Taming the Dragons -- Cummins in China Article

Cummins: Licensing to Joint Venture

Hazards in License

To enter and explore the Chinese industry, Cummins Incorporation. adopted a licensing proper alliance in the early 1980s. It authorized two certificate agreements primarily; firstly with CQAEP as well as the other with DFM. There have been various risks involved in applying licensing, because control over the technology can be weakened. There was clearly also a problem in adequately safeguarding the accredited technology coming from unauthorised make use of by various other parties. This led to rise in competition. Cummins Inc. was not able to permeate the Oriental market having its new and advanced technical products while the licensees did not sustain the specialized improvements elsewhere in the world. This kind of exposed Cummins Inc. to several reputational dangers as well. Dangers in Joint Venture

In the early on 90's, Cummins Inc. took advantage of the changing China business environment and modified its two licenses to 50-50 joint ventures with CCEC and DFM. This gave Cummins Inc. the power to use the new and developed solutions giving it even more competitive edge in the market, and in addition helped reduce its cash investments. Financial risks – Long term relationship requires trust & determination During the approval process the moment Cummins Incorporation. had to deal with a lot of economic risks. Firstly, they had to absorb all the property of the Chongqing Company such as the personnel which significantly elevated the amount of funds required for fifty percent ownership in the company. It had to bear the financial problems like debt and accounts receivables because of non dedication of CCEC. Secondly, due to the poor functionality of the CCEC as appreciated by the six sigma-type performance evaluation, the Chongqing government was forced to transfer the CNHTC value into the municipal government which will left Cummins with no effective Chinese spouse. Managerial Dangers and Conflict of Passions – Understanding & sustainability for development Cummins Incorporation. also confronted managerial concerns such as issues related...