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Kitchen Best

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John Ashford

on 8 May 2014

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Transcript of Kitchen Best

The Players
Ethics when doing cross boundary business in
Southern China

Kitchen Best
KB has the right to outsource and expect quality and the duty to ensure production quality
Qinghua has the right to control costs and the duty to meet required standards
Keemark has a duty to impartiality
Honghua has the right to a good price without bribes and the duty not to take them

KB has the duty to sell quality products without the undue influence of bribes

Ma Luc has the right to protect the company and the duty to maintain integrity
• Rights and Duties
Against the Law
Hong Kong
-Falsification of documents
Honghua, Macao
-Bribes for functional duties
-Inducing unfair competition
The Shago Incident
• Rights and Duties
• Justice
• Rights and Duties
• Justice
Hong Kong began industrialization

Chinese government adopts an open door policy to Small to Medium Size Enterprises (SME)
Hong Kong begin to relocate manufacturing to mainland China (especially in Guangdong providence)
Many Hong Kong businesses transform from purely manufacturing to include trade or service
New concentrations in:
Product Development
Quality Control
Maintaining their manufacturing operations in China
Kitchen Best
Founded by Chan Dong-Hwa,
(at age 35)

Hired as purchasing and production manager
Grandson of Li Qingyang, Chan’s wife’s aunt
Business relationship with Shago begins
Horatio Sze
Chan expands Kitchen Best
From 80 to 1500 employees
30 in management, admin, and logistics
1470 laborers in Foshan, China factory
Chan hands control to his son Henry Chan
as Chief Executive of the corporation

Transition to western management styles
Less paternalistic
Hong Kong is the worlds largest exporter of appliances such as juicers, food grinders, and mixers
Hong Kong has 282,000 SME
-Exports US $2.3 million* in household appliances
Shago nepotism crisis
Haus De Metro outsourcing crisis
Chan was still involved with running the business (managing key customers)
Daily management by Henry
Honghua policy crisis
Henry’s plan was to double the company’s revenue
Expand into US/Europe markets
Revamp corporate management
The global kitchen appliance industry forecast:
Reach a volume of more than 900 million units
Worth US $154 billion
Chinese appliance manufacturers were expected to ship more than 250 million units
The Shago incident

The HdM Germany incident

The Hongua incident
• Justice
• Utilitarianism
• Utilitarianism
• Utilitarianism
• Caring
• Caring
• Caring

Deviating from normal practices is not fair to customers

Bribery and kickbacks although historically customary are not legal
Focus on the greater good

Relationship damage
Relationship responsibilities

Fostering interdependence

Ensuring the future
Not focusing on the business goals and greatest good of the company

Broke laws in two countries

Management breaks policy in both companies
Personal gain at the companies expense
Ma Luk offering bribes and falsifying documents
Eddie Lau taking bribes coersion

Recommendations & Lessons Learned
Haus De Metro
Honghua Appliances
Shago has the right to expect quality
Shago has a duty to quality control before sending

Kitchen Best has a duty to deliver on promises

Wei has the right to report problems
Sze has duty to accountability

Breach of Contract
Bribery as a breach in impartiality
Imbalance in harm to benefit measures

Consequences of not fulfilling contracts

Organizational goals not met

Obligation to 8 year business relationship

Not fostering mutual growth

Ability to provide quality in question
Change corporate culture
Remove unhealthy influences
Create ethical policies
Develop internal controls
Lessons Learned
Keep silent partners silent
Beware of nepotistic business relationships
Develop and stick to quality control measures
Accountability to policy
Have due process for vetting partnerships
Anticipate the dip of developing a culture of ethics
Losing business; Reputation
Losing money; Litigation
Losing job or Resignation
Li Qingyang
85 Year old Silent Partner
Founder Chan Dong-Hua's Aunt
25% Equity stake holder
Company expenses domestic help
Founder and Chairman of the Board

"I treat my employees like my family members. Many have been with us for a long time and have stayed with us even when they could earn more somewhere else"

Worked in electronics from the line into management
Invested his savings and personally oversaw the business
Typical paternalistic style of SME family business
Li Meihua
Wife of Founder Chan Dong-Hwa
Personal assistant to Chan for the first 7 years
Niece of Li Qingyang (silent partner)
Henry Chan
Chief Executive
Founder Chan Dong-Hwa's Son
32 year old marketing expert
Successfully expanded into USA and European markets

Ma Luk
Director and head of greater China Business

With Kitchen Best since nearly the beginning

Worked from the factory line in to management

Chan Dong-Hwa's right hand man
Horatio Sze
Purchasing Manager

Grandson of silent partner Li Quingyang

Former quality control with supplier relationships
Macy Wei
Quality Control Manager

Worked from the factory line into management

Looked to Horation Sze for advice and mentoring
Thank You
Team 1
Full transcript