CASE ANALYSIS Huayi compressor Barcelona: Post-Acquisition challenges

CASE ANALYSIS 

Huayi compressor Barcelona: Post-Acquisition challenges 

Author: Alexandra Gatti 

Student Number: 500702488 

Class: IL5A 

Amsterdam, 29 October 2018 

Amsterdam School of International Business (AMSIB) 

Cross Cultural Management 

Lecturer: A.M. Carita 

Contents

Executive summary        3

Defining the issue(s)        3

Data analysis        3

Alternatives        4

Key Decision Criteria        4

Evaluating alternatives        5

Recommendations        5

Action and implementation plan        5

Exhibits        6

Exhibit 1.1 Consequence table        6

Executive summary 

The Chinese enterprise Huayi Compressor Barcelona S.L. faces post-acquisition challenges. Not only is the economic crisis creating difficulties to enhance profits, but there is also a subsequent challenge in finding a new manager to continue the internationalization process. As a first step, the case is analyzed, and three alternatives are presented.  

The first option suggests hiring a Spanish manager and focusing on cutting costs to survive the economic crisis. The second advises hiring a Spanish manager, but this time aiming at investing in transparent communication and skill-training to increase the employees’ motivation and productivity. This is done through a combination of cognitive and affective trust building techniques. ^[1] The last alternative involves hiring a Chinese manager which would maintain fluent communication with the Chinese board of directors to ease the implementation process. The focus lies on cognitive trust. As a next step, the three alternatives are assessed using specific criteria which can be found in table 1.1 in the appendix.  

Finally, the findings of this analysis indicate that the second alternative is the better suited path for Huayi due to the time and cost-saving advantages the quick integration of the Spanish manager would provide. Moreover, the manager’s cultural knowledge and the transparent communication would result in increased trust from the company’s employees.

Defining the issue(s) 

Even though the integrated Chinese enterprise Huayi Compressor Barcelona S.L. successfully acquired the Spanish compressor company Cubigel on May 2013, major challenges continue to exist. The future internationalization process needs to be planned and executed, but the manager Darwin Huang is no longer managing the company in Spain.  

The first challenge lies in choosing a suitable manager to take the reins of the business and deal with the low morale of employees, as well as the damaged reputation of the company which can be traced back to the cultural differences and ethnic tension between Chinese and Spanish nationals. The second challenge is generating future profits and sustainable growth in an environment marked by the general saturation in the compressor market and the global economic crisis. Even though the case states that the acquisition has been successful, the underlying problems remain and will be left for the new manager to solve.

Data analysis 

Huayi Compressor Barcelona S.L. aimed to expand inorganically through mergers and acquisitions and therefore acquired Cubigel. This allowed the company to leverage existing resources in producing industrial compressors and capabilities outside of the Chinese market.

Because of its economies of scale, the restructuring of the management and organization can result in a financial advantage. However, the company and its management have no internationalization experience. 

Efforts made in R&D activities failed, and from 2009 on several EREs and the Cubigel bankruptcy damaged the trust of the factory employees. Additionally, an unfortunate event near the factory of Cubigel created social tension between Chinese and Spanish Gypsies which build up, damaging the Chinese enterprise reputation. Furthermore, a reduction of 40 per cent of the employees and a failure to pay them caused numerous employee demonstrations which resulted in company losses of 50,000 USD per day. 

Alternatives  

Three different alternatives were considered in order to improve the issues described in the problem statement. These alternatives are assessed in the chapter: “evaluating alternatives”.

Alternative 1. Continue internationalization strategy with a Spanish manager who has experience in internationalization and B2B knowledge. The alternative focuses on cutting costs across different departments and levels to cope with the crisis.  

Alternative 2. Continue internationalization strategy with a Spanish manager with clear cross-cultural knowledge and experience in internationalization. This alternative focuses on investing in transparent communication through a combination of cognitive and affective trust building techniques. 

...