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Mathison But, in a company where everything depends on one man, then that man’s got to be committed to the product.

Thompson Well, it’s always the same if you ask me. We’ve either got to choose one of the big distributors whose business works so well that you don’t have to worry about individuals or you’ve got to find that rare person who’s got everything to win and who will sweat blood for the product.

Mathison Hm ... I don’t think we could ever take on someone without some kind of track record, Bill.

Thompson OK. What I’m saying is that the track record may not be in agrochemicals. Mathison But he’d have to have product knowledge.

Thompson I’d say energy, enthusiasm and business knowledge come first. We could always provide the product expertise from here.

Mathison And what about a distribution system?

Thompson That’s essential. But again, it needn’t be specifically in agrochemical distribution. No, what I’m saying, Robert, is that we’ve got to find someone who wants some adventure. Someone with a record of quick, successful growth who we could help to adapt if necessary to agrochemicals.

Mathison Well, there are lots of risks, Bill. It’d be much safer to give it to one of the established distributors.

Thompson Most of them already have links with our major competitors. There’d be a problem of conflict of interest. Also, we don’t want someone who just wants to fill a gap in their present portfolio, who is trying to get out of a problem situation with its present product range. We don’t want Martox to be just another insurance policy. We want it to be someone’s life blood!

Mathison Bill, I’m beginning to think you have someone in mind already?

Thompson I know a lot of people out there. None of them are ideal. I have, however, come up with a short list. I think we should look through it together very carefully.

Short list of contenders

•Company: Mercator SA

•Location: San Jose & Quito

•Turnover: $8.5 mln

•Established: 1970

•Owners: Sir Lopez & family

Mercator are one of the major banana growers in Ecuador and they consume 15,000 litres of Martox p.a. Sir Lopez is also a major political figure and has excellent connections in banana industry. Management is very good and finance is sound. Own distribution network is from plantations to ports. No experience in selling chemicals or in marketing and promoting products inside Ecuador. Also banana exports would always be main concern. Even so, Sir Lopez is very interested in diversifying out of bananas and sees distributorship as a major opportunity for achieving this.

•Company: Grunwald SA

•Location: Guayaquil & Quito

•Turnover: $25 mln

•Established: 1954

•Owners: 30 % German Chemical Company, 70 % Ecuadorian (Sr Steinbach)

Grunwald is a very real contender. Steinbach has been in Ecuador for many years and knows the agrichemical market like the back of his hand. As well as being distributor for the German company, Grunwald also distributes for a major Swiss concern. Main products – weedkillers, herbicides and insecticides. Could be a conflict of interest here. Steinbach is not prepared to give up any of existing distributorships but very interested in Martox. Excellent connections and distribution system. Modern, professional management.

•Company: Royce-Martinez SA

•Location: Quito

•Turnover: $ 3.5 mln

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d)4 indigenous technical salesmen

e)3 office staff

9.We can offer one of our top people as G.M. for 3 years and will pay 50 % of his/her salary and relocation expenses for a period of 1 year.

10.If the volume target in (1) above is not reached in two years, we retain the right to cancel the contract immediately.

11.6-monthly review periods should be built into the contract and both sides should have the right to cancel the contract with 6 months notice.

Group 2

Position paper for negotiations with Agrichem International.

CONFIDENTIAL

1.Present sales of AI Martox-Y are 64,800 litres per annum.

2.Probable sales price of Martox-Y is $6.00 per litre. Above that there would be considerable price resistance. Price could fall to $5.00.

3.Typical payment period in Ecuador is 160–240 days. In addition to this, there will be a 60-day period of goods in transit from Rotterdam to Guayaquil. If Agrichem invoice us 60 days before we receive stock, we would have considerable cash-flow difficulties.

4.We require, therefore, either 8 months credit for the first 3 years or 20 % of initial starting capital for the project.

5.Agrichem should supply:

a)1 resident technical manager for the first year at their expense

b)1 general manager for 3 years, and should bear half the cost

6.Contract to run for 3 years and to be renewed each year for an identical period.

7.We require first option on any other Agrichem products.

8.We must retain an option to market other manufacturers’ products as long as they are non-competing.

9.Additional discount to be given on sales above agreed target as an incentive.

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CASE STUDY 2. RUSSIAN ROULETTE

B a c k g r o u n d a n d O u t l i n e

Trade with the former Eastern Block countries has become a major issue for the European Union and is likely to remain so for many years to come. This case deals with problems arising when Tipper AG, a German truck manufacturer, enters into an agreement with the Russian government to set up a production plant in Russia. A cross-cultural clash leads to the situation in which both sides must negotiate to resolve their differences.

Objectives

1.to consider cultural differences and their effect on business and communications

2.to discuss the problems of setting up a production plant in another country

3.to discuss the production schedule and technical details (optional) of a product

4.to conduct a problem-solving meeting between two different cultures

Technical details about the All-Round truck (optional)

Production of the vehicle (the All-Round/All-Terrain truck) in Russia is under way.

1. Study the key vocabulary items and use them in your answers to the questions below.

terrain, snow plough, front-mounted, harvester, accessory, gradient, centre of gravity, axles,

diagonal, weight distribution, turning circle, steering, stable

2. Examine the information from the company’s brochure below, describe the capabilities of the truck and explain why it is suitable for use in Russia. Pay special attention to the questions:

•What are the advantages of the All-Round truck over other four-wheel drive vehicles?

•What technical details make the truck ideal for agricultural work?

A selection of All-Round’s many accessories

The following accessories can be easily fitted onto the front or back of the truck: crane, road sweeper, harvester, front loader, and snow plough. There are accessories for all kinds of agricultural and municipal work, summer and winter. Consequently, the vehicle can be used as multifunctional.

It can climb and operate on a steep gradient and drive over rough terrain because of its high ground clearance. It has 16 gears, enabling it to travel from a crawl up to 70 kph. It is easy to steer even when one of the heavy accessories is attached to the back; the front will not be pulled up by the extra weight.

All-Terrain (trucks) performance

•Steering remains safe and stable, even with rear-mounted accessories

•The necessary 25 % of the weight remains on the front axle, even when heavy accessories have been attached

•High safe load on the rear axle

•16 gears to enable speeds from a crawl to 70 kph

•Center of gravity remains between the axles even on extreme gradients

•Small turning circle

•High ground clearance (the height between ground and the truck’s bottom is 1.2 m)

•Dynamic axle weight distribution (50 %/50 %)

Introduction to the topic

What do you know of German and Russian cultures as regards doing business, in particular, holding meetings, correspondence, punctuality, accuracy and entertaining visitors? Discuss the following issues:

1. relative importance placed on values, i.e. each nation's perception of the other;

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Mr. John Simpson, head of Tipper AG’s foreign project development, explained the project to journalists. Tipper was not looking for a gigantic project, he said. In the past the Russians had spoken of production in the region of 100,000 units per year. Tipper believed a working target would be 10–12,000 per year although in Germany production figures have dropped to 7,000 per year. At the moment a pilot project is being planned.

The All-Round truck is, in the opinion of Tipper, the Russians and the United Nations FAO, the most suitable piece of equipment for the modernisation of agriculture and forestry. The four-wheel-drive truck, which can be used as a tractor and a truck, has the main advantage of flexibility – accessories for virtually all farm applications can be attached. It can also pull Russian agricultural equipment without the need for special couplings and travel on normal roads at a speed of 70 kph. The first All-Round trucks available in Russia will be exported by Tipper from its Schwarzenau plant but it is hoped to set up production in Russia during the latter half of this year.

Tipper AG already produce buses near Moscow under a licensing agreement made with the Russian Tractovon company a year ago. According to Tipper, Tractonov will invest 200 mln euros for the assembly of bus model 4598, which up to now has been built only in Germany. By next year, Tractonov will have built a new bus plant in Golizyno near Moscow, using the now obsolete assembly line in Russia and equipment from the Tipper bus production plant in Dortmund.

J u r g e n

Please bring this copy, with your comments, to our planning meeting. I’m concerned about:

1)cross-cultural problems and what we would do about that;

2)political problems in Russia;

3)bearing in mind our own recent restructuring, how unions will react to a production plant outside

Germany;

4)feasibility of project – we produce fewer than 50 per day here in Germany!

John

Memo to project planning team

After his meeting with Nowak, Simpson sends his memo below to the project planning team, outlining the options they must consider when choosing a site.

1. Study the key vocabulary items and use them in your answers to the questions below.

comprehensive, delegation, hi-tech, joint venture, redundant, market research, ethnic, infrastructure

2.Read and consider the agenda points before going on to the meeting.

3.Give detailed suggestions on each of the eight issues in the memo.

TIPPER

INTERNAL MEMO

To: RusPro Department

From: John Simpson

A comprehensive agreement has been signed with the Russians, but before production of All-Round trucks can begin, a suitable site for the production plant has to be found. The following alternatives have been suggested by a research delegation consisting of engineers from both countries.

OPTION 1

Build a modern, hi-tech plant in an area with good infrastructure and plenty of potential labour. Initially managed by Germans, with the help of other Europeans. Skilled labour also from Germany, but with an extensive training programme for local skilled and unskilled workers. A licensing

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Memo from All-Round project manager

Simpson receives a memo from Nowak, commenting on the production schedule.

Key vocabulary

completely knocked down (CKD), ‘married’, local contents (LC)

T I P P E R

I n t e r n a l M e m o

To: John Simpson

From: Jurgen Nowak

This is the schedule worked out by Production Planning for setting up production of the Аll-Round truck. It will be possible to produce the cabin, the chassis and selected engine parts in Russia. The engine block will have to be imported, along with the complicated parts of the engine, gearbox and hydraulics These are delivered in a completely knocked down state and ‘married’ to the local content parts. Attachments can be produced by other Russian companies.

Jurgen

Background information

This is an authentic schedule for such an undertaking. Each step has to be completed on time; otherwise the next step cannot begin.

Read the explanations of some technical terms and the production schedule. Get ready to describe it in detail.

CKD: completely knocked down. Parts arrive in Russia and are assembled there. LC: local content. Parts are manufactured and assembled locally.

Frame: stable metal chassis.

Jigs: machines which cut and mould parts.

Trim line: part of the production line where metal parts are trimmed.

Paint shop: nowadays vehicles are painted using an electrolytic process. The metal is charged to improve the adhesion of the paint. Vehicles have more than one coat of paint, starting with an anti-corrosive covering, then an undercoat, then several layers of topcoat.

Production Schedule for All-Round Trucks in Russia

Production conditions

Further building work

Deliveries

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