A Learning Journal


A Learning Journal


Order Description
Write a learning journal during the course of the semester to collect ONE article from press sources (newspapers, and magazines and so on). (PLEASE INFORM ME OF THE ARTICLE YOU CHOOSE BEFORE YOU START WORKING ON THE ASSIGNMENT).

The purpose of this assessment is to analyse the chosen article using the Global Management Model used in the unit by Steers, Nardon, Sanchez-Runde (2013). ?

The Learning Journal will include a copy of the collected article, plus a five-page write-up (using 12 point font, 1.5 line spacing) answering the following four questions:

??What do you see as challenges for a global manager??

??Discuss the area(s) (cultural, organisational or situational environments) in which a global manager needs to develop a good understanding.?

??Discuss the global management skills that need to develop in order for a manager to be effective and successful?

??Is/are there any ethical implication/s? If there is/are, what is/are they?

In this assessment, a student needs to take time in choosing an article carefully so that a suitable article is chosen. To be able to tackle the questions above, students are allowed and expected to make projections and assumptions, based on the contents of the article.

This assessment requires you to produce a well-written and well-researched write-up and to use a minimum of 10 references from scholarly sources. The writing should be in scholarly style. Note that the Chicago referencing system is the only acceptable referencing system for written work in this unit.

Worth: 40%



A case study on United Dairy Power

In March 2014, William Hui, a Hong Kong entrepreneur, purchased a controlling interest in United Dairy Power (UDP) with the aim of entering the Chinese infant powdered milk market (Kitney 2014). UDP is Australia’s largest privately owned milk supplier. It manufactures dairy products such as cheddar, mozzarella cheese, butter and whey powder but does not currently have the facility nor sufficient milk supplies to produce infant powdered milk (Kitney 2014).

Using the newspaper article by Kitney (2014) at Appendix 1 and the Global Management Model (Steers, Nardon and Sanchez-Runde 2013), this essay analyses the situation presented by the purchase of UDP by William Hui. In particular, this essay explores the global challenges for UDP, the global environment within which UDP operates and the global management skills that will help the company succeed.

The article by Kitney (2014) refers to a number of stakeholders such as the new owner of UDP, William Hui, the CEO of UDP, Mark Smith, dairy farmers, Austrade, competitors, current customers and potential customers. However, for the purpose of this essay I will primarily focus on two stakeholders – Mr Hui and Mr Smith.

Challenges for UDP’s Managers
According to Forbes (2014) William Hui has 20 years experience in industrial management with business interests in Swing Media Technology Group, a Hong Kong manufacturer of CDs, DVDs and other media products as well as Chinarise Capital, a Hong Kong company that trades mobile phone handsets and components. He does not have experience in the dairy industry nor has he previously owned an Australian business. While Mr Hui clearly sees the purchase of UDP as a significant business opportunity it also presents him with a number of challenges. These challenges include developing knowledge of the Australian dairy industry and Chinese infant powdered milk market, developing knowledge of Australian and Chinese food safety standards, evaluating whether to invest further funds in UDP to diversify into the infant milk powder market or whether to seek a strategic alliance to facilitate entry into this market, evaluating whether UDP should consider the purchase of dairy farms to guarantee milk supplies, as well as developing cross-cultural communication skills for effective interaction with UDP employees and Australian government officials.

While Mark Smith, the CEO of UDP, shares many of the same challenges as Mr Hui, such as cross-cultural communication skills to effectively communicate with Mr Hui and developing knowledge and expertise in the infant powdered milk market and manufacturing process, he is also presented with a number of challenges directly linked to Mr Hui’s global business ambitions. UDP is a national business that has only recently entered the global market (United Dairy Power 2014). Mr Hui’s vision of entering the Chinese infant powdered milk market means that Mr Smith will need to transform UDP into a global business competing on a global scale. However, none of this will happen unless Mr Smith is able to expand the facilities of UDP, increase the sources of milk to the factory and develop the global managerial competencies of both him and other UDP employees.

In addition to individual challenges, challenges also exist at the broader industry level. The Australian dairy industry has experienced significant global competition at a time of persistent droughts, a high Australian dollar and depressed milk prices (Guilliatt 2014). While global demand for milk has risen, the Australian dairy industry has shrunk (Guilliatt 2014). According to Dairy Australia herd numbers have dropped and the number of dairy farms has halved (Guilliatt 2014). Increasing sources of milk to meet the future demands of UDP is, therefore, a significant obstacle to Mr Hui’s vision of entering the Chinese infant powdered milk market.

Further challenges relate to the relationship between Mr Hui and Mr Smith as well as their roles going forward. While Mr Hui has committed to maintaining the existing management team (Kitney 2014), how much involvement will he have in the day-to-day management of UDP? Will Mr Hui seek to introduce Chinese management practices and decision-making processes into the organisation? How will Mr Hui facilitate UDP’s entry into the Chinese market?

Developing a Global Understanding
Clearly there are a number of global challenges and obstacles that UDP will face if it is to achieve Mr Hui’s strategic objective of entering the Chinese infant powdered milk market. In deciding how to proceed, the Global Management Model (Steers, Nardon and Sanchez-Runde 2013) suggests that Mr Hui and Mr Smith will need to consider the environment in which UDP operates and how this impacts their working relationship as well as the global expansion of UDP (Steers, Nardon and Sanchez-Runde 2013).

Cultural environment
Successfully managing a global business requires dealing with national and organisational cultural differences (Hofstede 1994). In the context of UDP, it is critical that Mr Hui and Mr Smith understand the current and future cultural environment in which UDP operates. Not only will this assist them in understanding how to communicate with each other, but it is also vital in understanding cultural differences which may impede UDP’s entry into the Chinese market.

From an ethical perspective, it is essential that Mr Hui and Mr Smith understand each other’s cultural similarities and differences. Using the Core Cultural Dimensions developed by Steers, Nardon and Sanchez-Runde (2013) Australia can be characterised as moderately egalitarian where it is acceptable for individuals to question their superiors; strongly individualistic with a focus on direct communication and individual decision-making; strongly mastery-orientated which embraces change and a preference for individual performance based extrinsic rewards; and moderately rule-based with an emphasis on legal contracts and decisions based on objective criteria. On the other hand, China is characterised by a strongly hierarchical approach where it is unacceptable for individuals to question their superiors; strongly collectivistic with a focus on indirect communication and a preference for preserving social harmony over individual rights; strongly harmony-orientated which defends traditions and values relationships; and strongly rule-based with an emphasis on individual behaviour being regulated by rules (Steers, Nardon and Sanchez-Runde 2013). Clearly there are some critical cultural differences between Australia and China which will not only affect the way in which Mr Hui and Mr Smith communicate with each other but also decision-making processes, management approaches and leadership styles. Hofstede and Bond (1988, 14) state, “differences among cultures … have many consequences for management practices.”

Organisational environment
According to Nardon and Steers (2014), manager’s actions are guided by organisational context, that is, the organisation’s strategy, structure, decision-making processes and cultural norms. In the case of UDP, their strategy to grow the business in Australia and internationally (United Dairy Power 2014) has lead to the purchase of the company by an overseas investor. However, it appears that UDP’s organisational structure continues to supports its previous national business strategy with international activities being an add-on to its domestic activities (United Dairy Power 2014). Clearly this structure will need to change as UDP pursues its global strategy.

While there is insufficient information to determine the decision-making processes of UDP, I have assumed that this reflects Australian cultural norms. That is, Australian managers are willing to share power and engage in two-way communication with subordinates as part of the decision-making process (Wang and Clegg, 2002). Chinese managers, on the other hand, are less likely to invite participation in decision-making (Wang and Clegg, 2002). While this is a generalisation of national cultures, it nonetheless highlights a significant issue that Mr Hui and Mr Smith will need to clarify as part of their on-going relationship.

Situational environment
The situational environment reflects the circumstances “facing a manager at any given point” (Steers, Nardon and Sanchez-Runde 2013, 151). In the case of UDP, Mr Hui and Mr Smith need to build a workable relationship and consider how they will achieve the strategic objective of global expansion.

An important element of Chinese culture that impacts the situational and organisational environment is the concept of guanxi. Guanxi encompasses mutual trust and reflects the Chinese practice of establishing trust before the transactional side of business commences (Hwang et al. 2009). In the context of relationships with customers and suppliers, Menzies and Orr (2010, 27), describe guanxi as “more complex than the western concepts of networking and business favouritism and provides an alternative path to formal … or contractual processes.” Guanxi also relates to good work relationships, that is, maintaining harmony and dealing with conflict using a collaborative style (Cheng, Rhodes and Lok 2010). While there are many positive aspects to guanxi, Mr Smith also needs to be aware of its negative aspects. That is, the “exchange of gifts” or “facilitated payments” to maintain guanxi with Chinese partners and government officials (Hwang et al. 2009, 237). This presents a significant situational challenge for UDP to retain the benefits of good guanxi while maintaining their ethical business practices.

Developing Global Management Skills
Reflecting upon the challenges facing UDP and its’ environment, there are a number of skills that, in my opinion, Mr Hui and Mr Smith need to consider. These include cross-cultural communication, negotiation, global mindset and global leadership skills.

Culture and cultural differences, such as those of Australia and China, often act as a barrier or “screen … in which people create, send, receive and interpret messages” (Nardon, Steers and Sanchez-Runde 2011, 85). In the case of UDP, communicating across cultural boundaries is made more complex by the fact that Mr Hui comes from a “high-context culture” (Steers, Nardon and Sanchez-Runde 2013, 210) where non-verbal cues are very important and much is communicated indirectly. It is, therefore, critical that Mr Hui and Mr Smith develop skills to communicate with each other, that is, across cultural boundaries. They need to be self-aware, learn to understand each other’s culture, develop common meanings and develop active listening skills (Steers, Nardon and Sanchez-Runde 2013).

Transforming UDP into a global organisation will require developing global relationships, partnerships, and potentially a strategic alliance to facilitate UDP’s entry into the Chinese infant powdered milk market. It is therefore critical that UDP considers the criteria for selecting global partners, based on compatible goals, systems and processes, culture, commitment and operational approach (Steers, Nardon and Sanchez-Runde 2013). Additionally, UDP will need to consider potential ethical conflicts, such as bribery, corruption or working conditions in China, and the strategies it may use to resolve these conflicts. UDP may wish to adopt an ethical decision tree approach (Buller, Kohls and Anderson 2000) in determining the appropriate strategy for particular ethical dilemmas.

Developing the necessary cross-cultural relationships to realise UDP’s global strategy will necessitate global management skills. These skills are often described as a global mindest, global management skills, cultural intelligence or cross-cultural competence (Bucker and Poutsma, 2010). In essence each of these concepts refer to a “set of individual qualities and attributes that help a manager influence individuals, groups and organisations who are from other parts of the world” (Javidan and Bowen 2013, 147). UDP managers with a global mindset are more likely to handle the global business complexities, such as navigating through the challenges and obstacles mentioned earlier in this essay, that may hinder the achievement of UDP’s vision as a successful global organisation.

In addition to a global mindset, Mr Hui and Mr Smith need to consider their global leadership skills. Research from the Global Leadership and Organisational Behaviour Effectiveness (GLOBE) program highlighted universally acceptable and unacceptable leadership attributes (Javidan, et al. 2006). Understanding these attributes is vital for developing effective cross-cultural leadership. Mr Hui and Mr Smith need to understand and demonstrate both the similarities and differences in their leadership styles then seek ways to bridge the gap between the two cultures. Not only will this aid their working relationship but it will also assist the adaption of their leadership style to enable attainment of UDP’s strategic objective of expansion into the Chinese infant powdered milk market.

Globalisation provides organisations with many challenges and opportunities (Story and Barbuto Jr. 2011). UDP’s success depends upon Mr Hui and Mr Smith developing and demonstrating their global management skills. They need to recognise the global realities that face UDP, understand the environment in which they operate and develop the global management skills necessary for their particular cross-cultural setting (Steers, Nardon and Sanchez-Runde 2013).

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Appendix 1
United Dairy Power boss targets massive Chinese market
MARCH 18, 2014 12:00AM
Source: The Australian

THE Hong Kong entrepreneur who now controls Australia’s largest privately owned milk processing company, United Dairy Power (UDP), wants to use it as a springboard to break into the multi-billion-dollar powdered milk market in China.

William Hui, who last month paid about $70 million to take control of UDP from its founder Tony Esposito, said he was willing to spend a further $20m to bolster capacity at the group’s factories or seek alliances to help UDP expand into the milk powder business.

In his first ever media interview, Mr Hui — who is also the chairman of Singapore-listed Swing Media Technology, a company that makes and trades CDs, DVDs and other media products — said he was also talking to his bankers about potentially providing finance to UDP’s suppliers to help them bolster milk supplies.

He said the company could consider purchasing farming properties in the future as part of its expansion plan for UDP, designed to cash in on the booming demand for powdered milk products in China.
The infant milk formula market in China is set to double to more than $25 billion by 2017. But while the global price for whole milk powder jumped 65 per cent over the past year, Australia’s production of milk powder fell 22 per cent over the same period.

Mr Hui stressed that the company remained committed to maintaining capacity in the local market and would only forge ahead with its expansion plans if it could source bigger milk supplies. UDP, based in South Melbourne, has processing facilities at Poowong in Victoria and Murray Bridge and Jervois in South Australia.

Mr Hui’s purchase of the company last year followed a fierce bidding war for the listed Warrnambool Cheese & Butter, a battle eventually won by Saputo after the Canadian giant beat off local rivals Murray Goulburn and Bega Cheese.

The purchase comes as several Chinese state-owned enterprises and private companies are in negotiations to bankroll construction of new milk powder plants in NSW through a plan being brokered by Dairy Connect, a not-for-profit organisation that represents the NSW dairy industry.

Mr Hui, who was introduced to UDP in August last year by Huashan Capital co-founder David Chen, confirmed there were other investors in China willing to follow his lead to purchase or invest in Australian dairy assets.

“We know there are lots of investors in China,” he said in an interview with The Australian. “In the coming five years there will be a lot of Chinese coming to this market. In the past five years it has been in mining, but in the coming five years it will be in dairy.

“Whether it is a big company or a medium-sized company in China, they will be interested because the dairy product from Australia is very good. “The environment here is very good for the cows and the milk. China has already been importing a lot of cows from Australia.”

Mr Hui said his purchase was a private one and unrelated to Swing Media or his other business, Chinarise Capital, which trades mobile phone handsets and components in Hong Kong.

Established in 1999, UDP purchases milk from the Kirin-owned Lion-National Foods Group but also provides transport and logistics services as well as manufacturing facilities. The company manufactures dairy products including cheddar, the Caboolture brand of mozzarella cheese, butter and whey powder.

Mr Hui’s growth plan will see a major expansion of production to allow diversification into milk powder, which will be exported to China. “We now still mainly rely on the local market,” he said. “If we get more milk supply then we will divert to the China market. Our factories have the potential to produce more but supply is at the maximum already. We need to look for the milk supply, increase our production and then we can go to China. Right now we have about 150 farmers, suppliers, and we are talking to them about supplying more. We are also talking to our bankers to see if they can allow us to provide finance to farmers, assistance to them, to help them grow as well,” Mr Hui added.

While he said there were no plans to purchase dairy properties and emphasised that “having a processing company is very different to having a farm”, he said it could be an option for the future. “We won’t buy farms now but we could in the future. But we are new to this industry,” he said. “Once we expand our facilities then we will consider buying some farms.” Mr Hui’s chief financial adviser and Chinarise CFO, Johnny Chan, said the company was in dialogue with Austrade about providing more support to the local farmers to help them bolster supply But he said the government needed to do more. “I think the government should give more support to the farmers, to help them to grow. They shouldn’t just rely on the foreign investor financing the farmers.”
Mr Hui said the company remained committed to the local market. It is being run by the existing management team, led by chief executive Mark Smith.

Earlier this month it increased prices for suppliers. “We won’t cut off production or capacity for the local market because we already have good profitability here,” he said. “We don’t want to cut that off and ship to a new market. Locally we are still growing. Locally we still have demand we can’t supply to. We cannot have enough supply for our customers — so we want to make sure our local customers are happy first.”

Tighter food safety rules in China have also made it more difficult for importers of dairy products, especially after a contamination scandal involving New Zealand dairy giant Fonterra last year. “We need to be very careful because of new regulations governing the import of dairy products into China,” Mr Hui said. “Other people have been getting into big problems. We don’t want to jeopardise everything we have established.”


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