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Business as Mission Case Study: High-tech, non-branded Manufacturing

Sector: High-tech, non-branded manufacturing.

Market: This multinational company has low-cost design, manufacturing, assembly, and testing capabilities in multiple factories in-country. They serve the high-tech industry (both domestic and export) through customer service and sales representative offices located internationally.

Structure: Publicly held foreign company. The company has over 11,000 employees of which over 1,000 are expatriates. Of their employees, 166 have a PhD, 1,300 employees have a Master’s degree, and 3,533 have a Bachelor’s degree. The company headquarters is located in-country and overseen by a nine-member board of directors.

Champion: Founder is a like-minded entrepreneur with a PhD in electrical engineering, nearly 30 years of experience in technology development at a prestigious high-tech company, and many years of management experience. He also has experience in opening high-tech manufacturing facilities all over the world. He desires to create an environment where transformation can take place in the communities that the company has created inside and outside the factory walls.

Business formation: With a tremendous amount of capital investment and government subsidies, the founder was able to establish a high-tech manufacturing facility in-country. With continued strong government support and large sums of capital investment, the company was able to expand at a blistering pace. They now have multiple manufacturing facilities in-country. They have been successful in the acquisition of certain related technologies to advance and support core competencies. As they have built their high-tech enterprise, the company has been able to leverage creating a community at each site. Advertised as a benefit for their employees, the community includes a range of housing options, a private school and a place of worship all located adjacent to the manufacturing facility.

Vision: Their vision is to profitably be the single largest manufacturer of this high-tech product in this country. While advancing technologies and applications, they desire to increase their market share with great integrity. With each manufacturing site, the company has intentionally created a community (housing, school, church) as an environment where transformation can take place through meaningful relationships and activities.

Story: The champion established the first in-country manufacturing facility in 2000. He brought in a team of 300 expatriates to start-up this incredibly high-tech manufacturing facility. The start-up costs for these high-tech manufacturing facilities are incredibly high. Yet, with the help of large government subsidies and approvals, the champion was able to not only establish a manufacturing plant, but also build an adjacent community complete with community center, housing complexes, a private bilingual school and church. Land subsidies were provided by the government and the church building was funded entirely from non-company funds. This community provides employees a valuable benefit and by design to mitigate prohibitive expat salary packages. Like-minded expats sense a calling to join this work and community. They, along with like-minded staff for the private school and church help create a positive community with enriching activities which have catalyzed some transformation.

Within a matter of years, the company has been able to expand at an unusually rapid pace. They now have multiple manufacturing facilities all over the country, and even acquired an existing facility from another high-tech manufacturer. They now have many different capabilities for various applications for their high-tech product, and now in the process of seeking partnerships for sharing technology with other high-tech companies. They are currently trying to keep up with the rapid growth of their company, as human resources are stretched thin and their stock has taken a beating since its IPO.

Lessons learned:

Build a team. The founder brought in a team of 300 expatriates when starting up the company. Having a large team of capable workers provided a strong foundation for establishing this company in the forefront of manufacturing this high-tech product in-country. They have also been able to bring in experienced professionals to fill many of the managerial positions, many of whom have been able to leverage relationships from previous jobs for the company’s growth.

Planning for long-term. The company is currently stretched thin on many fronts (human resources, cash reserves, capital, etc.) because they wish to establish their presence in-country in anticipation for increased market demand. The pace at which they are artificially growing has been a source of stress and frustration for the company, due to great external pressures to continually expand and grow.

Resolve tension with stakeholders. As a publicly-held company, their activities are subject to the approval and criticism of the stakeholders. There are tensions with certain non-core business activities and the value they provide to stakeholders, such as a large housing complex, community center, and private school. The company has maintained that these valuable benefits the company must provide, which will inherently add value to the company and add to the well-being of employees.

Gain favor with officials. Due to the controlled nature of the business environment, it is crucial to gain favor with the local officials in order to be successful. This company has successfully gained favor with the local government, which allowed them to obtain tremendous grants and subsidies to aid in expansion and development. This company is an employing powerhouse and high-tech manufacturing giant, which has paved the road for local governments creating favorable terms for this company to locate one of their factories in their province.

Future plans:

Continue to grow, not just expanding but developing existing manufacturing facilities. As they increase their market presence in-country, they are gaining competitive advantage by establishing themselves as the premier supplier of this high-tech product in the domestic market. This will create a barrier to entry for competitors, one of whom has the largest market share. Continuously improve technologies by acquiring technology through partnerships with other high-tech companies.

Results: In amazingly short amount of time (less than 8 years) have gone from nothing to the third largest manufacturer in this sector with over 11,000 employees Have blessed the host country by advancing their technological capability several 'generations' in this short period of time Have leveraged their technology to provide a favorable environment at each of their locations for community, education and fellowship. Have drawn many like-minded, vocationally qualified and gifted people to join the effort.

Observations:

As they entered the market a few years back, they were able to leverage large capital investments and the favor of the local government to gain huge momentum in establishing their company in-country. This sort of momentum would not be achievable without the favor of the local government, and the growth has been artificially sustained with the help of the local government. The local government has allowed them to build large living complexes and community centers, allowing the company to provide employee benefits in lieu of lower wages, especially for the expatriates.

The champion has been transparent about his vision and purpose of the company. This has allowed him to intentionally create a positive environment for sharing life and heart matters.

The community living complexes are mini-cities in their own right. There are schools, stores, groceries, community centers, etc., on site which are conveniently located near the factories. They also have a counseling and medical staff for the employees on site. The company has specifically asked to build a church at every manufacturing location, which has been granted by the local government.

The community living complexes and schools may be a source of financial strain for the company, as the company heavily subsidizes these extra-business activities. The company encourages personal involvement and philanthropy of the employees. The company does not give corporate money to benefit the local community, as this may create more tension between the stakeholders and the company.

Their government relations efforts are not just for local government, but due to the significance of this high-tech sector, they have had to invest considerable amount of time and resources at the national level in three countries.

Because the product they bring (critical high-tech manufacturing) is highly coveted, they have been invited to set up shop in many different areas. This great benefit has also allowed them, in two locations, to have the host government build the facility and let them operate/manage it. This high value has also leveraged their requests for land, subsidies and approvals for their residential communities, private schools and church buildings. However, this benefit/draw may also be part of their present quandary as it is politically incorrect to turn down offers to build more!

The schools are fairly unique – a hybrid of a local school and international school. The schools are allowed to enroll both expatriate and local children and run parallel English and local language schools. All expat teacher and administrator visas are provided through the manufacturing facility.

The ministry emphasis seems to be creating an environment and drawing like-minded people to join. Living near work in a full-service community seems to allow much freedom for neighborhood outreach. From what we could see and hear from our short visit there appeared to be very little intentional company-led strategies – outside of character training topics that were encouraged to be taught by each department (just topics, no curriculum).

Tensions resulting from their "special" government relationships. A combination of their desire to quickly establish a large company footprint before the competition enters and the allure and value of what they offer has resulted in company expansion at an unnaturally quick pace. The downside is a major source of financial and human resource strain for the company.

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posted by Justin Forman | 5.01.2008 - 7:00 AM

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