BUS536 Assgnt 2

Baosteel Europe Paves the Way for Integration and Expansion

For Baosteel, numerous economic and cultural aspects were of decisive importance when it chose Hamburg as its European location. Endeavoring for a win-win outcome, Baosteel Europe has developed a great relationship with the Hamburg city government, especially with its departments involved in economic development. Baosteel continuously manages this relationship by staying in touch with the media and having company representatives participate in and sponsor public events. Interestingly, Baosteel has also incorporated its Germanoriented practices of external representation back in China, demonstrating its dedication to learning from global best practices. Baosteel has also begun to develop ideas regarding networking strategies with other Chinese organizations in Germany geared toward the joint promotion of their interests and maintained loose partnerships with two other large Chinese corporations also located in Hamburg—COSCO and Bank of China.

Baosteel Europe is said to exemplify the “large Chinese corporation abroad,” and it occupies a frontrunner role in two senses—being both a “test case” and a “model.”5 Many Chinese companies still find it difficult to be internationally competitive, and there is often a discrepancy between an impressive success story told at home and the hesitant progress overseas that may be marred by setbacks. This could change quickly if “pilot projects,” such as the internationalization of Baosteel, are a success and the senior management of other companies draws the right conclusions. However, it is not only the views within an industry that are of importance. Chinese companies, especially those with international ambitions, must assume that they are being watched intently by the public both at home and abroad and must behave in a responsible manner.

After a rough start, Baosteel has made significant progress in recent years. Admittedly, the situation has been rather auspicious for the steel industry. An essential basis for further expansion in the international sector is a systematic development of HR beginning with recruiting and leading to career planning and further education. Baosteel aims to use the talents of both German and third-country specialists and to form international leadership teams that will be in a position to meet the challenges of international management. Further, in the case of international customer–supplier relationships, it is important to preempt cross-cultural conflicts by increasing the level of intercultural competence and strengthening an overarching corporate culture.

Baosteel is well on its way to mastering these challenges, having already united a variety of very different companies in Shanghai and developing a distinct corporate culture among its employees. When discussing Baosteel’s “hard skills,” the former chairwoman Qihua Xie once coined the slogan “quality, not quantity.” The same can just as well be applied to Baosteel’s “soft skills.” Overall, the Baosteel Group is an exemplary company from which other Chinese companies can learn.

CASE DISCUSSION QUESTIONS

1. What location-specific advantages did Hamburg, Germany, provide Baosteel? Evaluate other European locations that might offer similar advantages.

2. How did Baosteel manage its entry into Europe? What factors have enhanced its success?

3. How did Baosteel Europe overcome the challenges of managing a subsidiary?

4. What are the lessons on how to manage human resources in a subsidiary that we can draw based on Baosteel Europe’s experience in Germany?

5. Why does Baosteel devote considerable resources to corporate social responsibility?

1This case was written by Bernd Michael Linke (Friedrich Schiller University of Jena, Germany) and Andreas Klossek (Technical University of Freiberg, Germany). It was first published in the authors’ study Chinese Companies in Germany: Chances and Challenges, which was sponsored by Bertelsmann Foundation and Deloitte (the full study can be accessed at http://www.bertelsmann-stiftung.de/cps/rde/xbcr/SID-12ED87F35090242B/bst_engl/xcms_bst_dms_27517_27534_2.pdf). The authors would like to thank both for granting the permission to reprint this case. © Bertelsmann Foundation. Reprinted with permission. Case discussion questions were added by Mike Peng.

2Baosteel, 2009, Address by the President, Accessed November 11, 2009, http://www.baosteel.eu.

3In Chinese jargon, Hope schools refer to schools set up in poor rural areas where children would not have been educated had these schools not been set up. These schools are known to offer “hope.”

4“Hamburg provides Chinese company with link to Germany, Europe, and the world,” accessed November 12, 2009, http://www.gtai.com/homepage/info-service/publications/our-publications/germany-investment-magazine/vol-2008/vol-032008/foreign-direct-investment1/.

5Handelsblatt no. 43, March 1, 2007.