Factory 539: China Star Technology Electronics Ltd (A)

From an interdisciplinary perspective, this field-based case series uses the purchase of a China-based manufacturing company to create the prerequisites for a cost accounting analysis, operational effectiveness, and cross-cultural communication. It provides a discussion on the strategy of buying a Chinese company to enter a promising business area for the Chinese market, and an opportunity to introduce basic accounting, management, and operations terms that can be explored in the courses below. The material provides an overview of a partnership between a Westerner and two Chinese executives, the problems they uncovered through due diligence, the plans to enter a new market and their efforts, the principles of lean manufacturing in one language and different culture to pass on. If possible, inviting accounting, communications, or operations colleagues to teach together enriches the discussion and offers an integrated learning experience. Case A begins with an overview of the capacitor factory in Henan Province, China, that Peer Nielsen, Baocheng Yang, and Zhihong Li are looking to buy. They discovered several problems: workers’ wages were not paid for months, wage taxes were years behind, one of the company’s most profitable production lines was “rented.” Local competitors not only used their technology, but some also produced the same capacitors under the China Star brand. Then there were production lines that lacked raw materials and the huge unresolved electricity bill. But the political leadership in the area was eager for the new owners to buy the factory with the intention of manufacturing and provide the necessary permits and assistance to get started. Should the group buy it?

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