Leveraging Technological Capabilities across Polarized Cultures: Shanghai Delco Electronics Limited

Rallying its units for an impending spin-off from General Motors, the Delphi Automotive Systems division cleared the Delphi Delco Electronics (Delphi-D) unit to begin planning for entry into China in 1994. Delphi saw China as ideal for leveraging its technological and innovation capabilities as well as the enormous General Motor heritage and reputation from years of experience delivering quality products to the automotive industry. Delphi-D found a perfect partner in Shanghai Changjiang YiBiao Factory (SCY) (name disguised to protect the firms) that held nearly 50% of the Chinese automobile instrument cluster market. SCY was keen on acquiring new technology to meet increasingly sophisticated customer demands in order to retain market lead as well as to tap into the international market.After rounds of negotiation the two firms formed a fifty-fifty joint venture, Shanghai Delco Electronics Ltd. (SDE) in August 1996. However, SDE started experiencing problems almost immediately. The Delphi-D team at SDE assumed their SCY counterparts would willingly integrate proposed technology and the requisite processes at the joint venture. However, the SCY team resisted prescriptions from the Delphi-D team that they sometimes perceived as "haughty". Broiled in culturally-loaded misunderstanding in a market that was becoming complex by the day as the government legislated new regulations and other manufacturers jostled for a piece of the market, SDE's management sought focus by developing a five-year plan that captured the partners' goals in 1998. However, as the end of 2002 approached, SDE's five-year plan remained largely unrealized. This case shows how implementation challenges can affect the realization of joint venture objectives and illustrates specific challenges that can mar even a well-formulated technology intensive international joint venture strategy.