Merging business ideas – Part 1

Introduction

As a result of the rapid integration of global economies, as well as advancements in communication and cooperation between countries, the number of business partnerships between European and Chinese cement companies has risen in recent years. These partnerships include Lafarge and Ruian Cement, HeidelbergCement and Jidong Cement Co. Ltd, Holcim and Huaxin Cement Co. Ltd, and CRH plc and Yatai Cement.

The Chinese Central Government issued a new environmental law at the end of 2013 to reduce NO_X, SO₂ and dust emissions, and power and fuel consumption. This, along with the fact that the installed cement capacity in China accounts for approximately 60% of the total global capacity, indicates that the country offers huge potential and a variety of business opportunities to upgrade or modify plants to meet the requirements of the new environment legislation. As a result, it is likely that there will be more business partnerships or joint ventures between European and Chinese companies in the future. In order to create better value and benefits for the international cement industry and its shareholders, the smooth and efficient merging of European and Chinese business cultures is essential, and many important lessons have been learned over the years. When it comes to business culture, there are arguably some key differences between those of Europe and China. European companies are often renowned for their discipline, excellent quality standards, good planning and compliance with strict principles and procedures, while Chinese companies are said to be more focused on high efficiency and rapid growth.

An example of the merging of Chinese and European business cultures, through the execution of an international 5000 tpd cement project, is outlined below.

Project scope

The scope of the cement project included: limestone crusher; circular pre-mix (limestone and clay) storage; circular coal storage; 300 m longitudinal storage; Chinese stackers/reclaimers; European vertical raw mill and coal mill; 12 000 t raw meal silo; large bagfilter for dedusting of the kiln; raw mill and cooler; 3-stage kiln; European preheater; European PSC 3-086.10T cooler; European roller press (2 sets) RPS 13-170/140 with V-separator and SEPMASTER SKS-VC3000 high efficiency separator for final cement grinding; European packing machine and palletising equipment. The joint venture team comprised 45 Chinese employees and 35 European engineers and experts. The team handled the project execution, including design, equipment purchase, construction, erection and commissioning.

To ensure the reliability of the plant, the European team, which possessed a technological advantage, led the design process and supervised the site construction and commissioning. The Chinese team was responsible for the structural design, manufacture of equipment, construction, operation and maintenance (with the guidance of European experts); drawing review and approval were carried out in the country where the project was to be carried out. Cultural conflicts proved to be the team’s biggest challenge throughout the project.

Principles, changes and innovations

The European team adhered to all the relevant principles and procedures, focusing on high quality and reliability. Meanwhile, the Chinese team focused on the changes and innovations relating to the competitive market situation and the demands of various clients, finding valuable solutions that corresponded to the exact budget provided by the client.

Integrated organisation

A mixed organisation chart, which took the strengths of each team into account, was used in order to shorten the design period and minimise project construction and execution costs. The proposal involved bringing all design members together in order to avoid cultural conflicts, with the European experts leading the basic design (such as mass flow, heat and gas balance, flow sheet, workshop arrangement, etc.) and Chinese experts leading the civil structural design (with European coordination and supervision).

Setting targets

Initially, there were a number of misunderstandings between the two teams. While the European engineers possessed greater international experience, the Chinese engineers had more experience with different types of clients via class 1 (top global players with a global technical centre) and class 5 (without a strong technical centre).

European designers followed established codes and procedures (according to European standards) to conduct the design, with less emphasis on the financial and economic aspects of the project. The Chinese engineers carried out the project according to the budget outlined in the contract. For this reason, and due to changes in the site conditions after the contract was signed, the engineers did not completely comply with the original specifications.

To improve the situation, the project steering committee introduced a cultural education initiative for all project members. The programme allowed personnel to share their opinions and to develop a better understanding of both the Chinese and European cultures. This included examples from events that occurred in the first two months of the project. Following this, project management set a 10-month target to finish all designs according to the budget outlined in the contract and set further targets for each main engineer in the organisation chart (including team cooperation incentives). If the target was not achieved, the engineers (from both the Chinese and European teams) would not receive a team bonus.

Teamwork

To achieve the targets set by project management, teamwork was the first priority.

• During the basic engineering phase, design work was conducted in the European head office. All Chinese designers working on this section of the project were relocated to the European office in order to complete the design process in a fast and efficient manner and develop their understanding of European business culture (with a focus on procedure and codes).
• During the detailed engineering phase, more AutoCAD operators were needed to speed up the drawing process. All European designers were relocated to China to guide and supervise the design works.
• Regular meetings were held in order to discuss and carry out the design work smoothly. The project team held design meetings on a daily and weekly basis to adjust the direction of work.
• All project members used the same IT platform and drawing management system, developed by a European company. Information was presented in one universal technical language.
• During the drawing approval phase, the Chinese-European team followed strict procedures for design, proof, verification and approval. After the design work was completed, engineers from a local company providing certified designers for drawing approval were invited to work together with the team’s designers in order to speed up the process.

Read part two here.

Written by Shixiang (Danny) Chen, AVIC International, China. This is an abridged version of the full article, which appeared in the October 2014 issue of World Cement. Subscribers can view the full article by logging in.

Read the article online at: https://www.worldcement.com/asia-pacific-rim/24092014/merging-business-ideas-part-1-544/