When Mao and his father established the company in 1996, he remained true to the goal of building a quality kitchen appliance brand in China. Mao fulfilled this goal by fueling sales from ¥1 billion to over ¥10 billion in ten years, 2007 and 2017. However, Mao did not stop at this, and he was determined to generate over ¥100 billion in sales by 2030. In his words, “We don’t want to be an ordinary company with sales of ¥100 billion, but a great company with sales of ¥10 billion (Lee et al., 2021). To achieve this, Mao understood that corporate culture played a significant role in achieving the mission, as it was the main driver of achievements and innovation. Therefore, Fotile Group had to transform its culture through continuous reflection, practice, and exploration.
The Four Stages of Cultural Transformation
Mao nurtured his company through continuous reflection, practice, and exploration. Under Mao’s leadership, the Fotile Group underwent four major stages of cultural transformation. As a result, the company developed a unique management system that exhibited Chinese characteristics. The first stage occurred between 1996 and 2000. In this stage, the company built a brand through continuous innovation. Mao learned a lot from the previous business, and he used this experience to create a high-end brand. Mao invested more than ¥30 million in its first hood production (Kawaguchi, 2020). He also attracted research and development talent by offering his workers fat paychecks. In 1996, the first Model A was developed to solve the practical deficiencies of current models. A year later, Model Q was developed, increasing the business’ sales from 30,000 to 400,000 units.
The second transformation stage occurred between 2001 and 2007, when the company adopted Western management practices. When other dominant Chinese brands realized that Fotile was generating huge sales, they attempted to capture the market share by undercutting Fotile. Fotile could not keep up with the huge sales due to its poor management model. As a result, it launched a Performance Excellence Model (PEM), worked with a consulting firm to build and design a management system, and hired professional managers (Niedenfuhr, 2021). Fotile introduced the following models to improve management effectiveness: ISC management system, IPD process, Six Sigma Management System, OA budget management system, and staff performance management system.
Between 2008 and 2017, the Fotile Group introduced the traditional Chinese culture. Mao realized that Western management practices could not meet China’s needs. Mao realized that China had, over time, developed a value system. Therefore, Mao incorporated these values into the company’s management system to offer effective management that meets the needs of the Chinese market. The core values were righteousness, benevolence, wisdom, courteousness, and trustworthiness. The fourth stage is set to occur between 2018 and 2030, known as “For the Happiness of Millions of Families” (Kawaguchi, M. (2020). During the end-of-year party, Mao announced four ambitious objectives to achieve the new mission statement. These four objectives aim to make families happy, help entrepreneurs, transform sales, and enhance community happiness.
The Identity Share Scheme
Fotile introduced the identity share scheme as additional incentives to its employees under a comprehensive remuneration system. The goal of introducing the identity share scheme was to ensure that all company employees share in the generated profits. In 2010, the company officially launched the identity share scheme. All workers who had been part of the staff for over two full years qualified to get dividends in proportion to the shared owned. The issuance of these shared depended on an employee’s rank and job title and the value of their positions. The identity share income was successful as it was popular and aligned with employee’s interests (Niedenfuhr, 2021). The scheme increased coordination in different departments. All employees were motivated, and this improved the effort to meet business goals. Despite its success, the scheme encountered some problems which the business managed to address promptly.
Questions from the Case and Mao’s Response
One of the questions asked in the camp is about the role of culture in multiplying Fotile’s sales in the next decade. A company culture plays a significant role in generating revenue for the company. A positive organizational culture goes a long way in promoting customer service, employee well-being, and innovation, which results in better customer relationships, higher morale, and improved performance (Kawaguchi, 2020). On the contrary, a negative corporate culture leads to poor customer relationships, low morale, and poor sales performance. Mao would respond to this by asserting that the implementation of the identity share scheme is one of the cultural practices at Fotile that helped in increasing sales, as the scheme aligned with employees’ interests (Niedenfuhr, 2021). The other question was whether the identity share scheme was a benefit or an incentive to the workers. The identity share scheme was both an incentive and a benefit to the employee. Employees are encouraged to improve organizational revenues, and at the same time, they share in the profit.
Conclusion
Mao infused both the traditional Chinese norms and Western management philosophy to create a unique and strong brand. At first, the company avoided competition from low and medium brands by adopting Western management practices. The Western management practices only increased sales for many years, only for the sales to decline dramatically. The drop in sales was for two main reasons: the management was ineffective in dealing with the loss in sales, and other Chinese brands undercut Fotile to gain a market share. To solve this issue, Fotile introduced values from the traditional Chinese culture. Mao realized that applying Western social customs did not meet the needs of Chinese firms. Therefore, incorporating Chinese values into the Western management system complemented the Western management practices, offering an effective system that would serve the Chinese market.
References
Kawaguchi, M. (2020). A sociological approach to management philosophy of Chinese family businesses in a transition period: The case of Ningbo Fotile Group. Cultural translation of management philosophy in Asian companies: Its emergence, transmission, and diffusion in the global era, 105-120.
Lee, J., Huirong, J., & Zhao, L. (2021). Fotile group: Creating a culture-driven organization.
Niedenfuhr, M. (2021). Humanistic management with a Confucian twist: The case of FOTILE. Humanistic Management in Practice: Volume II, 217-238.8.
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