EMPIRICAL FINDINGS
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zhen Tobacco Industrial (STI) Company – a manufacturing unit of the Chinese Na-
tional Tobacco Corporation (CNTC), and a Western supplier, Golden Filter (GF). CNTC
has its headquarters in Beijing but is geographically decentralised based on Chinese
regional and provincial structures. This case study, in particular, examines the supply
network of one of its decentralised manufacturing and business units, which is based
in one of China’s Special Administrative Region, Shenzhen. Although the majority of
STI’s suppliers and customers are based in the Guangdong province, the State Tobacco
Monopoly Administration (STMA), which belongs to CNTC and is also based in Bei-
jing, manages most of the tobacco leaf supplies. These are imported from all over the
world, but are also supplied from local producers, on behalf of STI. Moreover, STMA
provides quotas to each manufacturing unit of CNTC, in terms of production capacity
and place of selling.
STI was established in 1987 and bought its first machinery from the UK, US and Ita-
ly. The company nowadays employs around 500 workers, including almost 80 man-
agement and administration staff. STI is separated into four departments: product
development, purchasing, production/workshops, and sales. The purchasing depart-
ment orders supplies from factories and warehouses owned by CNTC. Also, CNTC has
established a joint venture in China with an Austrian partner, which produces corn
and cigarette paper. Having mentioned the centralised direction of CNTC towards its
region-based manufacturing units, this case study investigates STI’s relationships with
headquarters and its relationships with other manufacturing units of CNTC. It should
be noted that although production of the state-owned tobacco company is more cen-
tralised than companies examined in previous cases and especially those in high-tech
industries, their product offerings are innovative in relation to the other production
units of the parent, CNTC. Most importantly, STI has localised most of its supply base,
and this explains how it differs from other manufacturing units of CNTC. Furthermore,
STI is the only manufacturing unit of CNTC that uses the biological filter for one of its
product ranges, which is supplied by GF; a European supplier. The above mentioned
parties form the key direct inter-relationship patterns in the product development
network examined in this case study.
The researcher’s access to this set of relationships came from an executive of a supplier
to STI, who suggested the general manager of its international marketing company,
Golden Filter (GF), as an appropriate informant. GF is the sole global representative
of the innovation patent. Its general manager was the most influential actor in this
network, in terms of nurturing and developing interpersonal relationships with gov-
ernment officials and key business actors at CNTC headquarters. This informant in turn
connected the researcher with the PD manager of STI, who was employed at CNTC
headquarters at the time business negotiations commenced.
