China Resources Corporation

1. Go back to 1998. What were the most significant challenges faced by CRC prior to implementation of the 6S management system? What were the problems that Jiang Wei was trying to address with the 6S system?

The CRC faced several significant challenges prior to the implementation of the 6S Management system. As a result of its diminishing traditional role in foreign trade, CRC had restructured and grew the company by diversifying into numerous industries, and by purchasing listed assets. This resulted in CRC becoming too diverse and poorly controlled (Campbell and Lane, 2007). The company made changes to attempt to fix this issue, such as closing unprofitable businesses, closing overseas offices, merging subsidiaries, and “improving financial controls and management” (Campbell and Lane, 2007, p.3).

Despite these attempts, the CRC subsidiaries were still stand-alone businesses that were not part of the overall corporate strategy. As a result, each subsidiary was managed differently than the others, and handled performance evaluation and reporting differently. With the implementation of the 6S system, Jiang Wei hoped that the subsidiaries would be included in the corporate strategy, and would be motivated to focus on profitability and the corporate’s long-term strategy (Campbell and Lane, 2007). This would enable the corporate managers to identify and understand the issues occurring within the subsidiaries, and then be able to address them to improve efficiency and profitability.

2. Were these challenges unique to CRC? How do they impact the management control needs of CRC?

The challenges faced by CRC were not unique to that corporation. For example, China Worldbest Group, China’s largest pharmaceutical and textile company, was experiencing many of the same issues. China Worldbest was also the most financially trouble company in China, caused by “over diversification, overexpansion, and poor management and financial controls” (Campbell and Lane, 2007, p.10). In 2006, CRC was appointed to assist the company in restructuring and in increasing profitability.

These challenges impact the control needs of CRC management in that the management is not able to identify and then address the issues facing the subsidiaries. Each subsidiary, and its employees, are more concerned with the subsidiary itself, rather than the corporation. CRC needed to get everyone on the same page, working toward the same goal, in order to increase overall profitability. Implementing the 6S management system has enabled CRC to centralize management and centralize the profit center of the corporation.

Reference:

Campbell, D. and Lane, D. (2007). China Resources Corporation (A): 6S Management. Harvard Business Review, 9-107-013.