Global Management

A case study on United Dairy Power

Prepared for Dr Htwe Htwe Thein, Ethics & Culture in Business 500

3 JUNE 2014

In March 2014, William Hui, a Hong Kong entrepreneur, purchased a controlling

interest in United Dairy Power (UDP) with the aim of entering the Chinese infant
powdered milk market (Kitney 2014). UDP is Australias largest privately owned
milk supplier. It manufactures dairy products such as cheddar, mozzarella cheese,
butter and whey powder but does not currently have the facility nor sufficient milk
supplies to produce infant powdered milk (Kitney 2014).
Using the newspaper article by Kitney (2014) at Appendix 1 and the Global
Management Model (Steers, Nardon and Sanchez-Runde 2013), this essay analyses
the situation presented by the purchase of UDP by William Hui. In particular, this
essay explores the global challenges for UDP, the global environment within which
UDP operates and the global management skills that will help the company
succeed.
The article by Kitney (2014) refers to a number of stakeholders such as the new
owner of UDP, William Hui, the CEO of UDP, Mark Smith, dairy farmers, Austrade,
competitors, current customers and potential customers. However, for the purpose
of this essay I will primarily focus on two stakeholders Mr Hui and Mr Smith.

Challenges for UDPs Managers

According to Forbes (2014) William Hui has 20 years experience in industrial
management with business interests in Swing Media Technology Group, a Hong
Kong manufacturer of CDs, DVDs and other media products as well as Chinarise
Capital, a Hong Kong company that trades mobile phone handsets and
components. He does not have experience in the dairy industry nor has he
previously owned an Australian business. While Mr Hui clearly sees the purchase of
UDP as a significant business opportunity it also presents him with a number of
challenges. These challenges include developing knowledge of the Australian dairy
industry and Chinese infant powdered milk market, developing knowledge of
Australian and Chinese food safety standards, evaluating whether to invest further
funds in UDP to diversify into the infant milk powder market or whether to seek a
strategic alliance to facilitate entry into this market, evaluating whether UDP
should consider the purchase of dairy farms to guarantee milk supplies, as well as
developing cross-cultural communication skills for effective interaction with UDP
employees and Australian government officials.
Page 1 of 12

While Mark Smith, the CEO of UDP, shares many of the same challenges as Mr Hui,
such as cross-cultural communication skills to effectively communicate with Mr Hui
and developing knowledge and expertise in the infant powdered milk market and
manufacturing process, he is also presented with a number of challenges directly
linked to Mr Huis global business ambitions. UDP is a national business that has
only recently entered the global market (United Dairy Power 2014). Mr Huis vision
of entering the Chinese infant powdered milk market means that Mr Smith will
need to transform UDP into a global business competing on a global scale.
However, none of this will happen unless Mr Smith is able to expand the facilities of
UDP, increase the sources of milk to the factory and develop the global managerial
competencies of both him and other UDP employees.
In addition to individual challenges, challenges also exist at the broader industry
level. The Australian dairy industry has experienced significant global competition
at a time of persistent droughts, a high Australian dollar and depressed milk prices
(Guilliatt 2014). While global demand for milk has risen, the Australian dairy
industry has shrunk (Guilliatt 2014). According to Dairy Australia herd numbers
have dropped and the number of dairy farms has halved (Guilliatt 2014).
Increasing sources of milk to meet the future demands of UDP is, therefore, a
significant obstacle to Mr Huis vision of entering the Chinese infant powdered milk
market.
Further challenges relate to the relationship between Mr Hui and Mr Smith as well
as their roles going forward. While Mr Hui has committed to maintaining the
existing management team (Kitney 2014), how much involvement will he have in
the day-to-day management of UDP? Will Mr Hui seek to introduce Chinese
management practices and decision-making processes into the organisation? How
will Mr Hui facilitate UDPs entry into the Chinese market?

Developing a Global Understanding

Clearly there are a number of global challenges and obstacles that UDP will face if
it is to achieve Mr Huis strategic objective of entering the Chinese infant powdered
milk market. In deciding how to proceed, the Global Management Model (Steers,
Nardon and Sanchez-Runde 2013) suggests that Mr Hui and Mr Smith will need to
Page 2 of 12

consider the environment in which UDP operates and how this impacts their
working relationship as well as the global expansion of UDP (Steers, Nardon and
Sanchez-Runde 2013).

Cultural environment
Successfully managing a global business requires dealing with national and
organisational cultural differences (Hofstede 1994). In the context of UDP, it is
critical that Mr Hui and Mr Smith understand the current and future cultural
environment in which UDP operates. Not only will this assist them in understanding
how to communicate with each other, but it is also vital in understanding cultural
differences which may impede UDPs entry into the Chinese market.
From an ethical perspective, it is essential that Mr Hui and Mr Smith understand
each others cultural similarities and differences. Using the Core Cultural
Dimensions developed by Steers, Nardon and Sanchez-Runde (2013) Australia can
be characterised as moderately egalitarian where it is acceptable for individuals to
question their superiors; strongly individualistic with a focus on direct
communication and individual decision-making; strongly mastery-orientated which
embraces change and a preference for individual performance based extrinsic
rewards; and moderately rule-based with an emphasis on legal contracts and
decisions based on objective criteria. On the other hand, China is characterised by
a strongly hierarchical approach where it is unacceptable for individuals to
question their superiors; strongly collectivistic with a focus on indirect
communication and a preference for preserving social harmony over individual
rights; strongly harmony-orientated which defends traditions and values
relationships; and strongly rule-based with an emphasis on individual behaviour
being regulated by rules (Steers, Nardon and Sanchez-Runde 2013). Clearly there
are some critical cultural differences between Australia and China which will not
only affect the way in which Mr Hui and Mr Smith communicate with each other but
also decision-making processes, management approaches and leadership styles.
Hofstede and Bond (1988, 14) state, differences among cultures have many
consequences for management practices.

Page 3 of 12

Organisational environment
According to Nardon and Steers (2014), managers actions are guided by
organisational context, that is, the organisations strategy, structure, decisionmaking processes and cultural norms. In the case of UDP, their strategy to grow
the business in Australia and internationally (United Dairy Power 2014) has lead to
the purchase of the company by an overseas investor. However, it appears that
UDPs organisational structure continues to supports its previous national business
strategy with international activities being an add-on to its domestic activities
(United Dairy Power 2014). Clearly this structure will need to change as UDP
pursues its global strategy.
While there is insufficient information to determine the decision-making processes
of UDP, I have assumed that this reflects Australian cultural norms. That is,
Australian managers are willing to share power and engage in two-way
communication with subordinates as part of the decision-making process (Wang
and Clegg, 2002). Chinese managers, on the other hand, are less likely to invite
participation in decision-making (Wang and Clegg, 2002). While this is a
generalisation of national cultures, it nonetheless highlights a significant issue that
Mr Hui and Mr Smith will need to clarify as part of their on-going relationship.

Situational environment
The situational environment reflects the circumstances facing a manager at any
given point (Steers, Nardon and Sanchez-Runde 2013, 151). In the case of UDP,
Mr Hui and Mr Smith need to build a workable relationship and consider how they
will achieve the strategic objective of global expansion.
An important element of Chinese culture that impacts the situational and
organisational environment is the concept of guanxi. Guanxi encompasses mutual
trust and reflects the Chinese practice of establishing trust before the transactional
side of business commences (Hwang et al. 2009). In the context of relationships
with customers and suppliers, Menzies and Orr (2010, 27), describe guanxi as
more complex than the western concepts of networking and business favouritism
and provides an alternative path to formal or contractual processes. Guanxi
also relates to good work relationships, that is, maintaining harmony and dealing
with conflict using a collaborative style (Cheng, Rhodes and Lok 2010). While there
Page 4 of 12

are many positive aspects to guanxi, Mr Smith also needs to be aware of its
negative aspects. That is, the exchange of gifts or facilitated payments to
maintain guanxi with Chinese partners and government officials (Hwang et al.
2009, 237). This presents a significant situational challenge for UDP to retain the
benefits of good guanxi while maintaining their ethical business practices.

Developing Global Management Skills

Reflecting upon the challenges facing UDP and its environment, there are a
number of skills that, in my opinion, Mr Hui and Mr Smith need to consider. These
include cross-cultural communication, negotiation, global mindset and global
leadership skills.
Culture and cultural differences, such as those of Australia and China, often act as
a barrier or screen in which people create, send, receive and interpret
messages (Nardon, Steers and Sanchez-Runde 2011, 85). In the case of UDP,
communicating across cultural boundaries is made more complex by the fact that
Mr Hui comes from a high-context culture (Steers, Nardon and Sanchez-Runde
2013, 210) where non-verbal cues are very important and much is communicated
indirectly. It is, therefore, critical that Mr Hui and Mr Smith develop skills to
communicate with each other, that is, across cultural boundaries. They need to be
self-aware, learn to understand each others culture, develop common meanings
and develop active listening skills (Steers, Nardon and Sanchez-Runde 2013).
Transforming UDP into a global organisation will require developing global
relationships, partnerships, and potentially a strategic alliance to facilitate UDPs
entry into the Chinese infant powdered milk market. It is therefore critical that UDP
considers the criteria for selecting global partners, based on compatible goals,
systems and processes, culture, commitment and operational approach (Steers,
Nardon and Sanchez-Runde 2013). Additionally, UDP will need to consider potential
ethical conflicts, such as bribery, corruption or working conditions in China, and the
strategies it may use to resolve these conflicts. UDP may wish to adopt an ethical
decision tree approach (Buller, Kohls and Anderson 2000) in determining the
appropriate strategy for particular ethical dilemmas.

Page 5 of 12

Developing the necessary cross-cultural relationships to realise UDPs global

strategy will necessitate global management skills. These skills are often described
as a global mindest, global management skills, cultural intelligence or crosscultural competence (Bucker and Poutsma, 2010). In essence each of these
concepts refer to a set of individual qualities and attributes that help a manager
influence individuals, groups and organisations who are from other parts of the
world (Javidan and Bowen 2013, 147). UDP managers with a global mindset are
more likely to handle the global business complexities, such as navigating through
the challenges and obstacles mentioned earlier in this essay, that may hinder the
achievement of UDPs vision as a successful global organisation.
In addition to a global mindset, Mr Hui and Mr Smith need to consider their global
leadership skills. Research from the Global Leadership and Organisational
Behaviour Effectiveness (GLOBE) program highlighted universally acceptable and
unacceptable leadership attributes (Javidan, et al. 2006). Understanding these
attributes is vital for developing effective cross-cultural leadership. Mr Hui and Mr
Smith need to understand and demonstrate both the similarities and differences in
their leadership styles then seek ways to bridge the gap between the two cultures.
Not only will this aid their working relationship but it will also assist the adaption of
their leadership style to enable attainment of UDPs strategic objective of
expansion into the Chinese infant powdered milk market.

Conclusion
Globalisation provides organisations with many challenges and opportunities (Story
and Barbuto Jr. 2011). UDPs success depends upon Mr Hui and Mr Smith
developing and demonstrating their global management skills. They need to
recognise the global realities that face UDP, understand the environment in which
they operate and develop the global management skills necessary for their
particular cross-cultural setting (Steers, Nardon and Sanchez-Runde 2013).

References
Bucker, J., and E. Poutsma. 2010. "Global Management Competencies: A
Theoretical Foundation." Journal of Management Psychology. 25 (8): 829-44.
doi: 10.1108/02683941011089116.
Buller, Paul F., John J. Kohls, and Kenneth S. Anderson. 2000. "When Ethics Collide:
Page 6 of 12

Managing Conflicts across Cultures." Organizational Dynamics 28 (4): 52-66.

doi: http://dx.doi.org/10.1016/S0090-2616(00)00005-X.
Cheng, Vincent, Jo Rhodes, and Peter Lok. 2010. "A Framework for Strategic
Decision Making and Performance among Chinese Managers." International
Journal of Human Resource Management 21 (9): 1373-95. doi:
10.1080/09585192.2010.488434.
Forbes. 2014. William Hui. Forbes. Accessed May 21,
http://www.forbes.com/profile/william-hui/.
Guilliatt, Richard. 2014. The Winning Formula. The Australian, March 15.
Hofstede, Geert. 1994. "The Business of International Business Is Culture."
International Business Review 3(1): 1-14. doi: http://dx.doi.org/10.1016/09695931(94)90011-6.
Hofstede, Geert, and Michael Harris Bond. 1988. "The Confucius Connection: From
Cultural Roots to Economic Growth." Organizational Dynamics 16 (4): 5-21.
doi: http://dx.doi.org/10.1016/0090-2616(88)90009-5.
Hwang, Dennis, Patricia Golemon, Yan Chen, Teng-Shih Wang and Wen-Shai Hung.
2009. Guanxi and Business Ethics in Confucian Society Today: An Empirical
Case Study in Taiwan. Journal of Business Ethics 89: 235-50. doi:
10.1007/s10551-008-9996-5.
Javidan, Mansour, and David Bowen. 2013. "The Global Mindset of Managers:
What It Is, Why It Matters, and How to Develop It." Organizational Dynamics
42 (2): 145-55. doi: http://dx.doi.org/10.1016/j.orgdyn.2013.03.008.
Javidan, Masour, Peter W. Dorfman, Mary Sully de Luque, and Robert J. House.
2006. "In the Eye of the Beholder: Cross Cultural Lessons in Leadership from
Project Globe." Academy of Management Perspectives 20 (1): 67-90. doi:
10.5465/AMP.2006.19873410.
Kitney, Damon. 2014. United Dairy Power boss targets massive Chinese market.
The Australian, March 18. http://www.theaustralian.com.au/business/indepth/united-dairy-power-boss-targets-massive-chinese-market/storyfni2wt8c-1226857438191.
Menzies, Jane L. and Stuart Orr. 2010. "The Impact of Political Behaviours on
Internationalisation: the Case of Australian Companies Internationalising to
China." Journal of Chinese Economic and Foreign Trade Studies 3 (1): 24-42.
doi: 10.1108/17544401011016663.
Nardon, Luciara, Richard M. Steers, and Carlos J. Sanchez-Runde.2011. "Seeking
Common Ground: Strategies for Enhancing Multicultural Communication."
Page 7 of 12

Organizational Dynamics 40 (2): 85-95. doi:

http://dx.doi.org/10.1016/j.orgdyn.2011.01.002.
Nardon, Luciara and Richard M. Steers. 2014. "Managing Cross-Cultural
Encounters: Putting Things in Context." Organizational Dynamics 43 (2): 13845. doi: http://dx.doi.org/10.1016/j.orgdyn.2014.03.008.
Steers, Richard M., Luciara Nardon and Carols J. Sanchez-Runde. 2013.
Management Across Cultures: Developing Global Competencies. 2nd ed.
Cambridge: Cambridge University Press.
Story, Joana S.P., and John E. Barbuto Jr. 2011. "Global Mindset: A Construct
Clarification and Framework." Journal of Leadership & Organizational Studies
18 (3): 377-84. doi: 10.1177/1548051811404421.
United Dairy Power. 2014. United Dairy Power. Accessed May 21,
http://www.udp.com.au/.
Wang, Karen Yuan and Stewart Clegg. 2002. "Trust and Decision Making: Are
Managers Different in the Peoples Republic of China and in Australia?". Cross
Cultural Management: An International Journal 9 (1): 30-45. doi:
10.1108/13527600210797334

Page 8 of 12

Appendix 1

United Dairy Power boss targets massive

Chinese market
DA MO N KI T NE Y
THE AUST RAL I A N
MA RCH 1 8, 20 14 1 2: 00 A M

Source: The Australian

THE Hong Kong entrepreneur who now controls Australia's largest privately owned milk
processing company, United Dairy Power (UDP), wants to use it as a springboard to break into the
multi-billion-dollar powdered milk market in China.
William Hui, who last month paid about $70 million to take control of UDP from its founder Tony
Esposito, said he was willing to spend a further $20m to bolster capacity at the group's factories or seek
alliances to help UDP expand into the milk powder business.
In his first ever media interview, Mr Hui -- who is also the chairman of Singapore-listed Swing Media
Technology, a company that makes and trades CDs, DVDs and other media products -- said he was also
talking to his bankers about potentially providing finance to UDP's suppliers to help them bolster milk
supplies.
He said the company could consider purchasing farming properties in the future as part of its expansion
plan for UDP, designed to cash in on the booming demand for powdered milk products in China.
Page 9 of 12

The infant milk formula market in China is set to double to more than $25 billion by 2017. But while the
global price for whole milk powder jumped 65 per cent over the past year, Australia's production of milk
powder fell 22 per cent over the same period.
Mr Hui stressed that the company remained committed to maintaining capacity in the local market and
would only forge ahead with its expansion plans if it could source bigger milk supplies. UDP, based in
South Melbourne, has processing facilities at Poowong in Victoria and Murray Bridge and Jervois in
South Australia.
Mr Hui's purchase of the company last year followed a fierce bidding war for the listed Warrnambool
Cheese & Butter, a battle eventually won by Saputo after the Canadian giant beat off local rivals Murray
Goulburn and Bega Cheese.
The purchase comes as several Chinese state-owned enterprises and private companies are in
negotiations to bankroll construction of new milk powder plants in NSW through a plan being brokered
by Dairy Connect, a not-for-profit organisation that represents the NSW dairy industry.
Mr Hui, who was introduced to UDP in August last year by Huashan Capital co-founder David Chen,
confirmed there were other investors in China willing to follow his lead to purchase or invest in
Australian dairy assets.
"We know there are lots of investors in China," he said in an interview with The Australian. "In the
coming five years there will be a lot of Chinese coming to this market. In the past five years it has been
in mining, but in the coming five years it will be in dairy.
"Whether it is a big company or a medium-sized company in China, they will be interested because the
dairy product from Australia is very good. "The environment here is very good for the cows and the
milk. China has already been importing a lot of cows from Australia."
Mr Hui said his purchase was a private one and unrelated to Swing Media or his other business,
Chinarise Capital, which trades mobile phone handsets and components in Hong Kong.
Established in 1999, UDP purchases milk from the Kirin-owned Lion-National Foods Group but also
provides transport and logistics services as well as manufacturing facilities. The company manufactures
dairy products including cheddar, the Caboolture brand of mozzarella cheese, butter and whey powder.

Page 10 of 12

Mr Hui's growth plan will see a major expansion of production to allow diversification into milk powder,
which will be exported to China. "We now still mainly rely on the local market," he said. "If we get more
milk supply then we will divert to the China market. Our factories have the potential to produce more
but supply is at the maximum already. We need to look for the milk supply, increase our production and
then we can go to China. Right now we have about 150 farmers, suppliers, and we are talking to them
about supplying more. We are also talking to our bankers to see if they can allow us to provide finance to
farmers, assistance to them, to help them grow as well," Mr Hui added.
While he said there were no plans to purchase dairy properties and emphasised that "having a processing
company is very different to having a farm", he said it could be an option for the future. "We won't buy
farms now but we could in the future. But we are new to this industry," he said. "Once we expand our
facilities then we will consider buying some farms." Mr Hui's chief financial adviser and Chinarise CFO,
Johnny Chan, said the company was in dialogue with Austrade about providing more support to the local
farmers to help them bolster supply But he said the government needed to do more. "I think the
government should give more support to the farmers, to help them to grow. They shouldn't just rely on
the foreign investor financing the farmers."
Mr Hui said the company remained committed to the local market. It is being run by the existing
management team, led by chief executive Mark Smith.
Earlier this month it increased prices for suppliers. "We won't cut off production or capacity for the local
market because we already have good profitability here," he said. "We don't want to cut that off and ship
to a new market. Locally we are still growing. Locally we still have demand we can't supply to. We
cannot have enough supply for our customers -- so we want to make sure our local customers are happy
first."
Tighter food safety rules in China have also made it more difficult for importers of dairy products,
especially after a contamination scandal involving New Zealand dairy giant Fonterra last year. "We need
to be very careful because of new regulations governing the import of dairy products into China," Mr
Hui said. "Other people have been getting into big problems. We don't want to jeopardise everything we
have established."

Page 11 of 12