming to Dallas and will stay for at least two weeks. Chairman Kim himself will be there for the first week. The other members of the group include Suk-Hi Rhee, Chairman of Daewoo International, Seong-Jin Kim, Chairman of the Daewoo Economic Research Institute,, and Soon-Hoon Bae, Chairman of Daewoo Electronics. (All names are listed in the American convention of first name followed by last name. Korean conventions list the last name first.) This group will meet with Oralee executives and others to listen to problems and help with solutions.

Company Profile

Name: (at present) Oralee Electric Company

Products: TVs, VCRs, radios, toasters, can openers, food processors, etc.

Annual Sales: $200 million in U.S. dollars

Employees: 227

Facilities: Headquarters and two manufacturing facilities in Dallas, Texas

Questions

1. How many cultures are represented in this case?
2. How might the management styles of the Japanese and the South Koreans differ?
3. Where do the Americans fit into the mix, and might there be more than one American culture represented, such as hispanics, African-Americans, etc.?
4. What are the important issues to resolve in order to restore profitability to the company?

Teaching notes

Objectives

Participants should learn that:

• Communicating with Asian audiences requires learning about differences and being flexible in communication styles.
• Asian audiences differ from one country to another. What might be extremely effective in Japan may not be so in South Korea. Stereotypes should be avoided.
• An understanding of American/Western style of communicating is also needed to be effective in intercultural communication.

Scenario A

The office staff in the Dallas plant has been complaining for some time about the uncomfortable office furniture. They have noted a rise in medical problems associated with computer use, and have pointed to an increase in medical costs for the company.

The office staff are all native-born Americans. They are used to sharing their concerns with their supervisors. Now they feel that the issue is critical. They want new, ergonomic chairs and glare screens for their computers at a cost of $50,000.

The Daewoo executive team from Seoul is coming to Dallas for a weeklong meeting to deal with some of the company problems and concerns. One staff employee, Anne Smith, has been chosen to speak to the South Korean executives and present the employee proposal for new office furniture.

• Instructions: Play the role of Anne Smith (or John Smith) and make a proposal to the group of South Korean executives. The presentation should be 8-10 minutes with 5 minutes afterward for questions and answers. The rest of the group should play the role of the South Korean executives.

• Debrief:

1. How difficult was it to play the role of the South Korean executives?
2. What kinds of appeals (ethical, emotional, logical, credibility, etc.) do you feel were most effective with the South Koreans? Why?
3. What connections can you draw between the effective appeals and the core beliefs of the Asian countries?

Scenario B

The South Korean executive group has agreed to buy new office furniture for the Dallas office staff. They are willing to pay up to $50,000, but they would like to get good quality furniture for less, if possible.

• Instructions:  Split the group into three smaller groups. Have one group play the role of the South Korean executives. Have the other two groups each play the role of office furniture company representatives—all Americans.

During one class period, have two rooms available—one for each office furniture company. Have the furniture company representatives negotiate with the South Koreans to sell Oralee the furniture it needs. The sales representatives will be bidding against each other, but they should not know what the other company is doing. At the end of the class time, have the South Korean executives choose a company, based on what they have been able to negotiate.

• Debrief: At the next class period, have the two office furniture companies share what they were and were not willing to do. Discuss which company got Oralee’s business and why. Discuss what kinds of appeals and what kind of persuasive strategies the office companies used and why they were or were not effective.

1. How difficult was it to play the role of the South Koreans?
2. Did the "American" companies consider different strategies because their audience was another culture?
3. What did the winning company do that the losing company did not do?