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The collaborative strategy in the Taiwan shoe industry
Tzong-Ru ( Jiun-Shen) Lee and Toong-Chinn Venice Koh
Department of Marketing, National Chung Hsing University, Taichung, Taiwan
Abstract
Purpose – The purpose of this paper is to elaborate the reason behind a sustainable guanxi network through the introduction of the collaborative strategy in the Taiwanese shoe industry. Design/methodology/approach – Literature review in the area of Chinese business culture, and guanxi network is used to elaborate the information obtained from the company. Findings – This paper highlights that the belief of sincerity and trustworthiness has refined to the organization culture that supports the sustainability of Taiwanese guanxi network. Besides, the transaction cost theory, resource-based view, and specific relationship investment has become a hinder strategy for Taiwanese organization to maintain the business relationship. This paper introduces an interesting collaborative strategy between three parties, the original equipment manufacturer (OEM) supplier, the machinery manufacturer, and the end-user (the branding). Although there is no direct business flows between the end-user and the machinery manufacturer, the specific relationship investment between these two parties are tight and cannot be separated. This has ensured the proper business flows between the OEM supplier and the end-user as well as the OEM supplier and the machinery manufacturer. Originality/value – This paper illustrates that a guanxi network is not sufficient to ensure a long-term business relationship to be established. Indeed, the organization culture as well as the consideration on the transaction cost and resources from each party does have a great impact on the collaboration relationship to be successful. Keywords Competitive strategy, Networking, Taiwan, Business enterprise, Shoes Paper type Viewpoint

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Received November 2008 Revised March 2009 Accepted April 2009

Introduction Chinese business culture has always been a fascinating subject for social science research. “The Taiwan Miracle” has played one of an important role that contributed to a strengthening interest in Chinese business culture. Along with Singapore, South Korea, and Hong Kong, Taiwan became one of the Four Asian Tigers due to quick industrialization and rapid growth during the latter half of the twentieth century. A number of westerners have praised Taiwan’s rapid economic growth and spectacular achievements as being miraculous in scope, hence the term “Taiwan Miracle.” The Taiwanese economy has undergone spectacular growth for three decades. This success is all the more striking given that Taiwan started off as a typical third world poor country. To make sense of the Taiwanese success, a great deal of scholarly research calls attention to Chinese business culture (Gomez and Hsiao, 2004). A challenging task for the scholarly research is the search for appropriate theoretical handles on the economic institutions commonly found in the society, particularly their organizational structures and the relation of these structures to

European Business Review Vol. 21 No. 6, 2009 pp. 567-580 q Emerald Group Publishing Limited 0955-534X DOI 10.1108/09555340910998841

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economic rationality and performances. Unlike western counterparts, business organizations in Taiwan are more rely on relationship network (guanxi-based network) and organization culture. Most Taiwanese business organizations tend to share a characteristic of significant networks in coordinating production, distribution, and consumption of products and service. Moreover, the belief of sincerity and trustworthiness has refined to the organization culture that supports the sustainability of most Taiwanese organization. This unique institutional feature of Taiwanese capitalism has distinctive from western notion of bureaucratization and efficiency. This paper examines the collaborative strategy of Tien Kang Co. Ltd (2008) based in Taiwan. Tien Kang Co. Ltd is the manufacturer of footwear machines and rubber machines for industrial application. They supply machine for their customer such as Pou Chen Corporation (2008), Feng Tay Enterprise Co. . . . , etc. who are the leader in Original Equipment Manufacturer (OEM) of shoe manufacturing. This paper elaborates the guanxi network between Tien Kang, the shoe OEM manufacturer and the “branding” shoe company (the customer of shoe OEM manufacturer). Literature review The guanxi-based network in Taiwanese business world Same as Chinese business culture, in the world of Taiwan business culture, business ties are often coupled with and structured by pre-existing social ties in the form of guanxi networking – one of the most enduring and definitive features of Chinese business culture. Granovetter (1985) mentioned that the coupling of economic and pre-existing social relationship are the social embeddedness of economic transactions. Granovetter emphasizes the fact that economic exchanges do not, and cannot, just happen in a spot market or sociological vacuum. Instead, there is a powerful tendency for economic transaction to be embedded. Guanxi networking is a form of social embeddedness that far from typical among western business firms or persons. The essence of guanxi network is that a person can capitalize on reciprocal obligation and trust implicit in strong social ties to facilitate the exchange of favors and informal influences outside the domain of the original social ties (Tam and Chang, 2004). To establish a social embeddedness in a guanxi network, Taiwanese businessman practice diligently in the tactic of guanxi management. For instance, targeting the important person of a project to establish a good guanxi. They may use many ways to establish/maintain the guanxi such as having dinners together, be family friends, built up a friendship, finding the targeting person’s interest and cope with . . . , etc. One important key in establish this special guanxi is the selected person must possesses the similar “key” which similar charaterics or similar view, interesting or similar prospect. However, this guanxi network must built with a clear sense of group identity and relatedless. A company has to evaluate own resource and objectives in order to ensure the successfulness of guanxi network. Besides, a mutual benefit between each parties have to exist before the development of a guanxi network. The organization culture in most Taiwanese organization Although guanxi network plays an important role in Taiwanese business world, not all guanxi networks are success or are sustainable. In fact, the Taiwanese organization culture influences the formation and the structure of the guanxi network.

Unlike western business world, Taiwanese business man does not look seriously in vision, mission statement, company value, . . . , etc. To them, practice the belief of cheng xin (which the belief of sincerity and trustworthiness) implicitly or explicitly are more important. The belief of cheng xin enforces every deal that most Taiwanese business men make. These are in the same way as winemaking or friendship building. The longer the fermentation period, the mellow the wine is. The culture of “cheng xin” helps create long-term business relationship for Taiwanese business organization, the longer the relationship is, the firmer the trustworthiness is. This kind of trustworthiness is beyond contract, written agreement or sets of policy that support the business transaction in western business world. Briefly, speaking, Taiwanese business world are built from bunches of guanxi network and the foundation of these network are from practicing of the culture – cheng xin. Without cheng xin, the guanxi network is fragile and failed to lasting long. The transaction cost theory Transaction cost theory was developed by Coase (1960) as part of a lecture given to students at the School of Economics and Commerce in Dundee, Scotland, then turned into a paper titled, “The nature of the firm.” The core notion of the transaction cost theory is: when a company tries to determine whether to outsource or to produce goods or services on its own, market prices are not the sole factor. There are also significant transaction, search, contracting, and coordination costs. Those costs frequently determine whether a company uses internal or external resources for products or services. This is the essence of the make-vs-buy decision. Coase indicated that the essence of the transaction cost enables the emerging of firms, the boundaries between firms and the market and the specific structured of each organization as well as the interplay of formal and informal relationships. Williamson (1975, 1981, 1985) explores further the Coase’s theory. He emphasizes that the formation of the organization as well as its specific structure is due to the impact of the transaction cost. The transaction cost is the cost which both parties need to pay and has no direct relation with production cost for the purpose of accomplishing certain deal, these includes the timing, money, human resource, risk needed when gathering information, negotiation, contract adapting, and governance. Williamson (1985) argues that two human factors and three environmental factors lead to the arising of the transactions costs. The two human factors are: (1) Bounded rationality: Humans are unlikely to have the abilities or resources to consider every state-contingent outcome associated with a transaction that might arise. (2) Opportunism: Humans will act to further their own self-interests. The three environmental factors are: (1) Uncertainty: Uncertainty exacerbates the problems that arise because of bounded rationality and opportunism. (2) Small numbers trading: If only a small number of players exist in a market-place, a buyer may have difficulty disciplining the up-stream suppliers

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to the transaction since the possibility of withdrawal and use of alternative players in the marketplace becomes small. (3) Asset specificity: The value of an asset may be attached to a particular transaction that it supports. For instance, the supplier who has invested in the asset will incur a loss if the buyer withdraws from the order transaction. The possibility (threat) of this party acting opportunistically leads to the so-called “hold-up” problem. In addition, there are another two factors affects the transaction cost: (1) Information asymmetry: The different degree of information on hand will give raise of moral hazard whereas the party who holds more information may deceive another party due to opportunism. (2) Atmosphere: The transaction cost is lower if trustworthiness exits between both parties, the delighted atmosphere can reduce unnecessary cost incurred. On the contrary, if both parties are in confronting positions, the transaction cost is certainly become higher. Consequently, the relationship of the “branding,” shoe OEM manufacturer and shoe machinery manufacturer is tightly and cannot be separated due to the consideration of the transaction cost. The shoe branding will seek for trustworthy supplier and the shoe OEM manufacturer need to depend on qualify machinery manufacturer. This relationship result the collaboration strategy of Tien Kang Co. Ltd and hence create a win-win situation for each parties. Resource-based view While TCT focuses on the costs associated with conducting exchanges between two separable entities, the resources based view concentrates on those factors that enable firms to gain a competitive advantage. Its proponents (Barney, 1991; Mata et al., 1995) observe that some companies appear to earn sustained, abnormal returns. They argue this outcome arises because they have access to key resources (Barney, 1991). These strategic resources share four criteria. They are valuable, rare, in-imitable, and non-substitutable. These four characteristics in combination enable a firm to protect a competitive advantage. Unless the resource is valuable, competitive advantage will not arise. By definition, valuable resources generate high returns. If the resource is not rare, many competitors can obtain it. Thus, the advantages obtained through using the resource cannot be sustained (Aubert and Weber, 2001). Relationship-specific investment Williamson (1981) defined relationship-specific investment (RSI) is the specific resource that the transactional partner has to invest in order to maintain the relationship with its exchange partner. The purpose of the RSI is to restrict the exchange partner in switching the cooperation associate easily due to the specific investment on the relationship that the investor has input and hence reduce the contractual hazards. Specifically, the economic value of RSI depends on the continuity

of the transactional relationship with the exchange partner. A firm that makes such investments will enhance the relevancy from the exchange partner on its transactional partner, and thus enter into a subordinate bargaining position. For instance, in the business context of international outsourcing, an OEM supplier typically makes both tangible and intangible investments in tools, equipment, operating procedures, and systems that are specialized to the requirements of a particular buyer (Bensaou and Anderson, 1999; Stump and Heide, 1996; Zaheer and Venkatraman, 1995). OEM suppliers provide manufacturing services according to OEM buyers’ (brand) technical specifications or performance requirements of the components. These suppliers also design their manufacturing equipment and business processes for particular buyers in order to respond rapidly to their clients’ demands (Kang et al., 2007). OEM industry in Taiwan OEM, short for “original equipment manufacture,” is “the buyer licenses products or components from another company and sells the products or components with the purchasing company’s name or logo on them (usually, but not always as part of a product), and resells the product through own market in order to gain more added value (Hobday, 2001). Simplified speaking, OEM is the manufacturer conduct the production process according to sub-contracting relationship with its vendor. Normally, the vendor will transfer its technology to the OEM manufacturer as well as conduct education and training to the OEM manufacturer. The industrial development of Taiwan starts from exporting of finishing material from mass manufacturing. In the year 1960, the cheaper labor from Taiwan was tie with the capital, technical, imported accessories, and semi-finished goods from advanced country to conduct machinery and assembly operation. The finished goods are sold to the advanced country like the USA, Europe, . . . , etc. with foreign country’s branding. After 1980, follow the accumulation of capital, technical experiences, Taiwan industry has transformed to OEM model, like the OEM of light bulb for Christmas tree, shoes, and further information technology products. This has helped Taiwan earn a name of “the kingdom of OEM.” Case study: and overview The background: Tien Kang Co. Ltd Tien Kang Plastic Machinery Co., Ltd, founded in 1982, is a plastic machinery company based in Taiwan. They develop various types of machines for different applications such as thermorubber/ Polyvinyl chloride shoe making machines, ethylene vinyl acetate (EVA) injection/compression machines, rubber injection/compression machines, solid silicon injection machine, TR injection/extrusion machines, thermo-polyurethane (TPU) injection machine and miscellaneous customized machines. Besides, Tien Kang also develop custom made machine which in assisting their customer in designing machines that meet the criterions of production according to the characteristics of new product innovated by customer. Like other small medium size firms in Taiwan, Tien Kang possesses a vigorous and enterprising spirit since the development stage of the company. The team is prepared

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to work hard for their money and not afraid to take great risks to expand their operations. As a result, Tien Kang has developed herself from a small business into large enterprises. In year 1993, Tien Kang obtained “excellence product prize” and “outstanding technical design prize” from Taiwan government. Year 1995, they achieved ISO 9002 Quality System certified by Germany North Rhine Westphalian state-Technischer ¨ Uberwachungsverein (RW-TUV). In addition to serving its home market, Tien Kang has been exporting for more than 100 countries such as China, Africa, Mexico, North America, . . . , etc. In facing the competition from China, Tien Kang has determined them in seting up its subsidiary in Suzhou Ind. Park, China, known as Tien Yu Precision Industrial Co., Ltd, to be the base of market extension overseas. At the present, their primary product is their EVA injection machines that are capable of producing the ever popular “Croc” brand PVC shoes, and other lesser known brand shoes of the same style. Around the world, about 40,000,000 pairs of these shoes are made. Owing to the popularity of these shoes, Tien Kang has found it very worthwhile to introduce a line of machines that can help production factories to increase production capability, and reduce time, effort, and resources required to produce this product. Their machines are capable of producing a two-tone color way, and dual density rubber in one injection molding process. These capabilities help to enhance not only the product line of the factory and brand, but also reduce production time on the products. To date, Tien Kang has sold over 1,000 of their machines worldwide. Table I shows the history background of Tien Kang. The shoe industry Taiwan shoe industry began in the year of 1960. At the time, many shoes factory was set up to satisfy the demand from home market. At the same time, the buyer from America come to Taiwan seek for plastic sandals and slippers, yields more established of shoe factory to supply overseas’ order. Henceforth, the abundance of labor, lower wages and higher stuff of the labor, Taiwan has received widespread public praise and supply the flood of order for many global shoes branding company. Up to 1971, Taiwan has become the largest exporting country for shoes. However, after 1988, because of the rise of China, and the revaluation of New Taiwan Dollars, the raising of the land and wages, many of the shoe factories started move to South East Asia and China. On the other hand, retain the research and development centre in Taiwan. Although under the threaten from the Mainland China, today, one of the world leader shoe factory still belongs to Taiwan Pou Chen Corporation. The Group manufactures athletic and casual footwear on an OEM/Original Design Manufacturer basis for major global brand such as Nike (2008), Adidas (2008), Asics, Reebok (2008a, b), Puma, New Balance, Merrell, Timberland, Converse, and Salomon. For the account of Taiwan’s professionalism in shoe making and shoe design, many major brands such as Nike and Reebok has set up a research and development central in central Taiwan and cooperate with Pou Chen Corporation, Feng Tay Enterprise Co., DaSheng Corporation as well. These have shown that, from making straw shoes to producing for the world, Taiwan’s footwear industry already occupies a crucial role in the global market arena.

1982 1983 1984 1986 1988 1989 1990 1992 1993 1994 1995 1997 1998 1999 2000

2001 2002

2003

2004

Established Tien Kang Plastic Machinery Co., Ltd Began producing TK-715-2C horizontal injection molding machine Developed TK-970 single color sole injection molding machine Developed TK-970-2C two color sole injection molding machine and TK-980-2C 2 color full Plastic shoe injection molding machine Developed TK610 & TK-996 one color sport shoe direct injection molding machine Developed TK-996-2C two color sport shoe direct injection molding machine Developed TK-996-3C three color sport shoe direct injection molding machine Registered in “List of Leading Firms” in Taiwan Established management information system Developed TK-996-4C four color sport shoe direct injection molding machine Adopted CIS, registered Adopted CIS, registered trademark, adopted CAD/CAM computer software Obtained “Excellence product prize” and “Outstanding technical design prize” Executed top quality climbing plan with China productivity center Achieved ISO 9002 quality system certified by Germany RW-TUV Shifted factory to a larger place to increase productivity Developed TK-628 EVA injection molding machine Developed R-300 rubber injection molding machine Tien Kang in Taiwan and Wintech in Italy started alliance of technology and cooperation Tien Kang/Wintech: first inventor of new generation of EVA injection molding machine. First announcement of new generation of EVA injection molding machine was made in Europe Simac 2000, and immediately machines were sold to the major shoe factories that produced shoes for big brands Achieved CE certificate for rubber injection molding machine series in accordance with the regulation of European security standard Invented “synchronizing opening device” for EVA stacked mold and “Color master batch injection system” and patented the designs in many countries Developed TK-320-2C two color rubber injection molding machine Developed TK-206/205 EVA Mylon/EMEVA molding machines Developed TK-107 and TK-207 arch type of EVA injection molding machines Developed TK-601 one color and two color TR injection molding machine Developed R30 solid silicon injection molding machine ISO 9001 quality system certified by Germany RW-TUV Developed TK-602-2C two color TPU extrusion/injection mold machine Expanded factory in Taiwan in double size (about 12,000 square meter) to cover high demand of mass production Established branch factory in China (Suzhou near Shanghai) about 65,000 square meter Developed TK-330 Rubber compression molding machine

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Table I. Tien Kang history background

The collaborative strategy between Tien Kang, OEM manufacturer and branding Overview Collaboration is where two or more parties work together towards a shared objective or goal (Mulder, 2005). This activity is about relationship, value resource, organization culture, management, and business goals and value. Collaboration must view as more than a technology deployment to derive value from collaboration investments. As its original meaning, collaboration stands for cooperation, teamwork, and combined effort. It is a strategy to maximize company profits through working together with similar or different businesses. Cooperative business between companies has begun in earnest since 2001 and has been praised as

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the best measure to boost profits of each company involved in it Parkhe (1993) defined strategic collaboration as voluntary collaboration agreement between businesses which is characterized by the unstable nature of business under dubious environments ( Jang, 2006). The collaboration between Tien Kang, the OEM manufacturer and the “branding” is in co-product development. This refers to the development of a new product with a unique attraction by function, looks or designs. The relationship between Tien Kang, the OEM manufacturer and the branding are shown in Figure 1. The branding R&D HQ teams focus on the development of revolutionary footwear, apparel, and hardware technologies. To solidify the brand’s position in technology and innovation, they are responsible for developing cutting-edge technologies and concepts in all product categories, creates products that drive the success of the brand, to give consumers exciting and relevant sports experiences. On account of these, continuously creating innovative state-of-the-art footwear becomes an essential. Country manager of the branding focus on different market need on due to the diversity in culture, life style, . . . , etc. of different market place. Hence, the creativity concept from the R&D team has to evaluate by the country manager to ensure the workability of the concept. The OEM manufacturer produce the product grounds on the specifications and requirements from the “branding.” The prerequisite condition is the OEM manufacturer needs a machine that is capable to produce the requested items.
6. New ideas/design accepted Reebok Nike Addidas Puma Etc... 7. Request sample

3. New ideas/designs co-ordinate

UK The country office of the 'branding'

The shoe branding

USA

The OEM manufacturer

VIETNAM

TAIWAN

4. New ideas/designs accepted

2. New ideas/designs proposed

ETC...

Figure 1. The collaborative model between Tien Kang, the OEM manufacturer and the branding

Tien kang-the shoe machinery manufacturer 5. New ideas/designs submitted

1. Sharing new ideas/designs 8.Order machine

Tien Kang as a machinery supplier plays a vital role in this circumstances. This situation enforce the need of the collaboration of the three parties – Tien Kang, the “branding” and the OEM manufacturer. The practices of this collaborative strategy between the three parties are involving by the following steps: (1) An innovative concept submission from Tien Kang to the “Branding’s R&D center. These concepts may include lightweight cushioning, radial curve contour for consistent medial contact, maintains propulsion and efficiency . . . , etc. (2) Information sharing with the OEM manufacturer. The concepts that submitted to the R&D centre will have to discuss with the OEM manufacturer. The feasible analysis, conceptual design, embodiment design of the concepts needs to open and sharing with the OEM manufacturer. Furthermore, a price commitment, lead time, the durability of the machine is also crucial to bring into the discussion. The contact is not unilateral, it is often multilateral. The OEM manufacturer might go further to discuss with the “branding” about the workability of the submitted concept and providing a cost analysis. (3) The R&D manager will propose the concept to the country manager for them to evaluate. At the same time, the R&D manager will offer the favorable OEM manufacture or the machinery manufacturer. If the concept is viable, the R&D manager will direct the OEM manufacturer and start proceed to product development process. (4) Upon receiving the request from the “branding,” the OEM manufacturer will move forward to procure the machine and start the production development procedure. These steps are not necessary to be sequential. Tien Kang may submit the concept to the OEM manufacturer instead of the “branding.” This signifies that the OEM manufacturer will be the one persuade the “branding” about the concept. Key success factor of the strategy This collaboration strategy takes about 40 percent on the sales volume of Tien Kang annually. There are many reasons uphold the successfulness of this collaboration strategy. First at all, the long-term business relationship between the “branding” with the OEM manufacturer and the OEM manufacturer with Tien Kang has been built up rigidly which ground on the transaction cost theory, and the specific relationship that each parties has invested. Lack of one from the above will result unanticipated loss either in product stability or higher transaction costs each parties need to bear. Moreover, the guanxi-based network and the culture on chengxin that Tien Kang and the OEM manufacturer has built up and practiced gain the creditability in the market therefore yield the branding hesitate to switch the value chain easily. Second, the robust R&D capabilities and rich manufacturing experience of Tien Kang are the crucial point for the strategy to be success. Tien Kang has accumulated more than 25 years technical experience in machinery manufacturing, this rich experience is not easy to learn/copy by the competitors.

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The international cooperation with foreign enterprise has enhanced Tien Kang’s manufacturing capabilities. For instances, Tien Kang started alliance of technology and cooperation with Wintech in Italy in order to invent new generation of Eva injection molding machines during 1999. Wintech Italy is the professional in injection machine field. Company has accumulated a long-term design concept, and in consideration of the production requirements of the modern footwear industry, the company has also made available the EVA injection machine with diversified operation flexibility and efficient production methods for investors, and manufacturers. The cooperation not only inherits the technology from Italy but also obtain the reputation/brand name from Wintech. It is very much different with “duplicate” the technology but is a kind of alliance in technology as well as inherits the reputation from alliance. The alliance with Wintech Italy has enabled Tien Kang in: . undertaking technology skills, become professional in Eva injection molding machine;
. .

inherit the reputation from the alliance, develop creditability in the market; and stabilize its trust-based network relationship.

Third, the professional sales and marketing team of Tien Kang places a vital role in the strategy too. Tien Kang is a company that deals with more than 100 countries. A lot of empirical evidence has confirmed the correlation between product sales and company performance. Marketing and sales are one of the most important components of a business’s survival in the market. There is no denying the fact that the sales and marketing team has contributed significantly to the achievement of Tien Kang. Within all, the characteristic of the team member becomes a vital reason compose the strong team:
. . .

Strong interpersonal and negotiation skills. Strong cross-culture negotiation skills. Good relationship maintenance skills from the sales team with global agent and customers. Aggressively participation of international trade show. Trade shows represent a significant opportunity to enhance brand and product visibility, promote new and existing products, generate leads and drive sales. In addition, show participation enables Tien Kang to learn about industry trends, gain competitor insights, make key industry contacts, and further solidify relationships with current customers. Through international fair, Tien Kang was able to make known by the industry and at the same time, collecting prospective customer’s data and gathering information of the competitors. Offer a personal touch and unrivalled customer service, one-stop contact point to help customer get immediate assistance.

.

.

The competitive advantage raise from the strategy Although the collaboration strategy holds only 40 percent of the annual sales for Tien Kang, the competitive advantage extend from the strategy are actually benefit Tien Kang to enhance its market share. The strategy introduces a top-down brand synergy for Tien Kang. Top down brand management involves marketing activities that capture the “big picture” and recognize the possible synergies across products and markets to brand product accordingly. For example, when the “branding” adopt the proposal that Tien Kang submitting and produce the product successfully, a business-to-business branding hence created. Tien Kang will be more easily to persuade with other buyer from any country since the “branding” has tested the new machine and result with positive outcome. Such goodwill with “branding” is thought to provide valuable re-assurance to other customers who may be putting their company’s fate – and perhaps their own careers – on the line. These strong competitive advantages cannot be duplicated easily since lasting impressions in the minds of product experience is intangible. In short, the collaborative strategy enhances valuable pieces of legal property that capable of influencing consumer behavior and providing the security of sustained future revenue for Tien Kang. In addition, the effect of rising oil price, globalization financial crisis force Tien Kang realizes the need of changing their marketing strategies. Traditionally, Tien Kang will have to spend a lot of their money for advertising and exhibition participation to introduce their new products, the outcome is however unknown. No one can guarantee whether the new product will be acceptable by the market. Under such unstable era, shooting the bullets carelessly is obviously not a wise option. By the integration of the collaboration strategy can aids Tien Kang use the bullets in the right place (develop the right product customer need) and without incurred much of marketing tools that cost a lot since the collaboration with “branding” will enforce a goodwill for Tien Kang that can bring more confidence on the new product for customer. Conclusion Carlisle and Parkers (1989) mentioned that:
If customer and supplier firms can recognize their common ground in a share interest in capturing the consumer sales which actually nourishes them both, it should be possible for them to work creatively and effectively together to capture that sale for “their” product.

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The collaboration strategy has enhanced the sales volume for the OEM manufacturer as well as Tien Kang. The OEM manufacturer utilizes Tien Kang’s R&D capabilities to capturing consumer sales. Tien Kang realize its value resource and competitive advantage, bring into the collaboration strategy hence helps creating business to business branding therefore lead to greater selling opportunities and more profitable relationships. Moreover, the “branding” has benefited from the innovation ideas and stability, superior quality that both OEM manufacturer and Tien Kang has provided. In summary, these win-win situations prove that the collaboration strategy is success. Many efforts and factors contribute this successfulness. Although the outstanding R&D capabilities and the strong marketing team of Tien Kang has been the significant factors, the long-term guanxi-based network that the three parties has built, the Cheng xin organization culture that Tien Kang has been practiced, and the

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consideration of the transaction cost that both “branding” and the OEM manufacturer matter as well as the specific relationship that Tien Kang invested are also cannot to be disregard. Lack of any one factor from the above, the favorable outcome of the strategy will become an unknown question. Scholar research in Chinese Business World is always challenge task especially in western due to western notion of Chinese bureaucratization. This paper provides an interesting practical collaborative structure and it is especially distinctive from western notion.
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Tam, T. and Chang, L. (2004), “The institutional making of efficiency and profit motive in a non-profit sector: organizational growth and the structure of entrepreneurship in the Taiwanese Hospital Industry”, paper presented at University of California Pacific Rim Research Conference on A New Breed of Chinese Entrepreneurs’s Culture, Organizational Imperatives, and Globalization, May 21-2, Hong Kong. Tien Kang Plastic Machinery Co. Ltd (2008), Company Profile, available at: www.tienkang.com. tw/en/index-about.htm (accessed October 2, 2008). Williamson, O. (1985), The Economic Institutions of Capitalism, The Free Press, New York, NY. Williamson, O.E. (1975), Markets and Hierarchies: Analysis and Antitrust Implications, The Free Press, New York, NY. Williamson, O.E. (1981), “The economics of organizations: the transaction cost marketing review 445 approach”, American Journal of Sociology, Vol. 87 No. 3, pp. 548-77. Zaheer, A. and Venkatraman, N. (1995), “Relational governance as an interorganizational strategy: an empirical test of the role of trust in economic exchange”, Strategic Management Journal, Vol. 19 No. 5, pp. 373-92. Further reading Ashkenas, R.N. (1990), “A new paradigm for customer and supplier management”, Human Resource Management (1986-1998), Vol. 29 No. 4, ABI/INFORM Archive complete, p. 4. Database of Taiwan Institute of Economic Research (2008), available at: http://tie.tier.org.tw/tie/ index.jsp (accessed October 2, 2008). Department of Investment Services, Ministry of Economic Affairs (2008), “The analyses and investment opportunities in machinery industry”, available at: www.taiwantrade.com.tw/ MAIN/resources/MAIN/EN/ATTACH/industry/20Machinery_EN.pdf (accessed October 12, 2008). Footwear and Recreation Technology Research Institute (2008), available at: www.shoenet.org. tw/frthome.asp (accessed October 2, 2008). Footwear and Recreation Technology Research Institute (2008), Industry News, available at: www.shoenet.org.tw/industrynews/industryshow.asp?repno¼551 (accessed October 2, 2008). Lajilia, K. and Joseph, J.T. (2006), “Revisiting agency and transaction costs theory predictions on vertical financial ownership and contracting: electronic integration as an organizational form choice”, Managerial and Decision Economics, Vol. 27, pp. 573-86. Taiwan Footwear Manufacturer Association (2008), available at: www.footwear-assn.org.tw/ english/index.asp (accessed October 2, 2008). The Leather Global Value Chain & the World Leather Footwear Market (2008), available at: www.factbook.net/leather_patterns.php (accessed October 2, 2008). The Story of Taiwan – Economy (2008), available at: www.taiwan.com.au/Polieco/History/ROC/ report04.html (accessed October 2, 2008). Thun, E. (n.d.), “Growing up and moving out: globalization of “Traditional” industries in Taiwan”, MIT IPC Globalization Working Paper No. 00-004, Massachusetts Institute of Technology, Industrial Performance Center, Cambridge, MA. About the authors Tzong-Ru ( Jiun-Shen) Lee is a Professor in the Marketing Department and the Institute of Electronic Commerce in the National Chung Hsing University in Taiwan. He received his BS and

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MS degrees in National Chiao-Tung University in Taiwan. He received his PhD degree from Texas A&M University, Texas, USA. He served at Texas Instruments in Dallas before he joined academia. His research mainly focuses on marketing, supply chain management, application of electronic commerce, and management science. He publishes in journals such as International Journal of Physical Distribution & Logistics Management, and Simulation Practice and Theory. He has also published four joint books. At present, he is the Associate Editor of the International Journal of Customer Relationship Management (IJECRM). Tzong-Ru ( Jiun-Shen) Lee is the corresponding author and can be contacted at: trlee@dragon.nchu.edu.tw; trlee@nchu.edu.tw Toong-Chinn Venice Koh is pursuing her MBA degree from the Institute of Electronic Commerce at National Chung Hsing University in Taiwan. Her current interest focuses on electronic commerce, finance, marketing.

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