Swedish Chamber of Commerce in Shanghai

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Empirical Findings

Chapter four presents the cultural and historical background of Sweden and China, fol-lowed by an introduction of the two companies and the Swedish Chamber of Commerce in Shanghai. At last, we present all relevant findings from our two case studies related to the five elements of the Star Model and culture.

Cultural and Historical Background

Sweden

Sweden is a wealthy and highly developed economy that is leading when it comes to gender equality. The power of the country lies in the hands of the parliament, and Swe-den is considered to be the one of the most democratic economies in the world (NE, 2012). Furthermore, the standard of living is very high, which is related to the deeply rooted welfare system. Every individual in the society is guaranteed social benefits and the distribution of income is in a global perspective very equal. The country has during the last 50 years gradually moved from an industrial economy to a service economy, with a highly educated workforce (Elmér, 2012).
Sweden has been an open country for a long time, and consequently, the Swedish socie-ty has influences from other cultures. The Swedish culture is signified by certain norms in the society, such as the values of equality, trust between individuals, and a strong in-dividualism (Trägårdh, 2007). Furthermore, Daun (1996) underlines that the fundamen-tal pillar in the Swedish society is that everybody has the right to express their opinions in every situation. This has resulted in low dependence of authorities, and in terms of business behavior, people are communicating with everyone in the business hierarchy. In addition, Swedes have high ambitions of accomplishment, which is achieved through a natural interest in their learning process (Daun, 1996).

China

China has more than 5000 years of history. However, the foundation for a centralized empire was not established until 221 BC, when Emperor Qin Sin united the country. The following 2000 years were characterized by flourishing periods in culture and science, and the creation of new dynasties (Lovell, 2006). China experienced few influ-ences from cultures during this period, since the country was relatively closed. This has made the Chinese culture very unique, and consequently it has given them another frame of reference compared to Western cultures. Whereas much of the Western culture is influenced by religious beliefs, the Chinese culture is more affected by cultural norms, particularly the philosophical system of Confucianism. Confucianism is ethical teaching of old morals such as respecting elders, live a good life, and being good to the society (Fan, 2012).
The dynasty era ended in 1911 when revolutionaries defeated the emperor and a period of political disturbance followed. The communist leader, Mao Zedong took power in 1949, resulting in a period of social and economic reforms that made the country more closed than ever before. After the death of Mao in 1976, his successor Deng Xiaoping turned the country towards a liberalization process, with open boarders and economic reforms as a result (Johansson, 2012). Since then, the economy has prospered, leading to a growing Chinese middle class and a heavy urbanization. The old Chinese agricul-tural economy has changed toward an industrialized oriented country. Today, there are still several influences from the ancient China, which is often used in the business beha-vior. One of the most used behaviors is guanxi, which can be translated to relationships, networks or social contacts (Fang, 1999). This expression is connected to the creation of personal and professional networks, and is essential to both Western and Chinese people when doing business in China. Furthermore, guanxi is linked to the aspect of face-value, which refers to keeping your own and your personal networks with good reputation (Fang, 1999).

Company Descriptions

Sapa Heat Transfer

Sapa Heat Transfer is a division and a business area of the Sapa Group. Sapa Group was founded in 1963, and the company was initially focusing on producing value-added aluminum products. The company grew fast, and in 1970 more than 300 people were employed. Its first country unit outside Sweden was established in Holland in the early 1970s. The success was followed by several acquisitions and start-ups between the 1970s and 2000s, and today Sapa Group is employing more than 14000 persons in 33 countries, and had revenues of SEK 35 billion in 2011 (Sapa Group, 2012a). The enter-prise is today owned by ORKLA and is divided into the three business areas Profiles, Building Systems, and Heat Transfer (Sapa Group 2012a).
The Heat Transfer division is the second biggest division within Sapa Group, with reve-nues of SEK 5 billion, and 1450 employees. Furthermore, Sapa Heat Transfer is one of the largest producers of aluminum solutions for the automotive heat-exchanger industry, and more than 90% of the production goes to the car and truck industry as air coolers, oil coolers, and heaters (Sunström).
Sapa Heat Transfer is currently established in the markets of Sweden, Belgium, China, Germany, India, Mexico and The Netherlands (Sapa Group, 2012b). The Chinese opera-tions started as a joint venture with a small local company in the Shanghai area in 1996. However, since 1999, Sapa Heat Transfer has been the sole owner of the Chinese coun-try unit. As of today, about 510 out of the 1450 employee workforce of Sapa Heat Transfer were employed by the Chinese country unit, including three Swedish expa-triates.

Specma Group

Specma Group was established in the 1920s. Since then, the company has been devel-oped towards a specialization in hydraulics, and in the early 1980s the company turned into a pure focus on hydraulics, tubes, and filters. Through acquisitions in 1996-1998 the business incorporated the similar businesses Kappa Hydro, Hymat, Eurobend, and Mitthydraulik. Additional acquisitions followed in 2004-2006, when the businesses of JMS Systemhydraulik, Wiro and Näsströms were merged. Those acquisitions made Specma a complete supplier of components and hydraulics. After some organizational changes in 2010 the name was changed to Specma Group (Specma Group, 2012a). Dur-ing the last 80 years, the company has grown from a small sized business to a global ac-tor with an 800 plus workforce and a turnover of SEK 1400 million in 2010. Specma Group is today owned by Latour, which is one of the largest companies registered on the Stockholm Stock exchange (Latour, 2010).
Today, the company has country units in Brazil, the Baltic region, Russia, Poland, USA and China (Specma Group, 2012b). Unlike other manufacturing companies, Specma Group has not established abroad in search for low-cost operations, but it is rather a question of satisfying their global key-clients. Most of the country units are located only a short distance from their clients (Sjölin). The Chinese expansion in 2007 was neces-sary because their key-client Cargotec set up production in Shanghai. Specma Group, which has a close connection to Cargotec and work with them globally, followed its usual principles and opened an office across the street of Cargotec (Sjölin). As of today, their only Swedish employee at the Shanghai office is the Manager Asia Lars Ihrelius. He manages 33 Chinese employees and he became the company‟s third expatriate in China when he arrived in 2009. The CEO, Ola Sjölin, with previous experience of working in China visits the Chinese country unit on a regular basis (Sjölin, 2012). Due to growth and market demands the company is today divided into three divisions;
OEM Division – This is the division with the highest turnover of all divisions, and it of-fers hydraulics and components for trucks and agricultural machines. Typical costumers are Volvo and Scania. It works on the markets of Brazil, USA, China, Poland and Fin-land.
Component Division – This division delivers spare parts and pneumatic components for the Nordic market.
System Division – The system division offers tailor made solutions for hydraulic power units, fluid conveyance systems in the areas of industry and marine application (Latour, 2010).

Swedish Chamber of Commerce in Shanghai

“The Swedish Chamber of Commerce is a non-profit member organization” (SCC, 2012). Their main activity is to help Swedish and Swedish related companies with their business and trade on foreign and domestic markets. The Chamber of Commerce in China was established in 1998 and has offices in Shanghai and Beijing. At the moment 270 companies are members, or 500 if you include subsidiaries, where most of them are Swedish, or connected to Sweden in some way (Hellstam). In general, the members are large and medium sized manufacturing companies, but non-manufacturing businesses are present as well. The basic idea is to assist companies with trade in China, which is achieved via networking and workshops. Workshops are held regularly, which could in-clude general information about the Chinese market, or more specific information, such as the branding in China or other topics related to China. Furthermore, the association serves as the link between the members of the Chamber (Hellstam). We chose to only focus on the chamber of commerce in Shanghai since both of the case study companies are established in that region.

Findings – Sapa Heat Transfer

Strategy

Sapa Group has set up three strategic pillars that are common for all three business areas, including Sapa Heat Transfer. Firstly, environment, health and safety are empha-sized, which involves providing a safe and healthy workplace, no matter where in the world they operate;
“We constantly seek to limit the environmental impact of our operations and im-prove resource utilization” (Sapa Group, 2012c).
The second pillar is genesis; Sapa Group is using the Toyota Production System to se-cure;
“…a company culture of continuous improvement involving all employees and achieving world class operations” (Sapa Group, 2012c).
Thirdly, they focus on customer value management, which involves value-added solu-tions, and close relationships with customers by utilizing all skill and experience availa-ble within the Sapa Group (Sapa Group, 2012c).
In addition to the general strategy of the Sapa Group, each business area has its own strategy. According to Strategic Projects Manager Michael Sunström, Sapa Heat Trans-fer has a business area strategy that applies to all country units within the company. However, he underlines that this is just an overall strategic plan, and that each country unit need to develop a business plan based on their specific market and customers. Business Area President Johan Menckel, explains that the strategies of Sweden and China are relatively similar, since both country units have a comparable customer struc-ture. He also argues that;
“One can never have a distinct strategy”.
However, he continues by explaining;
“But we have a relatively good opinion about our position, and what we want to achieve”.
The strategic decision of establishing in the Chinese market was, according to Menckel, based on the possibilities and potential of the market. He refers to their cross-border ex-pansion as a brave decision, since they had no local customers in China in the mid-1990s, and sales were only based on export. Five years later, when the Chinese car in-dustry grew rapidly, Sapa Heat Transfer had a great position. Sunström highlights the difficulties of entering the Chinese market, and explains that Sapa Heat Transfer formed a joint venture with a small Chinese company, which helped them to establish in the country. According to Hellstam, employee of the SCC in Shanghai, this is a common procedure for Swedish MNCs when they wish to become established in China.

Organization Structure and Processes

Sapa Group consists of three business areas, out of which Sapa Profiles is the largest one, followed by Sapa Heat Transfer and Sapa Building Systems. Each business area is relatively independent and is linked to the other two mainly thru the business area pres-idents and the top management of the Sapa Group (Sunström). Paula Casimiro, HR Specialist, describes the organization structure of Sapa Heat Transfer in Sweden as quite flat. She lists the following key positions;
“…factory operators, and then above them we have the First Line Managers, and they report to the Production Manager, and the Production Manager reports to the CEO”.
She continues to explain that this structure enables an effective flow of information within the company, both upwards and downwards. Furthermore, the production man-agers and the CEO of each country unit, together with Business Area President Johan Menckel, form the top management group of Sapa Heat Transfer (Casimiro). The plants in Sweden and China are the two largest country units of Sapa Heat Transfer, consisting of 430 and 510 employees respectively. Discussing the organization structure in the two countries, Menckel states that the structures of the two country units are similar.
“We have almost the same type of functions” (Menckel).
However, Sunström describes a small difference in the organizational set up in the two country units; the production process is divided into three parts, and in Sweden each part has its own production manager. In China, there are two production managers that are responsible for the three parts of the production process. In addition, there is a gen-eral production manager responsible for the entire production process. Furthermore, the Chinese factory has a centralized technical support and maintenance that is responsible for all three parts of the production process. In Sweden, each part has its own technical support and maintenance section. Sunström argues that this may create barriers, and that it can lead to decreased collaboration within the country unit. He continues to say that it is easier to reorganize the organizational structure in China, due to fewer regulations and administrative issues, and employees that are more open to change.
Although Paula Casimiro highlights the importance of the ability to co-operate when looking for new employees, Sunström states that the collaboration between Sapa Heat Transfer in Sweden and China has decreased in recent years. Today, the only collabora-tion between the factories in Sweden and China is the exchange of technical expertise.
“It is a little hard to unify the two big ones, Shanghai and Finspång […] we had more contact before, but the more they have grown, the more independent they have become, therefore we do not have much contact anymore” (Sunström).

People Practices and Motivation

Jessie Yao, HR Director at Sapa Heat Transfer in Shanghai, says that her main respon-sibility is to find the best and most skilled people for the Chinese country unit. Further-more, she explains that they value professional experience higher than personal charac-teristics. However, she states that different positions may require certain characteristics. On the question „Have you identified different characteristics between Sweden and Chi-nese employees‟, she answered;
“…Chinese staffs may be less confident and more willing to learn when they are junior with limited experience. And, compared with Swedish, Chinese staffs may be a bit prudent, while Swedish are more open to take [responsibility]. And, com-pared with Swedish, Chinese staffs are much more keen on development and pro-motion.”
In contrast to Yao‟s description of the Chinese employees, Menckel states that Chinese employees are less team oriented than Swedish employees. Moreover, he continues by describing Chinese employees to be extremely flexible and ambitious, and to be more driven than Swedes. However, he underlines that although the way of solving problems may be different between the two nationalities, the end-result is typically the same. In addition, he informs that the general level of education is higher at Sapa Heat Transfer in Shanghai compared to Sweden, and that the average age among the employees is lower. Sunström also expresses his impression of Swedish and Chinese employees.
“They are much faster than Swedes. We want to be more thorough, and work „by the book‟, in terms of safety and environment for instance. The Chinese are signif-icantly quicker when they get going”
He continues by explaining;
“They want the manager to tell them what to do and always give them directives. Here in Sweden, you often have to take the initiative, and here you do not get yelled at. In China, they are often scared to do something wrong if they do some-thing outside their assigned tasks. This is a difference that I have noticed”.
In the 1990s, during Sapa Heat Transfer‟s early years in China, there was training on how to work and do business in China for Swedish employees. Nowadays, expa-triates of Sapa Heat Transfer are mainly helped with practical issues, such as housing and other family matters (Sunström).
HR Specialist Paula Casimiro describes the HR practices of Sapa Heat Transfer in Finspång as very important for the success of the company. She explains that they have decided on three characteristics that they look for in the recruitment process; the employees should be result oriented, collaborative, and flexible. In addition, these characteristics are also evaluated in the employees‟ yearly performance reviews held by the HR department. Furthermore, the recruitment process also includes the eval-uation of work experience related to the specific position (Casimiro).
“[W]e believe that the three characteristics are more important than the work ex-perience, because we believe that professional competence is easier to change. In other words, if you do not have the right competence, you can always be trained, but if you do not have the three personal characteristics it is much harder to im-prove these” (Casimiro).
To motivate employees, Casimiro explains that they have developed a framework for the development of employees, and this ensures that the employees can have their work reviewed, which also ensures a fair salary. She describes it as a very well structured per-formance review, and that it is important for motivation. In addition, she points out that Sapa Heat Transfer has a bonus program, in which all employees receive a bonus de-pending on the profit of the company. In terms of special events, she says that Sapa Heat Transfer in Finspång does not arrange any special events for their employees.
When discussing the Chinese country unit, Yao describes that motivational factors in-clude ways of increasing the salary, position promotions, training opportunities, oral recognition, and some special reward programs. Furthermore, Sunström explains that it is not very common for Chinese employees to stay with the same employer for a long period of time, but that Sapa Heat Transfer in Shanghai has managed to keep many of its key persons. He argues that this has been accomplished thru a number of different motivational factors, including high salary and paid driver‟s license and other benefits for key positions. Additionally, the company has monthly birthday parties and family days, and the employees can enjoy one meal every day from the company cantina.
“They really take good care of the employees, on a whole other level than in Swe-den, and this is highly appreciated” (Sunström).
Sunström also describes how he motivates employees in his projects, and what factors that motivates him. He tries to give employees responsibility and to encourage them to be self-driven and to take initiatives. Personally, he is motivated by interesting and chal-lenging assignments, and he enjoys when there is a lot to do.

National and Organizational Culture

Both national- and organizational culture have been frequently discussed among our in-terviewees. Johan Menckel, Business Area President of Sapa Heat Transfer, states that his;
“…fundamental attitude is that driving forces among people are quite similar, no matter if you are Chinese or any other nationality. All people have an ambition, want to be appreciated, want to be promoted, and want to be seen and so on, so there is no big difference between the countries”.
However, he underlines that Chinese employees require more defined tasks and goals compared to Swedish employees. For instance, he explains that;
“…the Chinese employees expect the manager to make all decisions and to be clear”.
This view is also confirmed by Hellstam of the SCC in Shanghai, and by Sunström, Strategic Projects Manager of Sapa Heat Transfer in Finspång, Sweden. However, Hellstam describes the issue as double-sided. Consequently, Chinese employees work-ing in Swedish MNCs may have a hard time to go back and work under Chinese organi-zational culture.
“In the beginning, Chinese employees may view Swedish managers as weak…but after working at a Swedish company for a while, they seem to like this manage-ment style; the open and flat hierarchy” (Hellstam).
“…Chinese employees working in Swedish companies will after a little while adapt, and then they might have a hard time to go back to the Chinese hierarchy” (Hellstam).
Moreover, several of the interviewees of this study have expressed that they have en-countered a high number of everyday issues in China in terms of cultural differences. For instance, Menckel claims that;
“Chinese people do not want to deliver bad news”.
This is supported by Hellstam who points out that Chinese people often say what the counterpart wants to hear, rather than telling the actual truth. Swedes on the other hand, he explains, trust people until they are proven wrong. Furthermore, Menckel states that Swedish employees are more team oriented. However, Jessie Yao, HR Director of Sapa Heat Transfer in Shanghai, argues that;
“Both cultures are team oriented”.
Furthermore, she argues that the Chinese country unit has middle to high level of hie-rarchy, and that it is a quite typical organization structure for a manufacturing company in China.
Menckel describes the Chinese society as more hierarchal than the Swedish, and that Chinese employees therefore may lack an understanding of the entire business process. Sunström confirms Menckel‟s description of the hierarchical differences between the countries by saying;
“…he is not worth more than me because of his higher position”
This quotation refers to the Swedish way of thinking. In addition, Sunström claims that the Chinese culture has a strong focus on money, and that there are large differences in salary between factory workers and managers, which is a significant difference from Sweden. In terms of organizational culture, Menckel explains the following;
“We are trying to preserve the Swedish organizational culture, not just because it is Swedish, but because Sapa stands for certain core values. I think that is impor-tant, but I would call it our own organizational culture rather than calling it a Swedish culture”.
Both Sunström and Casimiro agree that the company has an overall Swedish organiza-tional culture. However, Hellstam says that Swedish companies may have to adapt their organization when entering the Chinese market, but that they might gradually become more and more Swedish.

Table of Contents
1 Introduction
1.1 Background
1.2 Research Purpose
1.3 Research Questions
1.4 Delimitation
1.5 Disposition
2 Frame of Reference
2.1 Jay R. Galbraith – The Star Model
2.2 The Star Model in a Cross-Border Context
2.3 Geert Hofstede – Cultural Theory
2.4 Additional Research
3 Method
3.1 Research Method
3.2 Case Study
3.3 Data Collection
3.4 Trustworthiness
3.5 Data Analysis
4 Empirical Findings
4.1 Cultural and Historical Background
4.2 Company Descriptions
4.3 Swedish Chamber of Commerce in Shanghai
4.4 Findings – Sapa Heat Transfer
4.5 Findings – Specma Group
5 Analysis
5.1 Strategy, Structure and Processes
5.2 Culture, People and Motivation
5.3 Additional Issues
6 Conclusion
7 Discussion
8 References
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