During the ‘honeymoon’ phase, Thomas and Asian build an excellent applier-buyer relationship with Lie (Yemen and Isabella, 2009, p. 5), which not only brings Lie all the business but also sows the seed for the following problems. Despite of advantages achieved by this relationship, however, Sheehan Filtration lost incentives to look for other possible suppliers since the suppliers gain familiarity with the client (Martinez-Jeerer, 2014, p. 66), which result the complacent of Lie in the end.
Then, the imprudent merge dispenses the paper work (Yemen and Isabella, p. 6), yet keeps the zinc formula in Lieu’s hand. Thus, like problems of other vertical integrating business (Martinez- Jeerer, p. 66), Sheehan Filtration lost their core resource for the business. From time to time, company shows passiveness when Lie dominates the supply chain. Among the ‘cold war’ phase, since Lieu’s and Quinn’s employees are not working together well (Yemen and Isabella, p. 5) and there is not any joint governing structures (Martinez-Jeerer, p. 4) allow people to communicate and address problems. A relatively small defect problem firstly results in argument between Asian and Lie and then a severe communication problem that Lie only speaks with Asian in absolutely necessary conditions (p. 9). Then, things come into the ‘conflict’ phase with Lieu’s unreasonable requests and attitude problems (p. 9). On one hand, partners no longer focus on value creation but value distribution and thus lose their incentives more severely (Martinez-Jeerer, p. 66).
On the other hand, absence of credible information update with Lehman hinder the problem solving procedure until the night before back to the US (Yemen and Isabella, p. 9), which indirectly erode trust between Asian and Lie and break opportunities for collaboration (Martinez- Jeerer, p. 68). Evaluate the pros and cons of the options available to Lehman. Four options mentioned in the case can be put into two different class, ‘aggressive’ and ‘passive’. There are slight impurity in the same class but huge differences among options in different classes (See Table #2).
The idea about incentives, information and collaboration mechanisms wrote by Martinez- Jeerer (2014) can be the criteria to judge different options. The ‘eliminate’ and ‘spy’ plan are considered as aggressive options for Lehman. Firstly, both plan will eventually boost incentives since Sheehan Filtration will finally control the factory and Asian and Thomas have a good partnership with Lehman. The rust formed between Asian and Lehman somehow build an adaptive strategic partnerships which will encourage incentive systems that support innovation and success (Martinez-Jeerer, p. 66).
Secondly, as for the collaboration mechanism, the story before the establishment of Sheehan Filtration that Asian and Thomas fired Dong Boo who steal their prototypes (Yemen and Isabella, p. 4) builds a strong trust between Lehman and Asian and Thomas and shows that Sheehan Filtration have their independence to learn and adapt strategies in a changing emerging market. However, It is hardly seen any internal working style change in the aggressive options. Thus, losing Lie still brings the doubt that whether communication problem still exists or not. Furthermore, directly firing Lie will not gain any resource for the company.
As for the information, the ‘spy’ plan lets company enjoy benefits of Lieu’s formula but may result in law issue in regards of intellectual property. The ‘retreat’ and ‘runaway plan are considered as passive options for Lehman. It is obvious that both plan lose some or all controllers of the factory. ‘Retreat’ plan keep major controllers and profits of the factory while give Lie a treatment that he is willing to have. This will not only decrease the costs but also boost the incentives that may solve the conflicts between Asian and Lie and make them go back to the ‘honeymoon’ phase.
Also, due to controllers lose, this may force partners to improve their collaboration mechanism in order to stay competitive. However, the factory scale may be damaged due to money retirement. Meanwhile, ‘runaway’ plan fully retreats the investment, which will force company to leave zinc industry, lose the profits as well as harm the original factory. How should Lehman respond to the situation? How does your choice align with Florist’s strategy? Based on the fact that Filtration manufacture in China is because of low costs (Yemen and Isabella, p. ) and enter into zinc market due to low margins (p. 6). It is confident to define that Sheehan Filtration is using global strategy focusing on global efficiency to achieve best cost position for scope economics. In my opinion, it has been proved that the factory can make profits whether Sheehan Filtration controls Lieu’s formula or not. In regards of the points above as well as the problems that company is facing, Lehman should consider a plan that can lower the costs, get the profits, and rewrite the company elaboration structure at the same time.
Based on the discussion above, the ‘retreat’ option is the best plan to reorganize the company’s equity lower the costs, stay profits as well as give both Filtration and Lie a new space to solve the conflict and collaborate again.