AmeriTech in the Philippines: Failure to Adjust to Filipino Cultural Norms?

Abstract

CASE DESCRIPTION The primary subject matter of this case concerns itself with cross-cultural issues and is appropriate for courses in cross-cultural management, international management, international business, and human resource management. The case has a difficulty level of three or four. The case is designed to be taught in 1 - 2 class hours. CASE SYNOPSIS An American computer supply company moves its operations to the Philippines in an effort to be more cost competitive but experiences cultural shock as it attempts to institute greater efficiency. The case details the struggles of the plant manager, William Dawson, as he learns the challenges of managing the "Filipino way." The case includes issues such as pakikisama, face saving, and collectivist behavior. INTRODUCTION AmeriTech was started in Lexington, Kentucky by a small group of former IBM employees who accepted a buyout package offered by the company when the Lexington division was reorganized in 1991. Originally, AmeriTech produced computer supplies such as ink cartages, cables, and other small computer supplies in a facility in North Carolina. The operation proved successful as the demand for such products rose globally, however, over time AmeriTech found itself less competitive in terms of cost over rivals from a number of Asian countries. In an effort to reduce labor costs, the founders moved their operations to Mactan Island near the city of Cebu in the Philippines. Instead of starting a Greenfield operation, AmeriTech was able to purchase an iinderperforming Korean firm that was operating in the economic zone of the island. AmeriTech purchased the facility and retained the entire workforce of the former Korean owned business. AmeriTech had hoped to continue its efficient and quality-oriented production techniques from North Carolina in the low wage environment of the Philippines. THE PHILIPPINES The Republic of the Philippines is a country in Southeast Asia consisting of over 7,000 islands (Figure 1). The capital is Manila, located on the island of Luzon. The Philippines was "discovered" by Ferdinand Magellan in 1521, who claimed the islands for Spain. The country was named after the Spanish King Philip (Felipe) and missionaries converted most of the population to Catholicism. The Philippines is unique in being the only Christian country in Asia. While Magellan met his death soon after arriving in the Philippines, the country was under Spanish control for a number of years. The Philippines came under the rule of the United States in 1898, when Admiral Dewey defeated the Spanish, and Spain ceded the islands under the Treaty of Paris. While Tagalog, or Filipino is the official language of the Philippines, English is widely spoken, especially among educated Filipinos. In 1935 the Philippines became a self-governing commonwealth, and there continued to be a strong push by the Filipinos for complete independence. This independence movement was interrupted by World War II when the Japanese invaded the country. With the help of the American forces, the Filipinos defeated the Japanese and gained their independence in 1946. After a number of different administrations, strongman Ferdinand Marcos ruled the country for a number of years and maintained strong ties with the United States. With increasing discontentment of the Filipino people, a "people's revolution" occurred and Marcos was forced to leave the country. Political instability resulted for a time; however, democracy quickly retook a firm hold in the Philippines. Fidel Ramos became president of the Philippines in 1992, and he opened the economy to market forces and encouraged foreign investment, including the establishment of export processing zones (EPZ) and incentives for foreign firms to establish a presence in the Philippines. AMERITECH IN THE PHILIPPINES With an increasing wage rate in North Carolina and the incentives offered by the Philippines, AmeriTech made the decision to close its American facility and begin operating in the Mactan Economic Zone of the Philippines. …