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INTERACTION EFFECTS ON PRODUCT DEVELOPMENT NETWORKS IN CHINA
In terms of supplier selection in China, as the PD manager notes, competition within
the supply side in China is keen and even suppliers with established relationships can
change, depending not only on price, quality and lead times, but most importantly on
whether the satisfy specific project requirements. In terms of supply base, the tobacco
leaves that are supplied to the Shenzhen manufacturing unit come through suppliers,
both Chinese and international. The parent company’s warehouses and most of its re-
lationships with suppliers are managed by STMA. Thus, one may infer that the degree
of decentralisation, because of the ownership structure but also due to the low-tech
manufacturing level is quite low. As a result, knowledge exchanges, both intra- and
inter-organisationally, and the product development processes, in general, are more
simplified compared to previous cases examined. Also, the number of business ac-
tors involved is comparatively lower than the number of people involved in high-tech
product development projects. What is important to be elaborated in this case, is the
development of the interpersonal relationship between the general manager of the
foreign supplier, GF, and a Chinese actor who had both political connections and inter-
personal relationships with actors from the CNTC headquarters, and who assisted the
foreign business actor to enter into negotiations with various manufacturing units of
CNTC and later on to sign contractual agreement with one of CNTC’s manufacturing
units, STI. The case further expands by analysing critical events and past interaction
episodes and exploring the nurturing and development of key relationship patterns in
order to explain how the network has evolved through time.
The discussions take place under the context of a specific product development
project, which involved a core innovation from a foreign supplier and more than ten
suppliers in China for tobacco mix, which included Virginia tobacco leafs from China
(local producers and CNTC’s warehouses), cacao powder and flavour from Guangzhou.
The joint venture with the Austrian partner produced and supplied STI with corn, ciga-
rette and packing paper. The relationship of STI with the joint venture is characterised
by trust and commitment, which in turn has positively influenced knowledge-based
resource combinations, as the two parties are working closely together for almost
a decade (interview: STI PD manager). Further, the key relationship pattern of the
project network, involves two central actors; the two key informants of this study;
the general manager of the foreign supplier, GF, and the PD manager of STI. They both
reveal how their seven-year interpersonal and inter-organisational relationship has
evolved. This is a key relationship pattern of the product development network, as it
contributes a special component - an innovative biological filter - to one of STI’s big-
gest and most promising cigarette brands, ‘Hao Ri Zi’.
In 1999, the leader of the Chinese government, Jiang Zemin, visited the prime minis-
ter of Greece. The two delegations discussed business opportunities and the biological
filter was an innovative product that attracted huge interest by the Chinese side. The
general manager of GF was introduced to a Chinese official who had close relation-
