...Joint ventures with Chinese companies Some multinational companies have opened subsidiaries in China through joint ventures with Chinese companies. Not all of them are successful though; there are advantages and disadvantages of such joint ventures. In the last years, China has emerged as “a worldwide economic powerhouse”[1], becoming more and more attractive as a joint venture partner for multinational companies in order to gain access to the Chinese market. Foreign companies can profit from Chinese knowledge of the Chinese market, their contacts to important government institutions, their knowledge of the Chinese way to do business and Chinese regional characteristics. Cheap production opportunities and an already existing team of workers can also be a huge advantage for them. In addition to that, the companies can save money and reduce their risks should a particular project fail through resource and capital sharing.[2] Especially advances in technology are really expensive, therefore pooling money and personnel can cut costs significantly. The German carmaker Daimler AG for example has recently been involved in a joint venture with China’s BYD Co Ltd to produce electric cars. That way, they are sharing the high costs of producing such a car.[3] The foreign business partner usually contributes to the cooperation with know-how about production procedures and techniques as well as excellent distribution strategies and managerial expertise. Moreover, joint ventures give...
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...Background Joint Ventures Agreement Sheraton Asia Pacific and Chinese Ministry of Foreign Affairs In August 1966, a joint venture was shaped between Sheraton Asia Pacific and Chinese Ministry of Foreign Affairs. Basically, Sheraton Asia Pacific Corporation is a Subsidiary of ITT Sheraton. Andrew Wilson was appointed by Sheraton, an Australian by origin, for the Deputy General Manager position, along with Clara Chan, a Singaporean Chinese, in the Chief Auditor position. These two higher officials were appointed in 1996 only after the regulatory authorities had given formal approval to the project. Agreement Launching Ceremony Incident At the very beginning, a lunch was organized by Yang Zhao, who happens to be the General Manager of the Beijing International Club Corporation. He was also the appointee of the Chinese Ministry of Foreign Affairs. During the lunch session, Clara Chan received her first lesson in JV management and experienced what it is like to be in a venture with the Chinese. Yang Zhao gave a rather subtle complement to Chan by saying that she belonged to the Chinese background and due to which she will be culturally in sync to help Sheraton and Chinese Ministry of Foreign Affairs to establish a good understanding and a better network of communication between these two companies. Chinese Economy: At a Glance Chinese government is tried to make a favorable market condition for the foreign investor to attract them to invest in China. The result to...
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...Danone v. Wahaha: Lessons for Joint Ventures in China Steven M. Dickinson Harris Moure PLLC www.harrismoure.com Danone Group and its partner, Wahaha Group Company, are shareholders in a joint venture company that is the largest beverage company in China. A recent dispute between the partners now threatens to wreck the joint venture. What lessons can be learned from this dispute for investors considering new joint ventures in China? Disputes such as this are not inevitable in China. They can be avoided by following certain basic rules. Many of the most important rules were violated in this case. As a result, the problems that have arisen were almost certain to occur. I. The Facts A. Formation of the Joint Venture Company The Wahaha Joint Venture (“JV”) was formed in February, 1996. At the start, there were three participants in the JV. (1) Hangzhou Wahaha Food Group Co. Ltd. (“Wahaha Group”), led by its chairman Mr. Zong Qinghou. (2) Danone Group, a French corporation (“Danone”). (3) Bai Fu Qin Ltd., a Hong Kong corporation (“Baifu”). Danone and Baifu did not invest directly in the JV. Instead, Danone and Baifu formed Jin Jia Investment Co. Ltd., a Singapore corporation (“Jinjia”). Upon the formation of the JV, Wahaha Group owned 49% of the shares of the JV and Jinjia owned 51% of the shares of the JV. This structure led to immediate misunderstandings between the participants. From the Wahaha Group’s point of view, the division of ownership was 49% Wahaha Group, 25...
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...Advantages of Joint Ventures in China October 5, 2011 Abstract The paper analyzes the advantages of Joint Ventures in China. The opening up of China’s economy to trade and foreign direct investment has been an important component in the growth of China, particularly in industry. Joint ventures in China produce advantages for the partners. China is the world’s largest and most rapidly growing developing country, it is very important to learn the advantages of Joint ventures in China. I will discuss two types of Joint Ventures and how to establish Joint Ventures (JV). Joint ventures include Equity Joint Ventures (EJV) and Contractual Joint Ventures (CJV). Then, I will introduce why foreign investors should invest in China. There are three reasons for this. And in the end, I will emphasize the advantages of joint ventures in China. There are five advantages about it, which all create benefits for partners. So China is a worthy nation to invest. Keywords: advantages, joint ventures, China, partners, invest, investment Outline Thesis： Joint ventures in China produce advantages for the partners. Because China is the world’s largest and most rapidly growing developing country, it is very important to learn the advantages of Joint ventures in China. I. Background about the development of joint ventures in China II. Two types of joint ventures A. Equity Joint Ventures (EJV) B. Contractual Joint Ventures (CJV) III. Why...
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...has decided to partner with a Chinese company and begin a joint venture. They chose a Chinese company because they understand that Chinas market is offering a vast opportunity of growth. As they have realized, “It is predicted that by the year 2025, Chinas economy will be by far the largest in the world.” The company has chosen Motosuzhou, a large Chinese enterprise of the Beijing municipal government. The American company formed a team composed of three members who went to the local establishments of the company in order to meet the Chinese managers with the goal of reaching an agreement for their company. The differences in doing business between both companies were rapidly obvious. For example, Electrowide’s team members were fascinated that the Chinese team members were more interested in their own lives and families than in discussing the projected joint venture. Negotiations continued for eight weeks. The American team had a contract made up. And when meeting with the Chinese team they made a mistake by presenting the contract almost immediately. The Chinese managers took that action as a fault and that it would destroy their future business relationship. Unfortunately, due to the differences in the way of doing business between the American company and the Chinese corporation, the joint venture failed. The main problem was that Electrowide’s team failed to respect the Chinese culture and understand Gaunxi. Instead of respecting the Chinese...
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...multinational foreign company entered into a joint-venture contract with a local Chinese beverage company named Wahaha in order to better access to Chinese market. The form of the joint venture was a great success at the beginning stage, with both parties gained substantial benefits from the relationship. However, in 2001, conflict arise when Wahaha Group created a series of Non-joint venture companies that sold the same product as the joint venture and use the Wahaha trademark. Since then, a long time dispute continued around the ownership of the “Wahaha” trademark, the rationality of the existence of non-joint ventures and the non-compete issue. Several lawsuits were carried but all ended in Wahaha’s favor. Eventually, Danone relinquish the claims and secede from the joint venture by selling its 51 percent share to the business’s Chinese partners. Main body With a global standing and desire for international expansion, Danone entered the Chinese market in the late 1980s. Compared with many developed countries where markets almost reach saturation, China has a promising market with cheap labor which provide a good opportunity for Danone to further develop. At early stage, Danone entered China through forming a joint venture with the local enterprise Wahaha. There are three main reasons for why Danone use the joint venture mode instead of using other modes to enter China. First, Danone can benefit a lot from Wahaha’s knowledge of local Chinese market and conditions. The premise for successfully...
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...Caroline MORAND 8 October 2010 International Trade Management BUAd 401 Individual Class Assignment #1 DANONE’s entry in China The article. Danone's quick expansion in China By Shangguan Zhoudong (chinadaily.com.cn) 2007-06-15 Brief introduction Group Danone is one of the most famous food and beverage groups in the world with its headquarters in Paris and 90,000 staff members worldwide. Group Danone is a Global Fortune 500 company with a long history and large size. Danone develops its business across over 120 countries focusing on three core categories: fresh dairy products, biscuits (in which it ranks second worldwide) and beverages (in which it ranks first worldwide). Founded in 1966, Danone has followed an active expansion strategy throughout the world since the 1990s. In less than 40 years, Danone has become a giant of the food industry, owning many famous international brands such as Danone, LU, Evian, and more. Since the end of the 1980s, Danone began to develop the production and business in China extensively by investing in building factories. Now, the main business of Danone in China concerns yogurt, biscuits and beverages. Danone has 70 factories in China, including Danone Biscuits (in Shanghai, Suzhou and Jiangmen), Robust (in Guangzhou), Wahaha (in Hang Zhou), and Health (in Shenzhen). The products are not only sold in China, but also exported to different countries. Four brands under Danone Danone: the leading brand worldwide...
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...(Successful of GM joint ventures in China) In 1997, General Motors establish a joint venture with the state-owned Shanghai Automotive Industry Corp (SAIC). GM investment value was at $1.6 billion. At the time, the Chinese market was very small; fewer than 400,000 cars sold per year. However, GM expects an expansion in Chinese automotive industry. Not only lack of local knowledge and connection in China, but the Chinese regulation forced GM to establish a joint venture with SAIC (SGM). There were only GM and Volkswagen in the Chinese market. See table 1 10 years later in 2007, GM and SAIC is able to sell more than 900,000 cars and light trucks per year, exceed GM expectation 18 percent increase over 2006. In addition, Chinese market grew to be about 8 millions cars per year, second largest car market in the world. The major hit is the mini-van cost $3,700, has .8 Liter engine, top speed of 60 mph, and weight less than 2,200 lbs. 460,000 mini-van sold in 2007. After the US economic crisis in 2008, GM sold a 1 percent stake in SGM to SAIC due the need to raise capital. In 2009, about 13.8 million cars sold in China, China become the largest automobile market in the world. SGM sold 1.8 million vehicles in 2009. In 2010, GM sold 2.35 million cars from total car sold in China grows to 18 million cars. China becomes the largest market for GM; surpass the US sales of 2.2 million cars. See table 2, 3 and 4. Case Discussion Questions 1. GM entered the Chinese market at a time when...
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...signed an agreement with the Hangzhou Wahaha Group in 1996, a Chinese beverage company, to set up a series of joint ventures in China. The partnership was established to market products under the Wahaha brand name. Ultimately, the agreement resulted into thirty-nine joint ventures. Those joint ventures were hugely profitable as the Wahaha brand became a household name in China. In spite of these successes, the relationship started to deteriorate. After years of court battles, Danone finally pulled out of the JV and ended this partnership with Wahaha. Based on the case study, this essay will firstly analyze Danone’s market entry mode and limitations of this mode. Subsequently, this essay will discuss contributions of both Wahaha and Danone in this relationship. Finally, this essay will present reasons for the Danone-Wahaha dispute and lessons derived from this dispute. Danone’s market entry mode Danone entered the Chinese market selling consumer drink products, including fruit juice, dairy products and bottled water, all with Chinese joint venture partners who were market leading brands in China. A joint venture is a special type of strategic alliance, which requires establishing a firm jointly owned by two or more otherwise independent firms (Hill, Wee and Udayasankar, 2012). Danone and Wahaha in this case are the two strategic partners to establish joint ventures together. Danone chose to create joint ventures in china since this entry mode can allow it to effectively tackle...
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...Possible topic : How Joint Venture has acted as a successful navigation in China <All about GM> * General Motors Company, commonly known as GM, is an American multinational corporation headquartered in Detroit, Michigan, that designs, manufactures, markets and distributes vehicles and vehicle parts and sells financial services. , * General Motors acts in most countries outside the U.S. via wholly owned subsidiaries, but operates in China through 10 joint ventures, including Shanghai GM, SAIC-GM-Wuling and FAW-GM. * The company manufactures most of its China market vehicles locally. Shanghai GM, a joint venture with the Chinese company SAIC Motor, was created on March 25, 1997. The Shanghai GM plant was officially opened on December 15, 1998, when the first Chinese-built Buick came off the assembly line. The SAIC-GM-Wuling Automobile joint-venture is also successfully selling microvans under the Wuling brand (34 percent owned by GM). Much of General Motors' recent growth has been in the People's Republic of China, where its sales rose 66.9 percent in 2009, selling 1,830,000 vehicles and accounting for 13.4 percent of the market. (This is what a microvan looks like) * * Buick is strong in China, being led by the Buick Excelle subcompact. The last emperor of China owned a Buick.The Cadillac brand was introduced in China in 2004, starting with exports to China. GM pushed the marketing of the Chevrolet brand in China in 2005 as well, transferring Buick...
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...foreign firms to increase their after-tax returns. For example, General Electric keeps only 30.7 billion of its 85.5 billion in cash reserves in the U.S., while intends to invests more than 1.5 billion in joint ventures with Chinese state-owned companies in “key high-technology sectors”. The purpose of the paper is to present the forms of foreign investment enterprises can be taken in China and the different tax incentives are used to induce foreign investment enterprises, then to analyze their influence on selection of a particular form of FIE. Body China developed one of the biggest market in the world and is attracting more and more global investors to move into China's market. It is necessary for foreign investor to understand all the potential tax costs would be incurred in China before making an investment decision in order to operate business in a most efficient way. Learning the regulation of taxation is the first step for foreign investors who decide to invest in China. The investment forms of FIE in China In China, foreign investment enterprises take four forms which is representative office, equity joint ventures, contractual joint ventures and wholly foreign-owned enterprises. Equity joint venture takes the form of limited liability corporations which mean Chinese and foreign partners jointly invest and manage the operations. There is a 25 percent...
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...Thomas D. Lairson Forthcoming in Wenxian Zhang and Ilan Alon, (eds.) A Guide to the Top 100 Companies in China, Edward Elgar, 2010. Chery Automobile Company Chery Automobile Co. Ltd. (奇瑞汽车股份有限公司) is one of the most important of Chinese automobile manufacturers. Though it remains owned by the local government of Wuhu, and is by no means the very largest of China’s car companies, Chery has been able to compete effectively in a very crowded domestic market and has established a significant position in international markets. This is rather remarkable for a firm founded in 1997 in a very poor province not known for economic innovation. Historical Development By Western standards, Chery is an unusual firm. It is the result of the hybrid nature of many Chinese businesses, combining government ownership and effective and competitive management. Quite simply, Chery exists because of the entrepreneurial efforts of government officials – known as the “Eight Guardians” - in a relatively small Chinese city looking to expand the economic base of their area and spurred on by the dramatic economic growth happening all around them. By the mid-1990s economic reform had led to fifteen years of rapid growth concentrated along the eastern coat of China. A second stage of growth extending these opportunities across the entire nation began in 1993. The Wuhu government, with support from the Anhui provincial government, was in the best position to define a new economic direction for...
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...since the reform began? How does the Chinese government perceive foreign enterprises operating in China? What has been the history of China’s relation with the outside world and how does this history influence its behavior toward foreign firms on Chinese soil? Yes, China is a market economy. China now participates extensively in the world market and mostly state owned but also some private sector companies play a major role in the economy. When China began to resemble a market economy, privatization had not occurred in China on a significant scale. However, since the reform it was relatively easy for them to identify their potential joint-venture partners. The removal of restrictions on investment, relaxation of restrictions on products produced and breakdown of silo meant that potential partners can enter China from any sector. Foreign companies help provide annual double-digit growth rate in the economy and also helped in raising the living standards of the Chinese people. Chinese people are also provided with better quality products and technology. As of now, there are more than 300,000 foreign-owned enterprises have invested in China with more than 25 million employers. Chinese government does not perceive foreign enterprises very positively. Foreign companies doing business in China are generally required to form joint ventures with Chinese companies instead of wholly owned subsidiaries. Entrance by foreign companies to the Chinese market is often determined by how much...
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...Doing business in another country takes time and research. To often management fails to understand that business values and behaviors done in the United States do not translate to the rest of the world (Daft & Marcic, 2011, p. 105). This could be an area that the president of Rocky River failed to research, and understand what business values his joint venture company Shui Fabrics believes in. CULTURAL CHARACTERISTICS There are cultural characteristics that influence organizations, those characteristic include language, religion, social organization, education and attitudes. Attitude is a big factor in the Rocky River and Shui Fabric joint venture, mainly understanding each other’s value. As noted in the textbook Understanding Management “Attitude toward achievement, work, and people can all affect organizational productivity” (Daft & Marcic, 2011, p. 111). Just as Paul Danvers doesn’t understand that his counter part Chui Wai is very pleased with the five percent return on investment, referring to attitude of the Chinese culture. Understanding each cultures cultural characteristic is key in a successful joint venture and business or partnership. SOCIAL VALUE Managers need to understand the local culture and one way is to understand the differences in social values. Researchers have identified different areas in which they refer to as dimensions. Within the different dimension countries are...
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...Luo Zhaouhui, the Chinese Ambassador to Canada, interesting explains on The Globe and Mail (2015) that, “Developing China-Canada relations is like sailing against currents. You either advance or recede.” Diplomatic ties between China and Canada have been established for 45 years and counting. Strategic partnerships between the two countries have held strong for over 10 years (Zhaouhui, 2015). The strong ties between the two countries are reflected through current statistics. As of 2014, about 100,000 Chinese students attend educational institutions in Canada. Chinese is considered the third most spoken language in Canada with over 1.3 million Chinese-Canadian residents (“Bilateral Relations”, 2015). 2. The standard practices and business etiquette in China Labelling and stereotyping can be very detrimental in cross-cultural situations; special care must be taken to ensure the team avoids that habit. The strongest armour against generalizations would be to educate our VCC negotiating team about standard Chinese practices in business and the negotiation process. The Chinese business culture places significant value on building relationships and getting to know the team individually. Personal connections would lead to friendships and friendships would lead to open trust and harmony – values emphasized in Chinese businesses. As a team, we need to recognize that in order to be successful in negotiating we must first build an honorary friendship with the Chinese (Yin, 2008). In China...
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