Cummins: The Game on the Chinese Market

The *New York Times* on November 13, 2006, highlighted the traditional "iron shovel" enterprise, Cummins, as it celebrated its 90th anniversary. The article described Cummins as "the Mark Twain of the engine industry," noting that despite repeated predictions of its decline over the past two decades, the company has not only survived but thrived. In fact, its performance has improved significantly. This nearly 90-year-old machinery manufacturer stands out as the only company globally with leading patented technology across five key engine systems and is the sole independent diesel engine company in the world. In 2005, it was ranked among the top 50 U.S. companies by *American Business Weekly*. Since 2003, its stock price has nearly doubled, a testament to its solid internal strength and strategic vision. Cummins’ journey in China began in 1975 when its former chairman visited with a U.S. delegation. By 1979, it became one of the first foreign companies to establish operations in China. Over the past three decades, the company has navigated numerous challenges. According to Shi Yuan, East Asia’s human resources director, the secret to Cummins’ success in China lies in its people. She shared how many headhunters struggled to recruit employees from Cummins, often commenting on the high loyalty and satisfaction of its workforce. This reflects the company’s strong culture and consistent global employment philosophy, which plays a crucial role in its Chinese strategy. Before 1996, Cummins operated in China as a representative office without full personnel autonomy. That year, it established an after-sales service center, followed by the creation of an investment company in 1997. Its strategic approach in China dates back to the early 1980s, starting with technology partnerships like Chongqing Engine Factory and Dongfeng Motor. It later expanded into smaller engines and parts production. Once its strategy was set, Cummins officially launched its operations in China. As Shi Yuan noted, the company's human resources strategy is closely aligned with its business goals. In 1998, during the Three Gorges Package boat trip, senior leaders outlined the company’s development plan for 1998–2005, involving all employees in strategic planning. This approach helped build confidence and direction within the team. By 2004, Cummins had already achieved its goal of $1 billion in sales in China, one year ahead of schedule. Today, the company continues to implement its 2004–2010 strategic goals, aiming to recoup previous investments. Despite the pressure, Cummins maintains a well-organized approach, ensuring each step is executed effectively. Cummins’ global success is built on people. In China, the company values talent development and has a long tradition of promoting internal candidates. Shi Yuan herself joined Cummins in 1995 without prior HR experience but was given opportunities to grow. She was later sent to the U.S. for international HR training, gaining valuable cross-cultural insights. Cummins also invests heavily in sending employees abroad for training, reinforcing its global talent strategy. A key part of Cummins’ approach is its “localized human strategy.” When it first entered China in 1996, it hired many local employees but initially relied on expatriate managers. Over time, it focused on developing Chinese leadership while still maintaining a balance of foreign expertise. In many cases, Chinese managers lead foreign teams, ensuring a deep understanding of the local market while retaining technical excellence from the U.S. Steve Chapman, a U.S.-based vice president, is well-known in China for his unique self-introduction in Chinese, highlighting Cummins’ cultural appreciation. The company also emphasizes integrity and transparency in hiring, conducting thorough background checks and requiring employees to complete ethical compliance reviews annually. Cummins promotes diversity and inclusion, both globally and in China. For instance, gender balance is a key consideration in recruitment and promotions. While challenging, this policy has helped the company maintain fairness and openness. In addition to its business success, Cummins is committed to giving back to society. It supports education through scholarships for underprivileged female students in mechanical engineering and organizes community events like charity auctions and book donations. Employees participate in these initiatives, fostering a sense of social responsibility. Cummins also encourages employee engagement through activities like the Social Club, which organizes sports and cultural events. These programs help develop leadership and teamwork skills, offering employees additional career growth opportunities. While Cummins offers a vibrant work environment, it also maintains strict performance management. Quarterly evaluations and a “last-out” system ensure accountability. Employees spend significant time on assessments, followed by detailed interviews to review progress and future development. Shi Yuan, who has worked at Cummins for over a decade, describes the company’s approach in China as strategic and forward-thinking. From large engines to small components, Cummins has carefully planned its expansion. Every move considers not just the market but also the development of Chinese employees and the country’s future. In summary, Cummins’ success in China stems from its strong leadership, focus on talent, and commitment to both business and social responsibility. Its localized strategies, inclusive culture, and rigorous performance systems have made it a leader in the global engine industry.

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