You are M. J. Herndon, a management consultant specializing in international business protocol, and you have been called in to provide assistance to Enviro-Offices, Inc., a Michigan-based manufacturer of sophisticated business furnishings for corporate offices worldwide. The president of Enviro-Offices, James Madderly, explained to you that a recent joint venture preliminary negotiation had not gone as well as expected and Madderly wondered if you could step in and assist them before the next meeting was scheduled. Herndon agreed, but asked to be filled in on the details as soon as possible, since time was limited. Madderly quickly introduced you to Mary Smythe, vice president of operations, and Juan Garcia, also a vice president of EO. Smythe and Garcia, in addition to providing you with copies of relevant business documents, provided you with the following narrative of recollected events and related documents ...
According to Smythe, Enviro-Offices [EO] had recently decided to purchase a furniture factory, VltavaWorks#3 (in the capital of the Czech Republic), and to expand operations through a joint venture with the new Czech owners of VltavaWorks and a German investment firm, GIC, with whom EO has an already established business relationship. (GIC is heavily invested in EO's German subsidiary, and anticipates several additional joint ventures such as the one now under negotiation in Prague.) Mary Smythe and Juan Garcia both flew together from EO's home office to Prague to meet with two GIC acquisition strategists, Dieter Zimmer and Greta Becker, and with Jaroslev Huss and Vaclev Hvizdala, the current President of VltavaWorks, and Vice President of Manufacturing Operations, respectively. Smythe and Garcia had never met the GIC representative Zimmer, although Smythe had met Becker in a previous conference. EO's recent German subsidiary activities had been established through the efforts of a joint team of expert brokers; EO management, having found that process relatively problem-free, had decided to conduct the current set of negotiations without such outside assistance.
The Czech executives Hussand Hvizdala, and a large number of their assistants (an entourage) met Smythe and Garcia at the Prague airport and took them directly to a lunch meeting held near the U.S. Embassy on Trziste 18. The restaurant was expensive, the food was wonderful, the hosts were jovial, and the GIC representatives Zimmer and Becker were present and seemingly relaxed. Smythe and Garcia spoke only English, so the GIC representatives, as well as Huss and Hvizdala, made every attempt to communicate in English, although only Becker was fluent enough for Smythe and Garcia to understand well. Both the Czechs and Germans also spoke either German, Czech, or Polish, however, so there were frequent side conversations taking place, a situation that Smythe and Garcia found confusing and noisy, but that seemed not to bother the hosts or GIC partners.
The meeting lasted several hours, during which period a lot of alcoholic drinks were served and consumed by all. Despite the latter fact, the meeting was nevertheless followed by a tour of the city, which Smythe and Garcia were reluctant to bow out of, even though both mid-westerners were exhausted and no longer feeling competent to discuss business. After the tour both were further dismayed when their hosts wanted to take them on another tour, this time of the factory. Afraid that they would appear rude, they nevertheless turned down the tour, asking to do it the next morning. The GIC representatives continued on with the Czech hosts after leaving Smythe and Garcia at their hotel.
The next morning all the representatives rode together to the plant, and once again, conversations in multiple languages were ongoing in the vehicle, although Greta Becker of GIC tried to translate as much as possible for Smythe and Garcia, who spent the morning in the plant, observing operations. During this tour Smythe noted that despite the fact that Prague was a modern city with good transportation and communication systems, the VltavaWorks#3 plant was obsolete in ways that would require heavy investment. At lunch they adjourned to a conference room -- a kind of cafeteria -- where the cafeteria staff proudly served them a big meal, complete with beer and brandy. Although Smythe and Garcia wanted to conduct business and discuss their concerns about both the plant and changes in management, the alcohol, the food, and the noisy conversation made it almost impossible. Both tried, but kept getting diverted, and Smythe especially remembered one exchange that bothered her.
Smythe tried to repeat to you the following exchange between herself and Hvizdala, word for word as she remembered it (there was no translator involved at the time):
Smythe: So what do you think of the new management plan we faxed you? Hvizdala: Please try some of this -- it is a specialty of our country. Smythe: Yes, delicious, but what of the plan? Hvizdala: The management we have works well for us. Smythe: I know, but Enviro-Offices thinks ... and GIC recommended ... that we bring a team in to restructure and down-size, especially since modernizing will take considerable ...[Hvizdala interrupts] Hvizdala: We're all quite used to the system we have. It's been in operation for 35 years. It is a success. And we have many people who need jobs... [Smythe interrupts] Smythe: Yes, but a lot has changed in the Czech Republic since the Communists were ... and well, your plant will have to change, too, don't you think? Hvizdala: How do you like the meal?
Smythe said that Hvizdala didn't really listen to her reply but spoke in German to Dieter Zimmer who glanced her way, looking concerned. Garcia's account to you later was similar. According to Garcia, later that same afternoon they had discussed a number of issues. In both Smythe and Garcia's views, the discussions had not advanced to EO's core concerns. Although they were amiable, the Czech contacts had simply pointed out the sights as they returned their guests to the hotel, and Smythe and Garcia sensed that they were being "stone-walled."
While waiting in the lobby for transportation to the airport, Garcia and Smythe had compared notes. Garcia told Smythe that he had inquired about the plan EO had faxed a week earlier, and a Czech assistant told him that they had not received any plan. Smythe shared with Garcia that she had gotten the contrary impression from Hvizdala that they had received the fax. Smythe also noted that she had learned from GIC representative Becker that Becker and Zimmer had badly wanted to meet with their US partners Smythe and and Garcia before the meeting with the Czech executives, to which Garcia had replied, "So, why didn't they call us?"
Smythe recalled that she had received the memo, of course, and had sent a copy to Garcia, but they both had assumed there would be sufficient time to address GIC's concerns once they arrived, so neither had acted with the kind of urgency that the GIC representatives now seemed to have wanted.
Smythe was able to provide you with a copy of the memo in question, which read as follows:
Munchen 8. 9. 95
Very honored Ms. Smythe!
I had the honor of meeting you six months ago in New York during the negotiations over the subsidiary growth plan. I would like to comment on our future negotiation in Prague.
Mr. Zimmer and I will already be in Prague when you arrive. GIC has authorized me to commit substantial assets to our mutual interests in VltavaWorks.
As far as upcoming negotiations are concerned, please understand that our level of commitment is contingent upon the expected rate of return of GIC's investment. Might we suggest that Enviro-Offices include a U.S. management team to restructure and downsize VltavaWorks to increase returns as soon as possible? In our opinion, they have come from the rain to the trough since being de-nationalized, although that is certainly a subject of some sensitivity for them.
We are very sure that together we can bring the management and financing together in a way that will be productive and profitable for all, but might it be possible for you to correspond with me concerning these subjects before we meet in Prague?
With friendly greetings,
Yours,
Greta Becker
You also discover that just before Smythe and Garcia boarded their plane, they were met by Zimmer and Becker, who appeared to be waiting for them at the boarding gate. According to Garcia, after shaking hands, Becker had said to them, "I'm afraid this venture will not be so easily completed. You may want to get some assistance before the next set of negotiations. Perhaps EO needs to refine its approach to joint ventures slightly? We have all confidence that you will accomplish this, but I will need to report back to GIC before we talk further. I hope you have a safe and comfortable flight back home."
Although there was nothing definite to support their reaction, both Smythe and Garcia agreed that the GIC partners were trying to indicate that events had not gone well, but Smythe and Garcia could not pinpoint precisely why, even after talking about little else on their long flight home. Therefore, on their return they decided to take Becker's advice: they briefed EO's president Madderly about the situation. After thanking them, Madderly called a friend and CEO of a Boston-based company that Madderly knew had just successfully completed a joint venture with a Japanese firm. His friend referred him to you.
After gathering and analyzing this information, and after calling the GIC representatives Zimmer and Becker to confirm your conclusions, you are ready to provide a plan of action for EO's management.
Assuming that you are M. J. Herndon, based on the information that you abstract from this case, from your knowledge as management professionals, and from your readings, determine what Enviro-Offices' problems were in this situation, and articulate a strategy that will help EO interact more successfully not only with their Czech Republic contacts at the next meeting in Prague, but also with other international business clients and partners in the future.
Remember that not all information in a business case is relevant to the problem or set of problems which you identify as critical to address in your report.
Keep in mind that this is a case in which communication problems figure prominently; thus your response needs to address the communication aspects specifically, and it also needs to demonstrate that you have read and conducted research.
Good Luck!!
copyright (c) 1997 Linda M. LaDuc
Updated 4-23-97 EdC
Last Updated 10-22-98/EdC