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Otis

1. Otis Elevator Company faces challenges in its joint venture in China as its partner, Tianjin Elevator Company, wants more technology transfer, exports, and equity participation than Otis is willing to provide. 2. Competitors like Schindler have secured better deals in China by agreeing to more equity partnerships with Chinese companies. 3. Otis has two options - curtail further investments due to the deteriorating relationship, or develop a long-term China strategy and be more aggressive to take advantage of growth opportunities in the recovering Chinese market in the 1990s.

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Thomas Atkins
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604 views

Otis

1. Otis Elevator Company faces challenges in its joint venture in China as its partner, Tianjin Elevator Company, wants more technology transfer, exports, and equity participation than Otis is willing to provide. 2. Competitors like Schindler have secured better deals in China by agreeing to more equity partnerships with Chinese companies. 3. Otis has two options - curtail further investments due to the deteriorating relationship, or develop a long-term China strategy and be more aggressive to take advantage of growth opportunities in the recovering Chinese market in the 1990s.

Uploaded by

Thomas Atkins
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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RANDYD.

DAYRIT
OTISELEVATORCOMPANY(A):CHINASTRATEGY
WhatmanagementoptionswouldOtisundertaketoproceedwithitsinvestmentsinChina
TianjinOtisElevatorCompany(CTOEC);
1.

Curtailfurtherinvestments;donothing
2.

DevelopOtisslongtermstrategyforChina;beaggressive
Relationshipdeterioration:
OtisprimaryconcernistopenetratetheChinesemarket,whileTianjinElevatorCompany
(TEC)clearlywantedtechnology,exportandequityparticipationfromOtis.
a.

TheheavyrelianceofOtisgrouponBankofChina(BOC)toborrowforeign
exchangeandworkingcapitalwhileCTOEClikestoexporttosupplytheventure
withhardcurrency.
b.

UnwillingnessofOtisgrouptoprovidenewesttechnologytoChina.
c.

Otissunwillingnesstocommitonspecifiedlevelofexportsbutrathertoabest
effortexporttargetof25%ofsalesbythe6
th
year.
C
ompetitorsmoveinsecuringthemarket:
1.

I
n1980,SchindlerwonthefirstequitycontractinelevatorproductionwithChinese
government.
I
n198889,SchindleragreedformingventurewithSuzhouElevator
Works(SEW).
T
heOtismove:
1.

I
n1984,theventureonCTOECbyOtis(30%),TEC(65%)andChina
I
nternational
Trust
I
nvestmentCorporation(C
I
T
I
C)(5%).

I
n1987,theventureofCTOECwithOtis
(30%),SEW(50%)andCTOEC(20%).
Why
curtailment?
1.

TECsunwillingnesstoenterintoaventureorexpansionwhereitdoesntcontrol.TEC
rejectedtheSEWdealin1988.Highexpatriatesandstaffreimbursementswerenot
welcomewiththeTECgroup.
2.

WeaknessesofCTOECsfinancialcontrolsandslowdecisionmaking.
3.

LackoftrustfromtheChinesepartnerincapitalinvestments.TheyhaveviewedSEW
entrytotheCTOECasanOtismaneuveringtocontroltheventure.
Why
sta
y
aggressive?
1.

BuildlongtermstrategyforChina,buildinganOtisChinagroup.Althoughthereis
depressionin1989,thelongestwillbein1991,andafterthat,exceptionalgrowthwill
follow.
I
tisonlyinAsia&AustraliathatOtisrankedlowerthanno.1inthewhole
world.
2.

TherewasdesperationinChinatobuildbusinessstabilityandgrowthpotentialafter
the1989crackdownandOtisgroupvieweditatthemostopportunetimetopresson
theirdemands.
3.

Proposemorecorporatecontrolandexemptionsfromexclusivityclausetogowith
increasedequity.
THECONCLUSION
OtismuststayinChinatofurtherstrengthenitscompetitiveposition.Theproblem
withTECwillberesolvedbycapitalizingonthedamagedpoliticalreputationofChinaandto
projecttoChinathatOtisisareliablepartneramidstallcircumstances.Theproblemwith
theequity,exportandtechnologytransferwillbeallowedattheminimumlevelbutcomes
witha.)additionalventureswithothercompaniesandb.)morepowerinbothmanagement
andfinancialaspectsinCTOEC.

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