Understanding Business Culture of Shandong Machinery I&E Corporation (SDMIEC) and suggesting solutions for smooth transition from SOE to Private Enterprise.

Understanding Business Culture of Shandong Machinery I&E
Corporation (SDMIEC) and suggesting solutions for smooth
transition from SOE to Private Enterprise.

Submitted
In the Partial fulfillment of the requirements of the
Post Graduate Program for Executives
in International Business (2012-13)
By

Ashish Jude Michael
2012PGX105

to the

Rajiv Gandhi Indian Institute Of Management

Shillong

India

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ACKNOWLEDGEMENT

It gives me immense pleasure to thank Mr. Cai, who has given us an opportunity to undergo
an Internship in SDMIEC. Along with him I would like to thank Ms. Wang Lei (Ms.
Maggie), Manager Fabricated Parts who was assigned as my mentor and she has helped me a
lot. I learned many things from her and without her help it would have been difficult to know
learn so much about SDMIEC. The special thanks to Ms. Miaoli and Ms. Luqingsun they
have been very kind and helpful to us. And I want to thank the entire staff of SDMIEC for
making us “feel like home and part of family”.
In addition to above I would like to thank Prof. He Yiming , OUC and Prof. S.K.Prusty, IIM
Shillong for helping us in the project, without their guidance it would had been impossible to
do this. And last but not the least I would like to thank Prof. Dai Hua, Director, OUC who has
always been as a local guardian for us. His immense knowledge and his teaching about the
Chinese Culture helped us a lot during this internship. I also give special thanks to Prof.
Rohit Joshi, Chairman PGPEx, IIM Shillong and Prof. D. Chanda, Chairman, Placements
PGPEx, IIM Shillong who have given me the opportunity to work on the internship in China.
I appreciate the hard work and effort put by PC committee to secure the internship for the
batch in China. Last but not the least I would like to thanks my fellow team members for
helping and supporting me.
Thanks to every one, who in whatever possible way helped in making this Internship
successful.

Ashish Jude Michael
PGPEx, IIM Shillong

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INTERNSHIP COMPLETION CERTIFICATE

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Institute Certificate

This is to certify that the internship report entitled “Understanding Business Culture of
Shandong Machinery I&E Corporation (SDMIEC) and suggesting solutions for smooth
transition from SOE to Private Enterprise” being submitted by Ashish Jude Michael
(2012PGX105) to the Indian Institute of Management, Shillong for the award of the Post
Graduate Program for Executives in International Business (2012-13) is a record of the
bonafide work carried out under my supervision and guidance. The internship report has
fulfilled all the requirements as per the regulation of this institute and in opinion reached the
standard for submission.

Professor Santosh K.Prusty

Indian Institute of Management, Shillong

Date:

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Table of Contents

1. Executive Summary
2. Introduction
3. Internship Objective and Methodology
3.1 Internship Objective
3.2 Internship Methodology
4. Background of Chinese Import & Export (I&E) Industry-PEST Analysis
4.1 Economic Development Background
4.2 Short History of Chinese I&E Industry
4.2.1 First Stage: Before Reforms of 1985
4.2.2 Second Stage: After Reforms of 1985
4.2.3 Current Situations (2011-12)
5. Introduction to Shandong Machinery I/E Corporation Limited. (SDMIEC)
5.1 Brief Introduction
5.2 Historical Events
5.3 Core Values
5.4 Services
5.5 Main Products Line
5.6 Organizational Structure

6. Findings
6.1 Chinese Business Culture
6.2 Flowcharts of operations
6.3 Customers
6.3.1 Customer Relationships Management (CRM)
6.3.1.1 Customer Segmentation
6.3.2 Designing of Customer Grievance and feedback forms
6.3.3 Analysis of Customer Feedback
6.4 Suppliers
6.4.1 Supplier Segmentation
6.4.2 Supplier Rating Method
6.5.1 Designing of Inter-departmental feedback form
6.5.2 Analysis of Inter Department Feedback

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6.5.2.1 Standardization
6.5.2.2 OOPS (Object Oriented Procedure System)
6.5.2.3 CRM (Customer Relationship Management)
6.5.3 Brief discussion and suggestions on issues of IMS and EUS.

7. Conclusion
8. Managerial Implication
9. Recommendations & Suggestions
9.1 Recommendations
9.2 Suggestions

10. Self Assessment of Internship
11. Annexures
12. Bibliography

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1. EXECUTIVE SUMMARY

Shandong Machinery Import & Export Co. better known as SDMIEC is basically a Chinese
Import & Export Firm. It started as an SOE in year 1958 and in 2011 it was privatised. This
change in ownership brings many changes in organizations working as now it is open to
competitive market.
This may make things very difficult as the transformation of an organization is one of the
most critical stage. In this report I have tried to understand the major problems, which
SDMIEC is facing. I have analysed and suggested solutions for making this transition
smooth.
I have observed five major problems, which SDMIEC is facing at present. I have used
Customer survey forms and Interdepartmental survey forms for drawing out conclusions. The
five major attributes, which SDMIEC requires in near future, are:
1. Need for Standardization.
2. Need for OOPS (Object Oriented Procedure System).
3. Need for Improved IMS (Information Management System).
4. Need for Centralized CRM (Customer Relationship Management System).
5. Need for Effective Utilization of Staff (EUS).
I have used Ranking Matrix and Pareto Chart to rank the problems as per criticality. Out of
five problems I have taken three main problems and analysed deeply for other two I have
discussed in detail in Conclusion.
The top three problems, which were prioritized as per ranking matrix, I have analysed them
by Why-Why analysis and Cause & Effect Diagram, following are the problems:
From Why-Why Analysis I identified that for problem I which is regarding need for
Standardization I came to root cause that Standardization is missing in SDMIEC because
initially started as a single organization than later ventured out and had so many diverse
divisions hence initially there was not much requirement of Standardization, but when it was
growing it should had taken care but was not done and hence the concept of Standardisation
was missing. I have suggested many ways in Cause & Effect Diagram such as introduction of

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SOPs (Standard Operating Procedures), Forms, Process Audits, Training of staff, Centralized
marketing department etc.
For Problem 2, which is “Need for OOPS (Object Oriented Procedure System)” by using
Why-Why analysis I found the root cause for the reason that OOPS concept was missing in
SDMIEC because when the market was not liberated there were lots of clearances &
sanctions to be taken from government and this made procedures very cumbersome and
complicated but now situation is changed and government have simplified many processes.
With help of Cause & Effect Diagram I have suggested various ways by which we can
implement OOPS concept, such as setting and measuring targets, ensuring faster information
by implementing ERP, training staff to be effective, making SOPs concise and complete
avoiding repetitive activities.
For Problem 3, which is requirement of CRM department. By Why-Why Analysis I found the
root cause because It was an SOE earlier and market competition was low, so CRM was not
required at that time but now as getting a new customer is much more expensive than
retaining and increasing business from present customer having a dedicated CRM department
makes sense. Also the CRM department can be given responsibility of making and updating
AVD (Approved Vendor Directory). I have discussed in detail about Customer & Supplier
segmentation in this report. I will not be able to summaries it here as it already written in a
concise manner and will only cause repetition.
For last two requirements I have suggested the faster we implement ERP system which is the
foundation of IMS (Information Management System) the more advantage SDMIEC will
have. Regarding Effective Utilization of Staff (EUS) I have suggested a more effective
organizational structure in which a centralized Marketing department, CRM (Customer
Relationship Management) department is introduced and Co-ordinating department, Audit
Department, Personnel department are upgraded to IMS (Information Management System),
QM (Quality Management), Human Resource department respectively.
Finally I have given some suggestions & recommendations.

2. INTRODUCTION

I was working in an Indian SOE and this created a curiosity in me regarding studying a
Chinese SOE, and understand the transition of a Chinese SOE into a Private Enterprise, the
issues & problems, which are faced. I got this opportunity in SDMIEC, but for understanding

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this transition I have to first understand the Chinese Business Culture. This lays the
foundation of primary and secondary objectives of my internship.
In this report I have tried to condense my 8 weeks of Internship experience at Shandong
Machinery I&E Co. Ltd (SDMIEC) in 10 chapters. I had two objectives from this internship.
One was to understand and experience Chinese Business Culture and second was to find,
analyze and solve major problems faced by SDMIEC.
I have discussed about the objective and methodology in detail in chapter 3 of this report.
Chapter 4 gives the introduction and overview of Chinese Import and Export Industry. It also
gives a PEST analysis of the sector. Chapter 5 gives the introduction about SDMIEC and its
SWOT analysis.
Chapter 6 gives in detail the observations and analysis of the topics, which are the Business
Culture of SDMIEC and the problems, faced by the firm. I have done a sample survey which
includes filling of Interdepartmental form by in-charge of four central divisions ie. Personnel,
Finance, Audit and Co-ordination and two divisions of Hi-Might and Hynar Machinery.
Further customer feedback was taken from customers of Hynar & Hi-Might machinery. I
have used tools like 80-20, Why-Why analysis and Cause & Effect Diagrams as tools.
Next chapter 7 lays the basic outlines of this project report such as Project title, scope of
work, managerial implication etc.
Chapter 8 is a sort of self-assessment of Internship Chapter 9 is conclusion and chapter 10
comprises of Recommendation and Suggestion, which I have given to SDMIEC
Management.
The survey details and filled forms were not allowed to be taken out of company’s
premises, a mail related to same is enclosed in “Annexure 3”.

3. INTERNSHIP OBJECTIVES AND METHODOLOGY

3.1 Internship Objective:
The primary Objective of the Internship was to understand the Chinese Business Culture.
The Secondary Objective of Internship is to analyze the problems faced by the firm during the
transition from SOE to a Private enterprise. Also suggesting various solutions, which we
think, can ease this transformation and make this company run smoothly.

3.2 Methodology:
The methodology I have used during my internship follows the following steps:

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1. Company Study:
To study any company we either have to depend on primary or secondary sources of
information. In this report I have utilized both of these. I have used the various sources of
information available on Internet and I have interviewed the staff and had discussions with
management of the company. This helped move on the next step.
2. Formulation Operational Flowchart:
For understanding clearly the functioning/operations of the company I decided to formulate
an operational flow chart of the two basic activities, which are the backbone of SDMIEC,
Export & Import.
3. Survey
To get the real picture I thought of conducting some open-end surveys. I designed a
Customer feedback form and Internal Departmental form in discussion with my mentor. We
targeted important customers and department heads of six different departments.
4. Redefining Problems
After getting the data from internship i.e. Survey forms and interviews we got many
problems. But these problems were very generalized so I redefined these problems under 5
headings.
5. Prioritizing & Ranking Matrix
In order to focus our attention on the three most critical problems as suggested by mentor
(Ms. Maggie), we decided and to have a discussion on how to prioritize the problems. I had
discussion with Ms. Maggie & Ms. Miaoli after lot of brainstorming we came out on a
particular system. Based upon that I made a Ranking Matrix and drew a bar chart based upon
which I selected the three most critical problems.
6. Why-Why Analysis
To find out the root cause of each problem I did a Why-Why analysis for the three problems.
7. Solutions Suggestion
After finding the Root cause analysis we found the problems. I again had discussion with my
mentor (Ms. Maggie) and jot down some improvements and actions which can help in
addressing the problems. To have a better understanding I have used “Cause & Effect
Diagram” to relate how each of our suggestions/improvement are related to the problems we
identified.

4. BACKGROUND OF CHINESE IMPORT & EXPORT (I&E)
INDUSTRY

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4.1 Economic Development Background
China is now world’s second largest Economy as per PPP. China’s economy has changed
dramatically in last 30 Years. A brief look at economical & technological environment will
provide us a better understanding of the current industry situation.
China has changed rapidly from a primarily centrally controlled economy to a competitive
free market economy. As a result the overall productivity has improved rapidly. The
movement of labor, services, products and human resources has also increased. If we check
the historical data we can see that China’s Cross Domestic Product (GDP) in 2011 was 11.3
trillion USD as per PPP. This rapid growth has increased the demand for Export & Import.
Customs statistics show the total import & exports amount to approximately 3.6 trillion USD
in 2011. And when we compare it to 1985 it was US$42.3 Billion when it adopted open
market policies. Now China has become a “World Factory” which requires wide variety of
raw materials, resources, finish products and technologies. The import and export of energy
and raw materials for production purpose makes up large proportion of foreign trade. This
has resulted in increase in the number of Export & Import (E&I) companies and the
competition has improved their quality of service.
The fast development of technology has also had a great impact on E&I companies.
Multinationals for see a large market for new technology. The major trading partner is Japan
in this segment. Large population is the basis of low cost production, which is a competitive
advantage for China.

4.2 Short History of Chinese I&E Industry
4.2.1 First Stage: Before Reforms upto 1985
Initially only large scale State Owned Enterprises (SOEs) were having license to import &
export. These were financially strong and were having monopoly in core export and import
activities. These were due to tight government regulations, a company without exports &
import rights if wanted to import computer from US. It has to seek help from China
Electronics Import & Export Corporation (CEIEC). CEIEC was authorized by government all
business related export & imports. As computer was an electronic product, the company
would ask CEIEC to be sole agent to source and purchase computers. They would sign a
purchasing contract with CEIEC and CEIEC then handled all the negotiations with foreign
vendors, documentations, payments and shipping for company. The company paid
approximately 70%-100% worth of goods in advance to CEIEC, CEIEC then issued a letter

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of credit (LC) to vendors in foreign countries to buy goods. After the goods were shipped and
arrived at port, CEIEC was responsible for Customs Clearance duties. Normally CEMIEC
will charge 3-4% of the trade amount together with all cost associated with shipping process.
However in order that CEIEC should not take advantage of its monopoly government
controlled service charges. The export business followed same procedure. In fact CEIEC
owned all vendors and buyers information as middle trader.

4.2.2 Second Stage: After Reforms after 1985
Local companies in China started to have more choices in choosing their import and export
agents starting in late 1980s. This increase in choices is attributable to the reform policies of
China Government. Besides CEIEC, local companies could reach an agreement with China
National Machinery Import & Export Corporation (CMC). They could even sign a contract
with China Cereals, Oils & Foodstuff Import & Export Corporation (COFCO) to import
computers. By this time Chinese government tried to reform the whole business system and
encouraged competition to simulate productivity, as a result market efficiency increased
substantially. The loosening of government control was welcomed by all local companies,
but still in late 1980s the competition was confined to the monopoly giant State Owned
Enterprises (SOEs). The government still did not grant import and export privileges to public.
Till this time a number of small private companies managed to establish some relationship
within industry regulatory bodies. SDMIEC was an SOE during this time too so it was clearly
going to face some tough time ahead, if private players were allowed in the industry.

4.2.3 Current Situations
For joining World Trade Organization (WTO) Chinese started to loosed its controls over
exports and imports. Any enterprise with one million Chinese Yuans (RMB) registered
capital could now apply to enter import-export business. After the government totally
eliminated control on the import and export servicing industry, the number of companies that
registered directly with customs increased rapidly which was just 100 in 1985.
Information sharing methods have fundamentally changed with the wide availability of
Internet. The internet also decreased the added value of traditional Export & Import service
providers. This resulted in fall of service charges upto 1%-0.6% on average as local
companies, as a result it became very difficult for SOEs to survive when monopoly was
abolished and SOEs were privatized.
PEST Analysis of I&E Industry In China

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5. INTRODUCTION TO SHANDONG MACHINERY I/E
CORPORATION LIMITED. (SDMIEC)
5.1 Brief Introduction:
Shandong Machinery imp. & Exp. Group Corporation (SDMIEC), established for over 40
years since 1958, exports hit new records every year with sales spreading over the world.
Western Europe, North America, Southeast Asia and the Middle and the Near East are the
major overseas markets. Owing to its competency induced due to talented staff, rich capital
and market exploration, it has broadened its business scopes to over 1000 types having a
considerable business scale. For instance, it deals in vehicles, building and repairing of ships,
machinery for producing petrochemicals, plastics and rubber, textiles, processed oils and
cereals, construction machinery, power machinery, agricultural machinery, light industrial
machinery, tools, farm tools, electronic products, storage batteries, wheelbarrow, valves and
other parts and components for various machineries and complete sets of equipment such as
power station, textile plants, light industrial machinery, etc. In 2002,we ranked No.120
among the 500 top international traders of China and NO.79among the 200 top exporters of
China. In 2011 it was transformed from SOE to a private enterprise.

SWOT Analysis of SDMIEC

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From SWOT analysis we can see that this has all the qualities of an SOE which also brings in
the inertia to complicate SDMIEC transition into a private enterprise.

5.2 Historical Events:
— November 8th, 1958, the company was authorized to establish, called China
Machinery Import and Export Corporation Qingdao branch, to be subordinate to
CENTRAL FINANCE.
— In 1965, the company renamed to China Machinery Import and Export Corporation
Shandong Branch.
— In 1989, separated from CENTRAL FINANCE, the company changed its name to
SHANDONG MACHINERY I&E CORPORATION.
— In 2000, we reorganized to a Group corporation.
— In 2011, we changed from a state-owned company to a private enterprise, from an
enterprise legal person to a corporate juridical person.
— Now use the new name SHANDONG MACHINRY I & E GROUP CO., LTD.
— Started from the very beginning with export of 200 thousand US dollars now have a
turnover of 700 million US dollars annually, the achievement thoroughly shows
endless developing process of firm.
— The company has been in an extensive cooperation with many domestic manufacture,
research and design companies, building an integrate combination of science,
technology and Industry, developing thousands of products for import/export,
providing a lot of necessary raw material and advanced key technique and equipment

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for the domestic infrastructure construction, industry, agriculture & science, culture as
well as the public utility development.
— Firm has been ranked in national import and exports Top 500 and service Top 500.
Enjoying a high popularity and good reputation at home and abroad, our company is
making every effort to approach the goal of becoming a leading 100-year trustworthy
company with a first-class professional rate in China.

5.3 Core Values:
As it is said that a firm without vision and values id s just like a blind man walking on a road
without an address. We are bringing out the core values of SDMIEC.
— Enterprise Spirit
Professional, disciplined, harmonious development.
— Core Value
Try to be a harmonious company.
— Management Idea
Unity and harmony, Stringent and Pragmatic, Share and Develop.
— Vision Target
Innovation development, and the pursuit of excellence, motivated with social responsibility,
harmonious and to become the most respectable leader in the industry.

The core values of SDMIEC are very strong and are well built into each individual working
with the company.

5.4 Services
SDMEIC acts like a bridge in the customers, which are generally Global and the
manufacturers, which are domestic (China). They have established cooperation with more
than thousands of domestic manufacturing enterprises and customers from more than 120
countries and districts. They are maintaining and developing the trade contacts to our mutual
benefits and we have formed a worldwide and effective international trade network.
The business covers various merchandises and technology import/export, countertrade,
entrepot trade, economic and technical cooperation, labor export and logistics under the
overseas engineering contract and so on.

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Relying on the cooperation of the business partners and the efforts of several generations of
staff as well as more than fifty years international trade experience, the company provides
high-quality products and service solutions.

5.5 Main Products Line is as follows:
— Complete Equipment
— Marine Engineering
— New Energy
— Small Machine
— Hardware Tool
— Farm Tools
— Rigging Hardware
— Bath Tools
— Auto Parts
— Machine Parts
— Valve
— Fire Equipment
— Decorative building materials
— Repast Appliance
— Textile Clothes
— Imported trade
— Bicycles electric vehicle

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5.6 Organizational Structure

6. FINDINGS

6.1 Chinese Business Culture
I have sub-divided this topic into several interactions, which take place in an organization.
And will be giving the insights, which I feel are unique to Chinese Business Culture.

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a. The way the dealings are done with suppliers and local customers.

Here stress is laid on long term relationships, with both suppliers & customers. They
physically go and meet suppliers and customers to finalize important deals. The concept of
“Guanxi” and “Saving face” can be seen even in day to day dealings. As relationships and
keeping one’s commitment is utmost priority. This also laid the basis of “Wine & Dine”
phenomenon widely accepted by Chinese Business men. Any major deal or business activity
is closed at dinner table as per Chinese Business Culture.

b. Nature of business meetings.

In business meetings generally the head takes the charge and review the proceedings. The
subordinates may propose their proposal either when invited by the head or after the head has
finished his review, but it has to be discussed prior with reporting authority.

c. The importance of Single point contact when it comes to dealings with customers
and suppliers.

Here each particular customer or supplier has a single point contacts known as Business
Representatives who act as the interaction points of the organization with outside world.

d. Overall working environment.

Overall environment is very friendly. People don’t take the office stress to their home.
Co-workers are like friends. But the reporting officer has higher positions and juniors respect
him/her and maintain that dignity.

e. Interactions between the staff.

Overall interaction among staff is casual not very formal. Good thing is that employees
are loyal, dedicated and trust worthy. But may not be open to revolutionary changes.

f. Importance of Exhibition.

In China attending exhibitions is a very import part of Marketing. Many companies find
their partners from these exhibitions. And it is easier for prospective customer to meet and
find more suppliers and can check samples and sometimes the product itself. I represented

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SDMIEC at TexQingdao which was such an exhibition which was organized by China
Council For Promotion of trade (CICPIT) and Qingdao International Procurement Exchange
Center (IPEC). It was basically held to promote Import and Export between Chinese and
Japanese Companies.

Over all I would say In Chinese business, people are interested in long term relationships
which are based on values rather than short term interactions which are just based on
monitory profit.
One should first try to build up trust and then only the may share the problems they face with
you. One should never be direct in saying “No”. And one must not surpass Hierarchical
structure, as it will reflect very bad impression. Chinese companies/organizations can be
regarded as a big joint family.

6.2 Flowchart of Operations
SDMIEC is basically in Import & Export firm, which was a SOE until 2011. It was
privatized only in the year 2012. The firm is a service-oriented company, which acts as a
facilitation bridge between the Chinese suppliers and the buyers both international & local. It
dose both export & import but the exports are much more than the exports. The flow chart
describing the functioning of departments i.e. Hynar & Himight Machinery.
I have covered the functioning of the firm in detail, I found there were many problems and
issues which the firm was facing during its transition from an SOE to a private organization.
To have a more clear understanding & analysis of the functioning I had to draw “Process
Flow Chart”.
We found that the organization needed some major restructuring and needs to adhere new
concepts. These have been covered in detail under the heading of Customer & Suppliers.

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6.3 Customers
SDMIEC is a big group having as much as 32 different businesses. The major customers
about majority are from outside China.

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6.3.1 Customer Relationships Management (CRM)
At present the company has not got any CRM system hence it is suggested that the company
starts to implement a CRM system based upon the following points:

6.3.1.1 Customer Segmentation
We tried segmentation of customers in the following ways:
Amount of business they give. For example at present nearly 72.85% of business comes only
from one customer UFN while the second highest comes is about 5.41% from SURCOURT
for Hynar machinery. This is high risk and the company should increase the business with
other customers too. The table below shows the break-up of business provided by major
customers for Hynar Machinery.

SL Customer % of Business Provided (As per sales
No. in past 6 months)
1 UFN 72.85
2 SURCOURT 5.41
3 Global International 3.95
4 DOCO International 3.59

Sales
to
Major
Customers

UFN

SURCOURT

GLOBAL
INTERNATIONAL

DOCO
INTERNATIONAL

Further if we see the major products sold in past 6 months

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Product
Sales

Tires

Truck

Screws
&
other
hinges
etc

Pipe
Aitting

Paint
Brushes

Wheel
Barrow

We can se that Tires and trucks are the major about 72 % of sales, which comes from same
customer UFN. This can be constituted as complementary products.
Now let us observe the above graph we can clearly see that there are basically two types of
customers First type are interested in Tires and Trucks and the second type in Hardware items
ie. Screws, Paint brushes, Wire ropes, Locks, Pipefittings etc.
I will now segregate the customers by the product type they purchase
SL No.
Type Of Product Customers Sales Share
1 Wheel Barrows, Tire UFN 79.26%
& Truck MFH
DOCO International
MINI-POST
CORPORATION
AL-JUBRAN
CORPORATION
2 Hardware DOCO International 20.74%
Accessories LINK
CORPORATION
HUAWEI
CORPORATION
EVERGREEN
INTERNATIONAL
OSTER
INTERNATIONAL
SURCOURT
INTERNAITONAL
BUROSE
CORPORATION
From the above table we can see that the market of Truck, Wheel Barrow & Tires is
relatively stable and customer loyalty is high only problem is that we are totally dependent on
UFN. We can target other customers too.

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Where else in Hardware accessories the number of customers is more but share of sales is
low.
I suggest the firm should concentrate its position on stable customers. The market mix is fine
just the share of other customers should be increased. Hence focus should be laid on product
category of truck, wheelbarrow and tires. If I put 80:20 rule I would suggest CRM team to
give 80% attention to customers of segment truck, wheelbarrow and tires and 20% on
hardware accessories.

6.3.2 Designing of Customer Grievance and feedback forms
It is always better to ask our customers and extrapolate on the feedback provide by them in
order to improve our service and also product line.
After discussion with my mentor and other Business Representatives of Hynar & Himight
Macinery we narrowed down the following points on which we needed feedback from
customer:
1. Customer priority for Low Cost, Quality & On Time delivery.
2. Any problem they have faced in products supplier and related query.
3. The purpose for which they are using our product. May be we can offer them a
package deal if they have need for some similar products which we can produce.
4. The closure of a customer complaint in a proper way.
Hence I designed the form along with my group members. You can see that the from is
divided into basically three parts:

1. Information about the Customer
It gives us the basic details of the customers.
2. Grievances faced by customer
This elaborates about the problem faced?, related product?, when?, if it was intimated to
SDMIEC?, were any commitments/warranty?, what SDMIEC can do to make things
better? But this was not the end I have ensured that the loop is closed by including
Actions taken, Responsible person and Deadline.
3. Survey to improve our services
This section help us to find what are the attributes customer is looking from us, if there is
any specific demand which he tells us and can create us to develop that demand into a
service and increase our business with him. This is targeting both the CRM & business

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penetration concepts. Finally this section is properly closed with Actions taken, person
responsible and deadline.
Below is the Feedback form designed by us:

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Findings from Customer Grievance and feedback form
We circulated about 50 such forms to 50 customers and got feedbacks from 30 of them.
Based upon them we got the following We found that the customers were relatively satisfied
will the service of company. For them the most important thing which mattered was low cost
(70%), then comes On time delivery (20%) and then Quality (10%).

6.3.3 Analysis of Customer Feedback
As per the feedback from customer of Hynar Machinery.
Customers have given importance to Low Cost followed by On-time delivery and Quality at
the last. This may be because they are dealing with very basic products. There was only one
complaint that too was regarding a product supplied 5 years back and the life of product was
only 3 years as per specifications given.
Majority of suppliers were directly selling the products only a few are using it as a line item
for their manufacturing.
We have not received any grievance till now but I have ensured that the grievance is properly
closed in the form. And this form can be kept as a future record.

6.4 Suppliers
Currently there are many suppliers to the company and there is no official document like
Approved Vendor Directory (AVD) that can give us the capability and ranking of each
supplier. The vendor management is currently done directly by Business Representatives, and
there is no centralized method to rate them.
6.4.1 Supplier Segmentation
After a detailed discussion with the business representatives of Hynar & Himight machinery
we came out with the following suggestions, one to segment the suppliers on the basis of
products exported and other is to have at least 2 or more suppliers for each product.
6.4.2 Supplier Rating Method
Supplier rating can be done in regards with the following parameters:

1. Low Cost
2. On Time Delivery
3. Quality
4. Capacity
5. Flexibility

26

6. Dependability

I will remind that the first three requirements are same as what our customers expect us to
do.
We can start a marking system with each attribute given marks as per importance on an
scale of 1 to 10. 1 being minimum and 10 being maximum. Priority points depend upon
the customer requirements and should be rated as per trend of Customer Feedback.
After lot of brain storming with our mentors and business representatives we came to the
following marking scheme:
SL Attribute Priority Points
No.
1 Low Cost 9
2 On time 7
3 Quality 5
4 Capacity 4
5 Flexibility 5
6 Dependability 5

Suppose there is a supplier XYZ and the related Business Representative has given some
marks maximum out of 10. (1 being lowest and 10 being highest) Then this is how we can
rate supplier XYZ.
Ranking Matrix
SL Attribute Priority Points Points Given by Total Points
No. (A) Business
Representative
(B)
1 Low Cost 9 9 81
2 On time 7 6 72
3 Quality 5 7 35
4 Capacity 4 5 20
5 Flexibility 5 8 40
6 Dependability 5 9 45
Total Points of XYZ supplier 293

This activity of rating suppliers can be undertaken by Customer Relation management
team (CRM) and it can set a minimum qualifying points for suppliers to enter into Approved
Vendor Directory (AVD), the suppliers in AVD can be given preference of chosen suppliers,
this directory can be used through out SDMIEC and used by any Business Representative to
find a supplier.

27

The AVD should include Suppliers name, Location, Name of Business Representative who
has identified it, Contact person, Contact number, Products that it has supplied to SDMIEC,
production capability and the Ranking Matrix. This activity can be done once a year.

6.5.1 Designing of Inter-departmental feedback form
While designing Interdepartmental feed back form I got two major questions, which I needed
to be answered. These questions came from an intensive discussion between our team and
mentors.
The questions were:
1. What are the major problems faced by the departments and how they can me solved?
2. If we want to implement ERP, is the present staff is aware about ERP?
Hence I have divided the form into two parts first focused on the first question related to
problems and second related to the ERP.
The first part contains space for two open-end answers related to two major problems faced
by the departments and the solutions suggested by them.
The second part will give me details about the requirement, awareness of ERP and computer
literacy.

28

Interdepartmental Feedback Form:

30

6.5.2 Analysis of Inter Department Feedback
The following are the major problems faced by each department:

1. Hynar Machinery: Lack of forecasting and document retrieval, Lack of
Standardization, Staff 50% time is spent in documentation work instead of
concentrating on marketing & other necessary operations activity. Process are very
important rather than the outcome. (POS approach)
2. Hi-might: Lack of forecasting and document retrieval, Lack of Standardization, Staff
50% time is spent in documentation work instead of concentrating on marketing &
other necessary operations activity. Process are very important rather than the
outcome.
3. Personnel (HR): Extra staff.
4. Finance: Lack of proper documentation and too complicated procedures.
5. Coordination: Lack of job description and non-availability of SOP (Standard
Operating Procedures).
6. Audit: Basically financial audits.
And from the second part I got that all the people working in these departments were
computer literate, all recorded the data in hard copies, all found very difficult to retrieve the
data and nearly all wasted more than 30 mins in searching of documents but only half of the
departments were aware about ERP system.

Based upon the feedbacks I have redefined the problems as:

3. Need for Improved IMS (Information Management System).
5. Need for Effective Utilization of Staff (EUS).

There were six departments I had given one vote to each department in Yes (Y) or No (N)
with respect to the redefined problems affecting them. After that I add them up to find which
problem has the highest priority for the firm.

31

Importance Matrix
Dept Standardi OOPS IMS CRM EUS
zation
Hynar Y Y Y Y N
Hi-might Y Y Y Y N
Personnel Y Y Y Y Y
Audit Y Y Y N N
Finance Y Y Y N N
Co-ordination Y Y Y Y N
TOTAL 6 6 6 4 1

Based upon the Importance and Ease to address matrix a Ranking matrix will be prepared
keeping in mind the time, cost and complexity of the problems faced. On the scale of 1 to 5. 1
being most and 5 being least I discussed with chief of operations of the firm and formed the
matrix below.

Ease to Address problem Matrix
Issues related Time Cost Complexity Total Score
to
Standardization 3 4 3 10
OOPS 3 3 3 9
IMS 2 1 2 5
CRM 3 3 3 9
EUS 1 4 1 6

Ranking Matrix
From the above data a ranking matrix was prepared to find the problem, which is most
critical, and to start from there.
Issues Related to Importance Score Ease to address Total Score (C=
(A) Score (B) A*B)
Standardization 6 10 60
OOPS 6 9 54
IMS 6 5 30
CRM 4 9 36
EUS 1 6 6

32

Pareto Chart
Based upon ranking matrix Pareto Chart was drawn.

From the above chart we can see that three issues are at relatively higher priority than the
other two.
I am discussing three most critical issues for further analysis and for the last two problems
Recommendations as Suggestions will be given.

Root Cause Analysis (RCA) :
RCA (Root Cause Analysis) by Why-Why Analysis was performed for each of the three
issues of Standardization, OOPS & CRM. This was done to find the reasons why these three
concepts are missing or are evaporated with time from organization.

33

6.5.2.1 Standardization

Why-Why Analysis
Me and my mentor and a volunteer from each department who participated in survey did
why-Why analysis from each of covered department. We came out with the following
analysis.

Because
initially
it
was
a
one

Because
it
wasn’t
there
It
wasn’t
thought
as
organization
but
later
it

initially.
Why?
important
initially.
Why?

diversified,
and
e ach
division

was
more
autonomous.

Why
Standardization

concept
was
missing?

It
was
initially
but
No. It was not there
dissipated
with
time.
initially itself.
Why?

Possible Solutions:
The same group, which was involved in Why-Why analysis, was asked for solutions. And in
order to find the effectiveness of the suggested solutions we decided to place them on cause
and effect diagram and check if they made sense

Cause & Effect Diagram

Measures Document Maintain
s
Centralized Quality Process Audits
Management
Forms (ISO90001)

Centralized
Marketing Template ERP
Implementation
s
Standardization of
Processes in
Important
Organization
Information
Motivation
to
use

Displaying
in
work
Std
formats

area
Guidelines

Training

SOPs

Environment People Methods

34

6.5.2.2 OOPS (Object Oriented Procedure System)

Why-Why Analysis
analysis.

Because
when
the
market
was

Because
it
wasn’t
there

not
liberated
there
were
lots

initially
and
POS
As
It
was
an
SOE
earlier
and
of
clearances
&
sanctions
to

(Procedure
Oriented
SOEs
follow
POS.
W hy?

be
taken
from
government

System)
were
followed.

but
now
it
is
not
so.

Why?

Why
OOPS
concept
was

missing?

It
was
initially
but
No. It was not there
dissipated
with
time.
initially itself.
Why?

Possible Solutions:
and effect diagram and check if they made sense.


Measures Documents Maintain
Measuring the Quicker
performance of process Information Flow
against targets.
Defining or
Setting Forms should be ERP
Targets. easy and
complete
Implementation

OOPS approach in
Organization
Make
things
Motivation
to
staff
who
make

procedures
easier
a nd
faster

move
easier
but
k eeping
in
mind
quality.

and
faster.
Shedding
down

un-‐
Training
about
necessary
Guidelines

being
effective
Streamlining
of
which
makes
process
slow.

SOPs

No un-necessary
repetition of activities

35

6.5.2.3 CRM (Customer Relationship Management)

Why-Why Analysis
analysis.

Because
for
getting
a
new

Because
it
wasn’t
there
As
It
was
an
SOE
earlier
and

customer
we
nearly
spend
10

initially
a
complete
market
competition
was
low
,

times
more
resources
then

CRM
system
followed.
so
CRM
was
not
required
at

retaining
the
present

Why?
that
time.
But
now
Why?

customer.

Why

CRM
concept
was

missing?

It
was
initially
but
No. It was just a part of
dissipated
with
time.
keeping CR but not in
Why?
scientific way.

Possible Solutions:
and effect diagram and check if they made sense

Measures Documents Maintain
Measuring customer Separate Team to look after
satisfaction. aster sales and customer
feedback.
Setting up a
Centralized
Customer Feedback
Implementation of ERP
Customer
Department.
Feedback forms &
Implementation
Phoneline.
CRM System in
Organization
Should
sell
solutions
to
Motivation
to
staff
to
improve

customers
rather
than
just
Customer
Satisfaction.

selling
our
products.

Sending
a
quarterly
bulletin
to

Training
about
how
present
and
probable
customers

to
deal
with
regarding
new
products..

customers
in
Segmentation
of

various
situations.
Customers

Attention level given in
order of importance of
Customer.

36

6.5.3 Brief discussion on issues of IMS (Information Management System) and EUS
(Effective utilization of Staff)

I have discussed Standardization, OOPS & CRM in detail. I will describe about the
importance of IMS and EUS. I have also tried to give the solution to these problems with my
own experience and knowledge. I have seconded my solutions with proper reasons.
IMS implies to Information Management System, which is a management area to related to
information sharing, information storing and information retrieving. Information is like a
blood for an organization. If the information flow is not proper or adequate the organization
may be suffocated. In todays environment of global competition many large organizations in
each sector have taken IMS system as their competency. Wal-Mart Information sharing
system, Boeing’s supply chain management system etc. These all are based on ERP
(Enterprise Resource Planning) concept. All organizations are switching to this ERP concept.
IMS is just an upgrade of ERP system. I suggest SDMIEC to implement ERP syatem as soon
as possible. This will definitely help the organization to utilize its resources more efficiently
and effectively.
Last but not the least I have spoken about EUS (Effective utilization of Staff). At present may
be all staff member are working at his or her full efficiency but it is upto the management to
direct this efficiency to effectiveness. The hard work shown by the staff should show results
too if results are not there definitely there are some issues. Either new strategy has to formed
or some organizational level reshuffling has to be done. Still as per our experience we have
suggested a new organizational structure, which may help SDMIEC.
Based on my experience and knowledge I have proposed a new organizational structure that I
suppose will improve the overall functioning group. I have seconded my restructuring with a
reason.

37

In this structure I have suggested to upgrade the present organizational structure of SDMIEC.
Firstly the Audit Department can be upgraded to Quality Management department so that it
may take responsibility of all process related and standardization responsibilities. It will also
help organization to get international certifications such as ISO9001, which definitely is good
for business.
Secondly we have suggested upgrading Co-ordination department to Information
Management Department. It can take the responsibility of ERP implementation, Corporate
Communication and Internal communication of Organization.
Third change we suggest in present structure was to upgrade Personnel department to an
active Human Resource Department. The Human Resource department in additional to
Personnel department current activities add human resource development needs by
organizing trainings etc.
Finally I suggested to add two new centralized departments of Centralized Marketing to help
the concept of “Umbrella Branding/Marketing” and Customer Relationship Management
(CRM) Department to maintain good relation with available customers and develop business

38

from present customers, also CRM can take responsibility of maintain supplier rating by
maintain an AVD (Approved Vendor Directory).

7. CONCLUSION
In a competitive global scenario like of todays each organization has to be constantly evolve.
With this continuous evolving as per the environment the organization can grow and sustain
its growth. I was only for a brief period of 8 weeks in SDMIEC and was able to find out some
problems and discussed them in detail.
If these problems are taken care I feel SDMIEC has a very bright future ahead of it. This time
of transition from an SOE to a private organization is very important. And hence it is very
important and critical decision-making periods for the senior management give deep thought
and then only take a decision. What I have written in my report is my perspective of the
problems faced by SDMIEC and I sincerely hope this report will give you some insights
about SDMIEC and help management to get a different view of the organization. With this I
will conclude my internship report.

8. MANAGERIAL IMPLICATION
A change in an ownership of an organization creates lots of changes both external & internal.
Organizational changes and reshuffling of departments will be required to implement
recommendations and suggestions, which I have suggested. The improvement will be a long-
term change and may not be observed within a very short time. The changes can be initiated
by taking small steps i.e. Formulation of SOPs etc. Then as the inertia of organization goes
down the major changes can be implemented.

9. RECOMMENDATIONS & SUGGESTIONS
9.1 Recommendations

— Establishment of a Centralized Marketing Division which will look into the Business
Development opportunities and the strategies for growth also will be analyzing the
performance of present divisions and help them in marketing in an effective &
efficient way.

39

— Establishment of a Centralized CRM (Customer Relation Management Team) will be
responsible for maintaining AVDs, Customer Feedbacks and business development
strategy from present customers.
— Auditing department can become more active and take responsibility of Quality
Management implementation in organization, which means they can start the change
for standardization.
— If in future management decides to implement ERP Co-ordination department can
take the responsibility of functioning of ERP system in additional to present tasks.

9.2 Suggestions
• Concept of Umbrella Branding and Marketing should be introduced where all the
Divisions of SDMIEC are marketed under the Umbrella of SDMIEC. This will help
in reducing the cost of marketing as there will not be any need to separately market
each division and the brand visibility will improve.
• HR department should initiate training programs, as these may improve efficiency.
• Suggestion scheme can be introduced where any employee can suggest any thing and
if that suggestion is good they may be awarded.
• Company has to do aggressive marketing, instead of just selling products we should
try to sell a solution to a customer’s problem.
• Company has to grow either by new product development or New Market
Development.
• At present there are more than 32 different divisions company should reduce them to
a smaller number, similar divisions can be combined together and can be constituted
as a Strategic Business Unit (SBU) with more autonomy.

40

10. SELF-ASSESSMENT OF INTERNSHIP
• What skills and qualifications you think that you have gained from the
internship?

From this internship I have learnt the working of an SDMIEC, I have seen the major
problem, which a company faces when there is a paradigm shift in its ownership.
Which in SDMIEC case was change in its ownership from SOE to a private
organization.

• What kind of responsibilities you have undertaken during the internship period?

The responsibilities given to me formulating some catalogues and representing the
company in an exhibition as a part of exhibitor team member. I was also given
opportunity to look into the major problems and challenges, which would be stood in
company in near future.

• How do you think the internship will influence your future career plans?

This internship helped me in understanding about working environment of a Chinese
company hence I will be more prepared to work in or with a Chinese firm or even
working in China.

• How do you think the internship activities that you carried out are correlated
with your classroom knowledge?

The tools of analysis and the basic knowledge about Chinese Business Culture helped
me a lot.

• Suggestions for the next interns.

Better learn Chinese before you start internship.

~~~~

41

11. ILLUSTRATION & ANNEXURE
Annexure 1
Standardized PPT for catalogue

Slide 1 Slide 2

Slide 3 Slide 4

Slide 5 Slide 6

42

Annexure 2

Attending TexQingdao with my SDMIEC Colleagues.

43

Annexure 3 ( Non-disclosure of Survey Details)

12. BIBLIOGRAPHY

1.Statistics from World Trade Organization http://stat.wto.org/CountryProfiles/CN_e.htm

2.Website of Shandong Machinery http://www.sdmiec.com/English/Default.aspx

Contact Details:
Name: Ashish Jude Michael
Mobile No: 9845431745
E-mail: jude.pgpex12@iimshillong.in

-------------

Understanding Business Culture of Shandong Machinery I&E Corporation (SDMIEC) and suggesting solutions for smooth transition from SOE to Private Enterprise.

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