final case report for management course, thanks to Joyce and Susan

1. WHERE IS THE WAY FOR MADE IN CHINA
A CORPORATE RESEARCH ON ZPMC
Group 10
MA Zhiyuan
JIANG Yi
LUO Yingying

2. Group 10 ZPMC Where is the Way of Made in China
1
WHERE IS THE
WAY OF MADE IN
CHINA
A CORPORATE RESEARCH ON ZPMC
CATALOG
Catalog.................................................................................................1
Abstract ..............................................................................................2
1. Introduction to ZPMC .............................................................................3
1.1 Snapshot ............................................................................3
1.2 Main Business...................................................................3
1.3 Organizational Structure ...............................................5
1.4 Shareholder Structure....................................................6
1.5 History ................................................................................6
2. Core competence.................................................................................13
2.1 Core competence and the Diamond Model ............13
2.2 Core competences of ZPMC .......................................14
2.3 Core Competences of different developing stages
...................................................................................................17
3. Internationalization ..............................................................................19
3.1 Going out: Chinese Wisdom ........................................19
3.2 Going out: ZPMC Way ................................................20
3.3 Illuminations for “Made in China” .............................25
4. Leadership .........................................................................................27
4.1 Personal traits of Guan................................................27
4.2 Source of Power.............................................................28
4.3 mixture of transformational and transactional ....30
4.4 Paternal Management Style .......................................31
4.5 Typical Chinese CEO.....................................................31
5. Conclusion and Reflection......................................................................33
5.1 Success of ZPMC...........................................................33
5.2 Potential Problems of ZPMC.......................................33
5.3 Illumination: “Made in China” to “Made by China”34
CORPORATE
RESEARCH
STRUCTURE
Introduction
core competence
Internationalization
Leadership
Illumination

3. Group 10 ZPMC Where is the Way of Made in China
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ABSTRACT
Made in China has become a world-famous brand, the label of which can be found in every
market of the world. Someone tried not to use any made-in-china products in one week but failed.
However, made in china is a synonym of cheap price and low quality in oversea market. It stays
in the low end of value chain and has a bad image abroad. When we search for bands that stand for
top quality or fashion design in our mind, we can hardly find any that’s created by China. ZPMC is
an exception, however, which occupied 78% of market share in port machinery industry by the core
competence of independent innovation and successfully transferred from Made in China to Made by
China. ZPMC has set up an inspiring example for made in China products to follow and pointed out
a new way for them to take.
The article will make detained analysis of ZPMC’s history, main business, internalization and
leadership style. We want to explore why it’s ZPMC among thousands of made in china products
that managed to succeed, in order to shed light on the future development path for made in china to
take.
In conclusion, we think the success story of ZPMC should be attributed to both external and
internal reasons. Port machinery industry which is labor, capital and tech intensive, is an area where
Chinese company can grow fast. Besides, the leader of ZPMC made correct strategy in every
historical moment, insisting on independent innovation and international standards.
However, successful as ZPMC is, there is potential threat lying in its paternal management style.
Rigid management style is the common problem existing in most of Chinese companies which must
be changed for sustainable development.
Key Words: ZPMC Independent Innovation Internationalization Paternal management
Made in China

4. Group 10 ZPMC Where is the Way of Made in China
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1. INTRODUCTION TO ZPMC
1.1 Snapshot
Shanghai Zhenhua Heavy Industry Co., Ltd. (ZPMC) is the top
heavy-duty equipment manufacturer in the world, whose main
products, supply of large-size port container cranes, have entered into
73 countries and regions all over the world, occupying more than 75%
world market shares. It’s a state holding company listed on A and B shares in Shanghai Stock
Exchange. The major shareholder is China Communication Construction Co., Ltd. (CCCC) which is
one of top 500 companies in the world.
ZPMC is headquartered in Shanghai and has 8 production bases located in Shanghai, Nantong
and Jiangyin, occupying a total area of 6670 hectares and 10 kilometer coastline. Changxing Base, in
particular, has 5 kilometer deep water coastline and heavy-duty dock of 3.7 kilometers. ZPMC is the
largest heavy-duty equipment manufacturer in the world and owns 26 transportation ships which are
from 60000 DWT (dead weight tonnage) to 100000 DWT, can deliver products globally.
ZPMC insists on independent innovation and has been awarded a first award of National
Science and Technology Progress. ZPMC has also established a national level enterprise technology
center and post-doctoral workstation. At present, ZPMC has 2000 R&D technical engineers in
mechanical, electrical and hydraulic, and awarded more than 50 nation and municipal technology
awards.
1.2 Main Business
The primary business of the company includes:
 Designing, building, installing, and contracting large-scale loading and unloading system and
equipment in port, w offshore heavy-duty products, construction machinery, engineering marine,
and large-scale metal structure and ship repair;
 Crane leasing activities;
 Sales of products made by the company;
 Using pure carrier for international sea transportation;
 Professional outsourcing of steel structure work.
The main products can be classified into 3 types:
Type One: supply of large-size port containercranes and
ore/coal bulk material handling machinery, such as ship-to-shore
container gantry cranes and rubber tire container gantry cranes
which have entered into 73 countries and regions all over the
world and occupied 75% world market shares. Bulk material
handling machinery includes ship loader, ship unloader, bucker
wheel stacker-reclaimer and environment-friendly chain type ship
unloader.
Gantry cranes

5. Group 10 ZPMC Where is the Way of Made in China
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Type Two: supply of large-size steelstructures and steelbridges. The production capacity is
400000 Ton per year. Now the U.S.A new Bay Bridge is under constructing.
Type Three: supply of off-shore products, such as huge floating cranes, pipe laying vessels and
other engineering vessels, all types of platforms and DP system.
Large-size port container cranes
Large-size steelbridge
Off-shore heavy-duty products

6. Group 10 ZPMC Where is the Way of Made in China
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1.3 Organizational Structure
To increase the communication efficiency and be easy to control, ZPMC has adopted a very
flatorganizational structure which is organized on function basis. The whole company is divided
into three parts: functional offices, production bases, and subsidiaries divided according to different
products. All the departments are lead by the president, which results in efficient resource allocation
and make the top manager gain a whole picture of company operation. But the fact that president is
so dominated in the organization can give rise to some side-effect, which will be explained in detail
in “Leadership style” part. The organizational structure is demonstrated in the table below:
General meeting ofshareholders
Board of supervisors
Board of directors
President (vice-president)
Personnel department
Audit committee
Nomination committee
Strategy committee
Compensation and
assessment committee
ExecutiveOffice
FinanceOffice
OperationOffice
Off-shoreOffice
ElectricityOffice
ManufactureOffice
TechnologyOffice
DevelopmentOffice
ShippingserviceOffice
Quality&SafetyOffice
Changxingindustrialpark
Changxingbase
Nanhuibase
Nantonggear-baseebase
Nantongbase
Changzhoubase
Zhangjiagangbase
BridgeCompany
Bulk-cargoCompany
SteelStructureCompany
HeavyIndustryCompany

7. Group 10 ZPMC Where is the Way of Made in China
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1.4 Shareholder Structure
As we can glean from the chart above, 46.12% shares of ZPMC are held by the state-owned
enterprise. In fact, even though ZPMC is a public company, those 46.12% shares are never for sale
on public. The China Communications Construction Company LTD directly holds 28.71% shares of
ZPMC, and the other 17.41% is held by its fully-controlled subsidiaries, Hong Kong Zhenhua
Engineering Co., Ltd and Macau Zhenhua Bay Engineering Co., Ltd, holding 17.08% and 0.33%,
respectively. On the whole, ZPMC is a state-owned enterprise in essence.
1.5 History
 Time Line
1992 —Foundation
Shanghai Zhenhua Port Machinery Co., Ltd. was established in February 1992, by
Shanghai Port Machinery Factory and Hong Kong Zhenhua, each investing $500,000. The
company had no more than twenty staffs and the founder is Guan Tongxian, 59 years old at
that time, the ex- Deputy Director of one department in the ministry of communications.
1992—The first purchaser order
ZPMC got the first purchase order from Vancouver Harbor, Canada, and had surpassed
dozens of worldly famous competitors, like Mitsubishi and Mitsui of Japan, Noell of
Germany, Samsung of Korea.
1996—New shareholders
The China Harbor Engineering Company went in with ZPMC with assets investment,
becoming the third shareholder.
1997—Enterprise restructuring
Hong KongZhenhuaEngineeringCo., Ltd
State-owned Assets Supervision and Administration
Commission of the State Council
ChinaCommunications Construction Group Company
ChinaCommunications Construction CompanyLTD.
Shareholding100% Shareholding100%
Shareholding17.08%
Shareholding
28.71%
Shareholding0.33%
Macau ZhenhuaBayEngineeringCo., Ltd
Shanghai Zhenhua heavy Industry Co., Ltd

8. Group 10 ZPMC Where is the Way of Made in China
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ZPMC restructured from a state-owned enterprise to a corporate. And in April of the
same year, the company issued B shares as a public company.
1998—Gaining market shares
ZPMC beat up all the other competitors and got 25% market share, becoming the No. 1
in the Port Machinery industry.
2000—Issuing A shares
In December, ZPMC issued A shares.
2002—Company rename
In January, the company changed its name for the Shanghai Zhenhua Port Machinery
(Group) Co., Ltd.
2009—Expanding new business
In May, the Shanghai Zhenhua Port Machinery (Group) Co., Ltd. changed its name for
Shanghai Zhenhua Heavy Industry Co., Ltd., as a formal announcement to enter into the new
business – offshore heavy-duty products.
 Development Stages
Timelines above are the brief overview of the company’s development. To take a deeper look at
its developing history, we divide its growing process into 3 stages:

9. Group 10 ZPMC Where is the Way of Made in China
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Stage 1: Periphery Innovation, 1992-1998
At this stage, ZPMC was just entering the Port Machinery field with only $1 million capital and
no more than twenty employees. Compared with those internationally famous port machinery
companies, like Mitsubishi and Mitsui of Japan, Noell of Germany, Samsung of Korea, ZPMC was
in lack of both Capital and qualified technicians.
In order to survive in the market, ZPMC chose to avoid direct combat with the big boys in the
industry, but instead adopt a strategy called “Periphery Innovation”. Periphery innovation means
ZPMC pledges to provide better service and lower price while keeping the same quality. Here are
some landmark events:
 Enter international market on the strength of “lower cost
and international standard”
In 1992, ZPMC got its first order from Vancouver Harbor, Canada with 25% lower price,
commitment of good after-sale service and international product standard. At this stage of history,
ZPMC is too financially and technically weak to carry out independent innovation. They just
imitated the competitors and stick to the international standard strictly.
The lower price did help ZPMC open the door to the international market. But high quality is
the key reason for company’s sustainable development. Since 1994, ZPMC began to apply for
ISO9001 accreditation and so far, the company had passed the accreditation of CWB, AISC, SLV,
UL, CE and so on.

10. Group 10 ZPMC Where is the Way of Made in China
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 Build own delivery system
At that time, only one company provided delivery service all around the world. ZPMC had
eaten a lot of bit relying on others for delivery. So, in 1993, ZPMC decided to build its own delivery
system. By doing so, ZPMC had decreased the delivery cost, guaranteed punctuality of delivery and
also increase the flexibility of operation. As a result, ZPMC could provide better service than other
port machinery companies for customers. So far, ZPMC is still the only one company having its own
delivery system.

11. Group 10 ZPMC Where is the Way of Made in China
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 Whole machine loading and unloading
In convention, most port machinery companies disassemble the products for delivering and then
reassemble parts of the products in arrival at the customer’s harbor. The reloading process is cost-
consuming, taking the customer one to three months to finish. To solve this problem, ZPMC created
a horizontal method of loading and unloading, which largely saves customers’ time.
Stage 2: core products innovation, 1999-2006
In this stage, ZPMC started to focus on the innovation of core products and technology. Because
in this industry, it is high quality, not cost advantage that promotes the sustainable development.
ZPMC, at this phase, has already possessed the capital and technicians to carry out products
innovation. Here are some examples:

12. Group 10 ZPMC Where is the Way of Made in China
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 Rubber tire container gantry cranes with “eyes”
In 2001, ZPMC applied GPS technology to rubber tire container gantry cranes, improving the
efficiency and decreasing the risks of accidents in loading and unloading process.
 New crane lifting 2 forty-ft containers at a time
In 2004, ZPMC created a kind of new crane which could lift 2 forty-ft containers at one time,
improving work efficiency by 50%. In 2007, it developed another new crane which could lift 3 forty-
ft containers, improving efficiency by another 25%.
In 2006, ZPMC had already got 70% market share, owing to the core products innovation. In
this stage, ZPMC attracted customers mostly by providing more excellent products rather than by
lower price and better service.
Stage 3: high integration innovation, 2007 till now

13. Group 10 ZPMC Where is the Way of Made in China
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In this stage, ZPMC went through its boundary, opening up a new market--automatic terminal
system-- to maintain the first place in market.
 Automaticterminal system
In 2008, the automatic terminal system of ECT Euromax, Holland, was put into use. This
system was provided by ZPMC and the whole system worth more than 200 million Euros. As a
matter of fact, the bid price of ZPMC exceeded that of a competitor from Austria by 5%-10%, which
is a sign that high quality and good service of Zhenhua become more important than lower price in
the competition.
 Automaticloading and unloading system
To improve the efficiency of automatic terminal system, ZPMC developed an automatic loading
and unloading system in 2009 together with Shanghai Jiao tong University and Shanghai Tongji
University. By practice, this system improved efficiency by 50% at least.
In this stage, ZPMC has gone through innovation of single product to that of the whole port
machinery system. Within 17 years, ZPMC has turned from a small workshop with $1 million capital
and no more than 20 employees to a “big boy” occupying more than 75% market share. ZPMC is the
company which realized the change from “Made in China” to “Made by China”.

14. Group 10 ZPMC Where is the Way of Made in China
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2. CORE COMPETENCE
2.1 Core competence and the Diamond Model
Core competence is defined as a specific factor that a business sees as being central to the way
it, or its employees, works. It fulfills two key criteria:
1) It is not easy for competitors to imitate.
2) It can be applied widely to many products and markets.
A core competence can take various forms, including technical/subject matter know-how, a
reliable process and/or close relationships with customers and suppliers. It may also include product
development or culture, such as employee dedication.
To explore the core competence of ZPMC, we employ a model as framework—Diamond
Modelof core competence. The diamond model of core competence of enterprises has two
meanings:
 Core competence of enterprises depends not only on the level of practical factors, such as
corporate culture, human resource, innovation competence, organization management
competence, marketing competence, strategy management competence, and production service
competence, but also on the interrelationship and transaction of these factors, every factor has a
close connection with the others, as shown in fig.
 Corporate culture is the core factor of core competence of enterprises, and other factors are
external factors of core competence of enterprises. Corporate culture is connected with six
external factors with double lines, the way of using corporate culture to enhance core
competence of enterprises is bolstered by these six channels. The six factors which have close
connection result in an intercrossed space structure model by organic combination, the structure
make an enterprise as an entirety owns great potential energy. Core competence of enterprises is
enhanced in the implantation and operation of the six basic channels.

15. Group 10 ZPMC Where is the Way of Made in China
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2.2 Core competences of ZPMC
The industry where ZPMC operates requires efficiency and quality so much that innovation is
very essential to the development in this industry. This characteristic can be illustrated in the
developing history of ZPMC:
 Stage 1: Periphery Innovation, 1992-1998
 Stage 2: core products innovation, 1999-2006
 Stage 3: high integration innovation, 2007-now
Only by employing deeper and wilder innovation could the company grow sustainably.
Importance of innovation has almost been a common sense r, however, only ZPMC succeeds through
innovation. The reason behind its success story is that they have implemented innovation in all the 7
aspects: Human Resource, Organization Management, Strategy Management, Production & Service,
Marketing Management, Innovation Management and Corporate Culture.
 Corporate Culture
The corporate culture is largely affected by the core value of the founder, Guan Tongxian. He
set a mission for the company: Fight for the rejuvenation of the Chinese nation and
improvement of situation of Made in China product. This exciting mission was well
communicated to the whole company and the employees regarded their job not just a way to make a
living, but a great career for the national profit. So the employees are always highly motivated to do
the best.
 Strategy Management
Organization
Management
Strategy
Management
Production
Service
Marketing
Management
Innovation
Management
Human
Resource
Corporate
Culture

16. Group 10 ZPMC Where is the Way of Made in China
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The company appropriately analyzed the relevant environment, sensitively seized every
opportunity to develop and made correct strategies. For example:
 At the establishment of ZPMC, the company made the strategy to open up the international
market first;
 At the beginning stage of ZPMC, due to the limited resources, the company opened the oversea
market by lower price and better service, but also followed the international production standard
strictly.
 After being the biggest market share holders in 1998, the company turned to core technology
innovation, because they understood that in this industry technology is the deciding factor and at
that time they also had enough capital and qualified technicians.
 When the port machinery field is saturated, the company entered into the market of off-shore
products.
 Human Resource
There are three features of human resources in ZPMC: low cost, high quality, and good
personality.
Low cost
It is known to all that the cost of labor in China is much lower than that in most countries,
especially the developed ones. The port machinery industry is labor-intensive, so the low cost of
human capital benefits the company an advantage of 30% lower price.
High quality
There are 23 high-level managers, among which 19 have post graduate diploma, 3 have
university diploma and 16 senior technical certification.
Until 2008, the company has more than 2,000 R&D technical engineers in mechanical, electrical
and hydraulic, and among them 179 are senior technical engineers. The employees who are holding
the post graduate diploma, university diploma and the following tertiary education are 5.16%,
77.50% and 17.34%, respectively.
Good personality
The company treasures traditional merits in employees, and through the ASA system, the
employees of ZPMC all have good personalities, like diligence, honest and fortitude.
 Production & Service
human
capital
low cost
high quality
good
personality

17. Group 10 ZPMC Where is the Way of Made in China
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ZPMC focus on providing the best products and service.
Follow the international standards
There are more than 20 international standards of port machinery in the world. ZPMC analyzed
all the standards carefully and strictly followed to guarantee the quality of products.
Since 1994, ZPMC began to apply for ISO9001 accreditation and so far, the company had passed the
accreditation of CWB, AISC, SLV, UL, CE and so on.
Ability to provide the best
ZPMC has an excellent team with highly qualified technicians (more than 2,000 R&D technical
engineers in mechanical, electrical and hydraulic). By employing product innovation, ZPMC
provided products with more efficient and advanced functions, while by employing periphery
innovation, ZPMC offered better service which cut down the customers’ operation cost and
improved the efficiency.
Customer-oriented
ZPMC is always customer-oriented. At the very beginning of the developing history, the
company had set down the strategy to better serve the customers and this conception was embedded
in the corporate culture.
 Marketing Management
To gain the first order, ZPMC offered a rather competitive price and in this order, the company
hardly earned any money, but it was a way to establish the reputation for company.
 Organization Management
In this company, there are some rules, simple but important. Some doesn’t seem to be corporate
rules but rules for life, such as no smoking, no excessive drinking, no gamble, no Shanghai dialect in
the public, no second jobs, and not allowed to engage in others’ marriage. All those rules are not
only to require employees to work better but also to be a better man.
 Innovation Management
As we can see in the analysis of developing history mentioned previously, Zhenhua really got a
great achievement on innovation, resulting from the proper policies to a large extent.
Adequate financial resources
ZPMC invested 3% of turnover every year to research and development. The adequate financial
resources guaranteed the innovation.
Training and learning
The company established all kinds of training schools for workers to improve their professional
skill, including the projects which cooperate with world famous universities like Noer University,
Queensland University, and paid much attention to encourage employees to read books to gain the
advanced technical knowledge.

18. Group 10 ZPMC Where is the Way of Made in China
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Reward policy
Every year, the company invested 10 million RMB in rewarding the technical engineers who
got excellent achievement, and the highest reward reaches 1 million RMB.
2.3 Core Competences of different developing stages
All the characteristics mentioned above are the core competences of ZPMC, but they do play a
different role in the different developing stages. Only Corporate culture plays an important role in all
the developing stages.
 Stage 1: Periphery Innovation, 1992-1998
In this stage, ZPMC opened up the international market and finally got the first place in the
market by lower price, good after-sale service and international product standards. Those three
advantages are supported by the low cost of Human Resource, correct strategy to start from foreign
market and good production & service. the core competences are strategy management competence,
Human Resource competence, marketing management competence and Production & Service
competence.
 Stage 2: core products innovation, 1999-2006
In this stage, ZPMC won more customers by providing more excellent products rather than by
lower price and better service only, and it focused on core product innovation. The achievement is
supported by proper strategy transition, high qualified human resource and correct innovation policy.
Adequate financial
resources
Training and
learning
Reward policy
Innovation Management

19. Group 10 ZPMC Where is the Way of Made in China
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So in the second developing stage, the core competences are strategy management competence,
Human Resource competence and Innovation Management competence.
 Stage 3: high integration innovation, 2007-now
In this stage, ZPMC, the core competences are strategy management competence and
Innovation Management competence.

20. Group 10 ZPMC Where is the Way of Made in China
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3. INTERNATIONALIZATION
ZPMC’s internationalization is quite specific, successful and illustrative. In this part we are
going to talk about its internationalization. The structure is stated as below:
3.1 Going out: Chinese Wisdom
Internationalization is one major trend for contemporary corporate practice (see Thomas
Friedman “The World Is Flat: a Brief History of the 21 Century”). It is a very important and
complicated decision for managers to make, as well as an important strategy for companies to
maintain long-term goal. It is also somehow inevitable. There exist 3 kinds of incentives for
companies to implement internationalization:
 Profit-driven: hunting for more profits
 Development-driven: striving to develop and strengthen to prepare for future competition
 Entrepreneurship: leader’s ambition or patriotism
For most large mature companies from developed countries, their incentive of
internationalization is mostly profit-driven; for most young and immature companies, their incentive
is mainly development-driven and entrepreneurship. Is is quite typical for Chinese companies to
internationalize for development, like Lenovo, TCL and Haier.
Behind “going out” strategies is the Chinese Wisdom to pursue long-term success, although they
have to invest a lot and carry high risk in the short run, and are viewed as blind-internationalization.
However, in a catch-up situation confronting most developing companies, “staying home” is never
safe, large transnational companies will come in eventually. “Going out” strategies put companies in
a global competition environment, which can build up core competence and avoid intense
competition and country risk in domestic market. (In reality, many small companies were stuck in
domestic competition and finally beaten up by large newcomers.)
ZPMC is specific in pursuing internationalization in that it aimed at internationalization in its
market and technologies from the beginning, rather than to wait until it controls the domestic
why going out how going out illumination
• Larger market
• Cheaper raw material
or labor cost
• Lower environmental
standards
Profit-driven
• Expansive supply
chain
• Advanced technology,
management and
human capital
Development-
driven
• Ambitious
• Patriotism
Entrepreneur-
ship

21. Group 10 ZPMC Where is the Way of Made in China
20
market. This is of industry characteristics (port machinery industry tends to have higher level of
internationalization), yet also a sign of ZPMC management’s Chinese wisdom. (Later ZPMC merged
with Shanghai PMC to take almost the whole domestic market.) ZPMC’s internationalization
incentive combines the feature of both developed and developing companies, which is not only
profit-driven, but also development-driven and entrepreneurship:
3.2 Going out: ZPMC Way
 International Process
ZPMC’s internationalization process is stated as below:
ZPMC’s internationalization is divided into 3 phases, along with its core competence
development (stated in part 2).
• Port Machinery Industry is a high-internationalized
industry, due to wide ports distribution in the world
• Dmestic market is relatively small at that time
• Large ports were experiencing a huge replacement then
Profit-driven
• Chinese Wisdom
• Meet international standards of Port Machinery
Development-driven
• Ambition and vision of CEO Guan to realize the dream of
"every large port should have ZPMC"
• Patriotistic culture to achieve "Made by China" goal and
show capability and vigor of China
Entrepreneurship
•Periphery innovation
•International standards
and service
•Self-support
•25% market share
1992-1998
•Core innovation
•Independent innovation
•International tech
coopreation
•>70% market share
1999-2006 •High-synthetic
innovation
•Industry transformation
2007-
present

22. Group 10 ZPMC Where is the Way of Made in China
21
Stage 1 (1992-1998)
ZPMC tried hard to learn and mimic advanced foreign technologies, and strove to meet
international standards. In 1992, ZPMC gained its first large order from Canada
(internationalization from the start), mostly due to ZPMC’s low price, but also its quality and
standards.
During the periphery innovation, ZPMC also offered considerate service, like direct shipping, to
increase attractiveness to international customers (English study was encouraged by company
policy). To avoid strong international supplier and distributor, ZPMC had been supporting itself by
making accessories and shipping on its own. In 1998, ZPMC had acquired 25% world market share,
ranking it the largest port machinery maker.
Stage 2 (1999-2006)
ZPMC speeded up core innovation to strengthen internationalization and dominance world
market, after digesting all advanced technologies and gaining considerable earnings to support
further innovation, making itself not only largest, but also most advanced and brand-renowned.
It emphasized international technology cooperation with advanced companies, academics and
R&D institutions. Through intensive independentinnovation, ZPMC acquired 20
technologies that far ahead of its competitors, among which are Japanese Mitsubishi, Korean
Samsung and German MAN. With its advanced technologies, ZPMC entered the strictest European
market. In 2006, ZPMC acquired more than 70% world market share. Its internationalization is both
wider and further.
Stage 3 (2007 till now)
Since 2007, as the industry leader, ZPMC saw the saturation of port machinery market and
started to stretch out towards ocean heavy equipment and steel structure. During the industry
transformation, ZPMC still sticks to internationalization policy and puts itself in global competition
 Internationalization achievements
A general measure of ZPMC’s internationalization is its foreign business proportion. From the
chart below, we can conclude that ZPMC’s foreign business proportion is nearly 80% in 2009, a
level much higher than general Chinese manufacturers. ZPMC is now a world-famous brandin
the industry, especially among developed countries (although ZPMC keeps low-key style in China).
Generally, ZPMC has significantly high internationalization level.

23. Group 10 ZPMC Where is the Way of Made in China
22
However, a detailed measure of internationalization under the Internationalization Cobweb
Model gives an ambiguous result. Among the 6 dimensions of Cobweb model- DOI (a
combination of foreign business and HR portion), Operation mode, Corporate finance,
Marketing, Corporate structure, HR, ZPMC does a good job in DOI and marketing, but
relatively low in management dimensions including operation mode, finance, structure and HR.
ZPMC’s internationalization is biased.
9%
33%
26%
14%
12%
5%
1%
Main Business In Regions 2009
mainland,China(exporting)
Asia(excluding mainland
China)
Europe
America
mainland,China
Africa
Oceania

24. Group 10 ZPMC Where is the Way of Made in China
23
Here we must clarify that Internationalization Cobweb Model only measures the general
internationalization, which is not applicable to all industries or companies. ZPMC’s biased
internationalization strategy is different to general transnational companies, but also successful.
We will discuss the reasons of ZPMC’s internationalization strategy in the next part.
On the other hand, Internationalization Cobweb Model also illustrates some potential
problems for ZPMC’s future development, which will also be discussed later.
 Internationalization entry mode
There are 3 transnational entry modes: “entry by trade”, “entry by contract” and “entry by
investment”. At present, ZPMC’s biased internationalization is mainly achieved through “entry by
trade”, or direct exporting, the reasons of which can be classified into 3 perspectives- industry,
company and leadership perspective.
Before analyzing from 3 perspectives, let’s see what are the major pros and cons of each entry
mode for ZPMC (cons in blue):
 Industry Perspective
Port Machinery companies preferthe “entry by trade” mode, even for large
transnational corporate like Japanese Mitsubishi. First, PM products are high-tech intensive and
many countries cannot provide itself, which results in very low trade barriers. Second, PM products
require strict compliance with international standards to facilitate all kinds of large ports around the
world, which lowers the need to involve and go deep into foreign local demand. Thus, concentration
on domestic manufacture base to export products, with less investment and more flexibility, is more
popular in PM industry.
Entry by
trade
•Cheap and diligent Chinese labor; local government support for
cheap land and facilitating finance; Shanghai high-tech academic
and talent support
•Low investment and risk of internationalization, more flexibility
•High transportation cost; trade barriers; low sensibility to foreign
demand
Entry by
contract
•Overcome trade barriers and high transportation cost
•Lose control of technologies, cultivate new competitiors
•rigidity and low return on investment due to contract
Entry by
investment
•Overcome trade barriers and high transportation cost
•More invlovement and control of foreign market
•More use of international finance, talents and management
experience
•High investment and risk of internationalization

25. Group 10 ZPMC Where is the Way of Made in China
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On the other hand, “entry by contract” is very rare due to urgent technology protection
needs in PM industry. “Entry by investment” is also less popular due to huge initial investment
in manufacturing base, and it is very difficult to find suitable place with low land price and enough
high-tech talents.
 Company Perspective
ZPMC uses “entry by trade”, mainly for the reason that it can make full useof Chinese cheap
and diligent labor, low-price land and facilitating finance offered by the government, and high-tech
support from Shanghai academics and institutions.
Moreover, ZPMC developed strategies to overcome“entry by trade” weaknesses and
absorb “entry by investment” strengths: it ships equipment on its own fleet to lower transportation
cost; it set up international offshore offices to run international bids worldwide to get acquainted
with foreign market; it cooperates with international high-tech companies and professionals to use
international talents.
 Leadership Perspective
Guan Tongxian, the CEO of ZPMC, vows to build own high-
tech products and commits to independent research and
manufacture, even for accessories. Also, Guan wants to create
more jobs for Chineseand help increase their personal
income, especially for migrant workers. Those concerns contribute
to “entry by trade” mode.
In all, “entry by trade”, direct exporting, or biased internationalization, is
appropriatefor ZPMC to achieve internationalization, whether from industry
characteristics, use of resources, relevance of local market, trade conditions, investment or
nation sense, at least for the moment. In this way, ZPMC chose its suitable internationalization
policy.
Use of
resources
Relevance
of local
market
Trade
conditions
investment
Nation
sense
Industry
character-
istics

26. Group 10 ZPMC Where is the Way of Made in China
25
Yet, there are potential problems for ZPMC to deal with in the way towards a generally-
recognized transnational company. As Internationalization Cobweb Model illustrates, ZPMC’s
management is very rigid, concentrated and immature, far behind advanced international
management experience, which cannot provide with a long-lasting foundation for ZPMC in the
future. What if the powerful CEO Guan retires?
3.3 Illuminations for “Made in China”
Nowadays, more and more Chinese companies are going out to be international. The incentives
behind this trend have been discussed above. However, not every Chinese company succeeds; even
those seemingly successful, their strategies are in hot debate.
According to Resource-based View, the source of a firm’s profit is the rare resources it
owns that are internal, intangible tacit and cannot be imitated. ZPMC gives us a clear illustration on
how to successfully use a firm’s rare resources to achieve internationalization.
At the beginning period, ZPMC’s rare resource is its comparative advantages on
manufacturing cost (cheaper labor, land and finance) and fast-learning ability. It is always difficult to
internalize as a new player, but ZPMC took advantage of its low cost and learning ability to meet
international standards to open up the market. Moreover, a sense of service well helped gain
industrial repute and make up for the technology disadvantages.
After obtaining certain market share and company fame, ZPMC speeded its innovation to
gain technology advantages, by innovation investment and management and cooperation with
advanced academics. At that time, ZPMC’s rare resource is its continuous innovation ability and
commitment, to “turn comparative advantages into competitive advantages” (Guan’s word) to
facilitate dominant internationalization.
After becoming the industry leader, it is also ZPMC’s rare resource- its rich experience in
heavy industry innovation that facilitates ZPMC’s transformation towards new industries for further
development.
From ZPMC, we have illuminations on internationalization with “Made in China”:
 Not every company is suitable to pursue “entry by investment” strategy, especially if there are
low trade barrier and low local demand differences. Companies should decide based on
industry practice and company resources.

27. Group 10 ZPMC Where is the Way of Made in China
26
 Chinese companies can open up international market with low cost, but should still stick to
international standards, like quality and environmental requirements.
 Chinese companies can provide considerate service to make up for technology disadvantages.
 Chinese companies need to learn how to suffer from losses at the beginning to achieve good
reputation and brand. This is Chinese wisdom.
 For long-lasting development, Chinese companies must build up their own competitive
advantages, such as speeding technology advantages, because comparative advantages will
eventually lose.
 Chinese are diligent and talented to achieve any technology innovation, as long as proper
environment and education are provided.
To be fair, we have to point out that ZPMC’s success is with great luck, such as government
support, lucky entry time and low trade barriers. Moreover, PM industry is quite technology-
oriented, while many others are more design or brand-oriented, which requires other core
competences that are more difficult to acquire for Chinese, such as marketing or sense of fashion.
And remember, ZPMC is still not successful to pursue
internationalized management.
What matters for “Made in China” is to find the
appropriate strategy to make full use of its rare
resources and build up core competence to achieve
internationalization and become world-renowned in the long
run.

28. Group 10 ZPMC Where is the Way of Made in China
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4. LEADERSHIP
ZPMC can’t achieve such tremendous success without the
leadership of a 77-year-old man, GuanTongxian, the founder and
the then CEO of ZPMC. Guan Tongxian founded the Corporation in
1992 when he is 59 years old. Only in 17 years, ZPMC surprisingly
transforms from a small workshop near sea to the biggest heavy-duty
equipment manufacture occupying 78% world market shares in the
port machinery industry. Guan should take the most of the credits of
the miracle. This part we are about to analyze the leadership style of Guan Tongxian, in order to shed
light on the leadership style that’s working in Chinese business world.
4.1 Personal traits of Guan
 He is old, which is an advantage in China. The old in China’s history always play the role of
leader, because they are considered experienced, steady, reliable and well-respected. Conversely,
leader in young age is more likely to encounter wide-spread suspicion and resistance.
 He is ambitious. At the very beginning of ZPMC, Guan set a seemingly unrealistic goal,
claiming that “where there is container handling terminal, there is container produced in China.”
This used to be considered a fair tale, but Guan successfully turned it into reality in only 17
years.
 He is energetic. He launched the business in the age of retirement. Even in his late 70s, he
said he had no intention to retire. He often works to the midnight, but arrives at work at seven
thirty punctually the next morning.
 He is patriotic. His vision of career is by no means to make money himself, because he
earns much less than what he deserves. He said he felt sorry for the fact that made-in China is a
synonym to low-quality product. So he hoped one day, made-in China becomes things people
look up to admire. In 2008, He hired lawyer to sue CNN commentator Jack Cafferty for his
remarks that describe Chinese product as “junk”.
 He is austere. As the CEO of such a big company, he leads a simple life, living in the dorm,
sharing office with a dozen of employees.
 He is intellectual. He is a college student in 1950s, when only a few smartest people can
enter university. He studies engineer, but also knowledge of literature and art.

29. Group 10 ZPMC Where is the Way of Made in China
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He possesses other kinds of traits, such as innovation, persistence, all of which are the necessary
ingredients of being a good leader. But six traits explained in detail above are the most prominent
characteristics of Guan.
4.2 Source of Power
Guan is a leader with strong power, the source of which is referent, legitimate, reward, coercive,
in a deceasing order of ranking.
 Referent is his biggest source of power. Guan has many personal traits that enable him to won
reference from subordinates. Firstly of all, He is an old man of ambition and intelligent. Chinese
people worship a steady and experienced leader more than an innovative and passionate leader.
However, the old are considered to be steadier and experienced than the young. In addition, he is
someone of noble mission, putting aside his personal interest. This spirit of devotion is highly
admired in China. Besides, he is very humble and austere in his personal life, which is
extraordinarily moving in China where corruption is prevalent.
Trait
Old
Ambition
Energetic
Austere
Patriotic
Intellectual

30. Group 10 ZPMC Where is the Way of Made in China
29
 Legitimate ranks second as the source of the power. It’s Chinese tradition to be in awe of
authority. Whether the person in authority is capable or not, their orders are to be obeyed
unconditionally.
 Reward is also a source of power. Guan has implemented various reward policies to motivate
employees. Every year, ZPMC will devote nearly 10 billion RMB to encouraging innovation. In
2003, they set up four kinds of one billion RMB-worth rewards, for people who have made great
contribution to technological innovation. Every year, there are two English tests. People who
passed the test can get a salary raise in accordance with their test score.
 Coercive is closely related with legitimate, legitimate gives leaders the right to implement
coerce and coerce, on return strengthens the power of people in authority. Guan is a caring
leader, but he is also a leader, imposing coerce to employees. He was once asked how to make
sure that each employee will participate in the conventional meeting every Monday evening , he
reply with ease that “The absent employees will be deducted salary.”
Guan is an expert at heavy-duty equipment himself. But expert is not a source of power
because there are tons of people out there in china who possess excellent expertise in this area.
Expert is china is never an important factor in being a good leader because in china’s ancient
philosophy, the mort noble people should not carry out the specific task, but to think widely.
Reference
Devotion to
noble
mission
Old man of
ambiton and
intelligent
Austere in his
personal life
Referent
Legitimate
Reward
Coercive
The Pyramid of power source

31. Group 10 ZPMC Where is the Way of Made in China
30
4.3 mixture of transformational and transactional
 Transformational Leadership
Firstly, Guan is a charismaticleader, enthusiastic and self-confident, and being able to
communicate his vision of how good things could be. He is not only energetic himself, but also able
to energize his employees to achieve the goal together. As a matter of fact, the stock of ZPMC is
decreasing, but just as one person said that as long as you hear the speech of Guan on the future
development of ZPMC, you will regain confidence in ZPMC and keep hold of its stocks.
Secondly, He engages in supporting and encouraging followers and helping them develop
and grow on the job:
 Training and learning is one spotted characteristics of ZPMC’s organizational culture. He
established all kinds of training schools for workers to improve their professional skill, such as
school for welding. Because the salary is directly connected with the welding skill, workers are
very active in attending all kinds of training courses.
 Guan put a lot of emphasize on English. Most of ZPMC’s products are sold to markets overseas,
so English is of great importance for ZPMC to expand business overseas and improve service
quality. As a result, ZPMC organizes two English examinations per year, examined by
foreigners. The salary of the workers will be raised by the range of 600-1200, according to his
test score. There are many other similar tests within ZPMC.
 ZPMC launched a MBA program with the cooperation with NOVA University in U.S.
employees graduating from the program can get a master degree, which is recognized by the
world except China. Each employee is entitled to be admitted into the program as long as they
meet the admission requirement which has nothing to do with educational background.
 He encourages the employees to read. There is pension around 1000 yuan per year for buying
books.
 Transactional Leadership
Guan doesn’t pay a lot of attention on interactions with employees. He made the strategy of the
company development on himself and assigned specific tasks to different divisions. Although, he has
no faith in the notion that money is the only incentive, he does make full use of money to motivate

32. Group 10 ZPMC Where is the Way of Made in China
31
employees. For example, he a welding team with 4000 workers, most of them are migrants. As to
how to motivate migrant workers, Guan said that “it’s not necessary to say big words to them. They
only care about money.” So the migrant workers get wages on the hourly basis, more hours they are
working, more they gain. In this sense, Guan is a transactional leader.
4.4 Paternal Management Style
Unlike western corporations where leaders empower subordinates for motivation, Guan still
uses a sort of paternal management model, taking care of everything. The employees don’t have
much empowerment to be the part of decision making. Guan assigns tasks to subordinates and makes
sure that they get the work done efficiently and by international standards. Guan is acting like a
parent of all the employees in ZPMC, telling them what to do and providing training program to
equip them with better knowledge and skills. Guan has 14 vice presidents, who are more like the
assistant of Guan for they don’t have much autonomy to make decisions. Guan is said to be charged
with things from the prescription of “Cola” to business strategy.
Another evidence of his paternal way of leading is his disbelieve of democracy within
corporation. He said that democracy is not working in a company and minority shouldn’t surrender
to the majority.
The path from made-in-China towards made-by-China doesn’t just involve with the
production improvements, but also the upgrade of its leading method from paternal
management mode to modernized management mode. Chinese leaders have the history of being
authoritarian, and unluckily, they are still practicing that. They tend to make decisions all
themselves, and treating subordinates as stupid and shortsighted. Guan is taking charge of
everything, without giving empowerment even to his vice presidents.
This kind of paternal management mode can be effective and efficient when the leader has right
vision and strategy, like Guan Tongxian and when most of the subordinates are ill-educated. But,
putting all the stakes on the ability of the leader can be risky. A minor mistake of one person can be
magnified to a disaster.
Conversely, giving powers to the subordinates can make them feel more valued and motivate
themselves to a higher performance. Empowerment can also make CEO get rid of trivial business,
focusing their energy on planning. This is the direction of corporate reform in the future of China.
ZPMC has come to another turning point of the business, expanding the core business cranes to
heavy-duty steel structure and offshore heavy duty products. At this critical time, paternal
management mode is becoming more and more inefficient and spectrum of ideas and innovation
from subordinates are much more needed in desperate.
4.5 Typical Chinese CEO
Guan Tongxian, is typical of CEOs in China.
1) Most of the successful CEOs in China have a high sense of moral and social responsibility.
They put priority to serving country instead of maximize personal interest.

33. Group 10 ZPMC Where is the Way of Made in China
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2) They are often faced with complex, multi-party negotiations, involving with other businesses
and different parts of the local or national governments. So they are always seeking for harmony
between multiple parties.
3) Most of them impose paternal management mode on the subordinates. This is a very
distinctive feature of Chinese CEOs compared with western CEOs.

34. Group 10 ZPMC Where is the Way of Made in China
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5. CONCLUSION AND REFLECTION
5.1 Success of ZPMC
ZPMC’s success is driven by both external and internal forces. Its prominent internal forces
are strategies and leadership, while the prominent external forces are industry characteristics and
environment support.
ZPMC’s success suggests Chinese companies develop large and clear plans and strategies, and
have a strong leadership to execute strategies, which is especially important in a catch-up situation.
Additionally, Chinese companies should find appropriate industry and keep track of China and world
economic trend, which largely influences how far a company can go.
5.2 Potential Problems of ZPMC
ZPMC now faces potential problems both from inside and outside. From inside, the retirement
of powerful founder and CEO Guan is a great crisis to ZPMC’s future development, which leaves a
weak management system. From outside, deteriorate environment and high-risk industry
transformation are big tests to ZPMC.
•Three steps of development and appropriate strategy in every
step
•Commitment to continuous innovation
•strong execution power
Strategies
•Large vision that is well communicated to employees
•Value innovation and talents
•Lead by example, with passion, ambition and patriotism
Leadership
•PM industry is technology-intensive, labor-intensive and
capital-intensive, which is quite appropriate for current China
Industry Characteristics
•Government policy and finance support for heavy industry
•Wrold developing demand for port machinery
•Shanghai location and Hong Kong control- far from state-
owned restrctions
Environment support

35. Group 10 ZPMC Where is the Way of Made in China
34
5.3 Illumination: “Made in China” to “Made by China”
Made in Chinais one of the most recognizable labels in the
world today due to rapidly developing China's large manufacturing
industry. However, Made in China, in the global market, was a synonym
of cheap price and low quality. Only a very few brands of Made in
China enjoy good reputation in the international world and ZPMC is one
of them. Although, the CEO Guan Tongxian attributes the big success of
ZPMC to a lot of chances, Rome was not built up in a day. The story of
ZPMC’s success is inspiring, but the question arises: why ZPMC
succeeds and other made in china still stays in the low end of value chain. Here are some lessons for
made in china products to learn:
 Leaders play a decisive role in the fate of a business. So the leaders should have a big
picture of the whole business, a long vision of the company development and a sense higher
than self-interest. At the very beginning of ZPMC, Guan insisted on manufacturing by
international standards, no matter how hard and costing it is. He knows the price advantage can
help them get into the market. But he is also aware that it’s the quality and self-innovation, not
price that can make them sustainable, especially in long-enduring products area like heavy-duty
equipment. However, many other leaders of made in China manufactures are so shortsighted that
they are only concerned with short term profit, at the expense of long term development. The
tainted milk powder is just one example of irresponsible made in china products and the leaders
are to be blamed for that.
• Retirement of Guan leaves a weak management system,
which may lack ability to take opportunities and
prestige to motivate employees
• How to sustain after retirement of founder remains a
headache to Chinese companies
Change of leadership
• Increasing labor cost and steel material cost in China
lowers profits
• Large demand decrease due to financial crisis and
following trade wars
• Government policy change towards light industries
Deteriorate environment
• Huge R&D investment before making profit
• Possible innovation failure in new areas
High-risk transformation

36. Group 10 ZPMC Where is the Way of Made in China
35
 Made in China should put more efforts on improving quality. ZPMC used to be in the
situation where capital and technology is in scarcity and they are discriminated by international
market. So they open the market with low price and good service. Once they gain the capability
for innovation, they put a lot of capital into research and improve the quality of their production.
In 17 years, quality, which used to be the biggest disadvantage of ZPMC has been turned into
the biggest advantage.
 Made in China products should rely on independent innovation to win in
the Homogeneous Competition. There has a problem of homogeneity in made in China
productions. Manufacturers compete with each other by lowering prices to zero profit. In order
to earn profit, most of them have to lower the quality of the production, which eventually
destroy their future development. So the way to stand out is to be innovative. Innovation can
help lower the cost and improve the quality.
 Part of the success of ZPMC should owe to being a state holding company. Just like Guan puts it
being a state holding company can enjoy policy inclination and favorable treatment by local
government. However, most of made in china manufactures are private owned business,
restricted by a lot of regulations. So the government should launch some policy to
help them grow or at least eliminate unnecessary obstacles along their way of development.
However, ZPMC has the same problem as other made in China manufactures which impose
potential threat to its future development. The problem lies in its way of management. ZPMC still
adopts the paternal management method to lead the company which put the company into a great
risk. What if the manager made a wrong decision? What if the manager retired? That’s what ZPMC
is facing today. The fate of ZPMC used to be so relied on Guan Tongxian that after he retired, there
incurred social wide worries of its future. What’s more, paternal management method can’t fully
energize the subordinates and leads to low
efficiency since only one person in the
company is thinking. So the made in china
manufactures should adopt a modernized
managementmethod, which
empowers the subordinates and encourage
them to think creatively. Only in this way, the
mistakes by CEO will be timely corrected and
the replacement of CEO will not have an
overwhelming influence on the future
development, because the whole company is
working itself.

37. Group 10 ZPMC Where is the Way of Made in China
36
To Dear Prof. Wu:
Thanks for throwing light on our life.
Best!
Brian, Susan and Joyce
2010.11.03