...market and Danone Group is one of them. Danone is a French food and beverage conglomerate and 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...
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...China Basically, Danone chose joint venture as their entry mode at the early stage of entering Chinese market. More specifically, in 1996, they began a joint venture with the other two companies: Hangzhou Wahaha Group Corparation (Wahaha Group) and a Hong Kong corporation called Bai Fu Qin (Baifu), and formed five new subsidiaries in China. However, it should be noted that Danone and Baifu did not directly invest in the JV, but established Jin jia Investment, a new corporation in Singapore instead with Danone as their controlling shareholder. In this case, Wahaha Group held 49 percent of the entire shares of JV while Jinjia owned the remaining 51 percent. The reasons why Danone decided to form a joint venture rather than a wholly owned subsidiary or other formats can generally be associated with the considerable benefits they may gain from it. Firstly, as a French company who has just entered the Chinese market for no more than 10 years since 1980s at that time, Danone’s knowledge about domestic market was still limited and may face a challenge if they run their business solely. Therefore, it is essential for them to learn from their partner in terms of related market knowledges, such as the competitive conditions, culture, political and business systems in China. Secondly, the partnership enabled Danone to share related costs and risks of developing a new product or process, in turn, led to the increase in their profit margin. It can be generally seen that Danone, as a multinational...
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...Introduction: In 1996, Danone, a 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...
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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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...Wrangle With Wahaha Isabella Tennant – 300276839 Danone began in Spain as a small yoghurt stand. It was successful, becoming the first industrial manufacturer of yoghurt. The Danone business kept expanding globally, having a presence in all continents. Danone began to sell many different products early on. In 1997 the Danone group decided to focus only on three worldwide business lines. These were Fresh Dairy Products, Beverages, Biscuits and Cereal Products. This focus meant that Danone’s human and financial resources were freed up allowing for swift expansion into new markets in many continents, such as Asia. Danone faced challenges while operating in China due to a lack of market knowledge, such as the challenges with Robust. Robust, the second largest company in the Chinese beverage industry was purchased by Danone in 2009. Once purchased, Danone decided to manage Robust directly instead of using the original management. The new management was not familiar with the Chinese Beverage Market and Robust struggled, resulting in its milk and tea products almost disappearing from the markets. Wahaha was a company established by Zong Qinghou in 1987 that sold a nutritional drink for kids. A joint venture was formed in 1996 between Danone Group and Wahaha Group. The structure of the joint venture (JV) consisted of three participants: Hangzhou Wahaha Food Group, Danone Group and Bai Fu Qin (Baifu). The Wahaha Group owned 49% of the shares. Whereas, the Danone Group and Baifu...
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...Executive Summary Joint venture is method or an approach which allows companies to further their interest internationally without taxing their resources b having a partner who is compatible to work on the project albeit in short term or long term project. Joint venture allows companies to pool their resources together and benefit each of the companies in reaching their potential. Apart from that, joint venture also allows company to complement each other short coming with what they do best. This is evidently shown when discussing Daicel Evonik Ltd where Daicel Chemical Industries Ltd and Huels AG complement each other in term market knowledge and technological capabilities know-how among them. But then, joint venture does have limitation where culture plays an important barrier to achieve success. In Danone Co. Ltd and Wahaha Co. Ltd which will be discussed further, the dissolution of ventureship between these two companies can be attribute to communication particularly in conflict management. Thus, managing cultural differences is important especial in term of managing conflict among the partners. Conflicts are parts of life and may appear in any organization. They particularly often occur in hybrid organizations whose parents coming from different cultures, different countries with different ways of thinking and doing things. Knowing how to management conflict with proactive approach (minimize conflicts to happen) and reactive approach (resolve conflicts) is crucial for firms...
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...Companies The Danone-Wahaha partnership once seemed ideal, but the companies’ relationship has deteriorated. What lessons can be learned from the dispute? Jingzhou Tao and Edward Hillier T he Danone-Wahaha dispute is a story of the relationship between two very different entities against a backdrop of incredible change. The dispute reveals many questions that China faces as it integrates into the world economy, such as what to do when rule of law leads to an unpopular result or harms a valued Chinese company. The players Group Danone SA, a Paris-based multinational corporation (MNC), is a giant in the global dairy product and bottled water markets. The MNC employs roughly 90,000 staff across five continents. Though it is a beverage giant in China, the Hangzhou Wahaha Group Co., Ltd. is much smaller than Danone. Since its founding in the late 1980s, the company has grown from three people selling drinks to school children to become the largest Chinese bottled-water company today. This growth is mainly the result of the drive and talent of founder Zong Qinghou, who expanded the company by satisfying Chinese consumer demand and aligning his business strategy with government policy. Danone and Wahaha formed their first joint venture (JV) in China in 1996. Over the years, the number of JVs grew from 5 to 39, and annual sales rose from a few hun44 May–June 2008 chinabusinessreview.com dred million renminbi to more than ¥14 billion ($2 billion) in 2006. Danone held a 51 percent...
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...MNEs in China: The Case of Danone and DHL International Business Winter 2014/2015 Table of contents 1. Introduction 3 1.1. FDIs and Entry in China 3 1.2. Research Contribution 3 1.3. Research Method 3 2. Literature review 4 2.1. FDIs 4 2.2. Macro Environment 5 2.3. Timing of entry 6 3. Discussion 6 3.1. Introduction of Cases 6 3.2. Motives of Entering China 7 3.3. Joint Venture in China 8 4. Conclusion 9 4.1. Implications 9 4.2. Limitations 9 4.3. Research Outlook 9 5. References 9 1. Introduction 2.1. FDIs and Entry in China How should MNEs enter China? MNEs are usually presented with multiple entry choices, namely export, licensing agreements, franchising and FDIs. While each mode presents advantages and disadvantages, FDIs cause MNEs to make direct investments and be directly present in foreign countries, as opposed to indirect investments and presence through other modes of entry, hence the name “foreign direct investment”. But with direct presence in a foreign country MNEs are subject to both formal and informal institutions, and those institutions will directly influence a company’s decisions and it’s mode of entry (Ingram, Silverman 2002). MNEs have to decide whether to go as a first or late mover and due to what kind of motivation they decide to do FDIs in China. In countries with a weak institutional framework, Meyer et al. (2009) find that MNEs should choose the Joint Venture FDI mode of entry, or if...
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...name about more than just retailing. The suggested strategy in the 2008 Walmart supplier meetings shows that it’s heading in that direction (Business Week). This also follows Gome’s strategy of renaming its suppliers to their own brand (Business Week), but goes beyond it as the foreign brand in China is already associated with higher reliability and quality assurance. This actually holds true in China were retailers do a better job of enforcing supplier quality than the local regulations. With that, Walmart is still able to use its expertise and knowledge in supplier negotiation and distribution system to keep costs down. Although Walmart is a Joint-Venture, the sources do not mention any attempt to leverage the local partner to meet the local market, which seems the opposite to some other joint ventures discussed like Danone and Wahaha. Working together with the local partner to understand where and how the local regulations can be used or adjusted for Walmart’s success and gaining a stronger hold of the potential customer’s heart might help Walmart’s growth and dominance in the Chinese market (The Economist). Most of what we mentioned about the Chinese consumer habits in previous cases is especially relevant for Walmart. The Chinese consumers go shopping to get out of the house, not necessarily to shop. They’re more impulse driven and like on-site promotions. They’re brand conscious but not loyal. They’re frequent shopper of small amounts and especially...
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...International Management, 7e (Deresky) Chapter 3: Understanding the Role of Culture 1) International firms like Starbucks and McDonald's most likely modify their business practices in Saudi Arabia because of . A) prevalent religious customs and beliefs B) poor international business relationships C) low demand for American products D) tight restrictions on foreign trade Answer: A Diff: 3 Page Ref: 91 Chapter: 3 Skill: Concept AACSB: Multicultural and Diversity 2) Women in Saudi Arabia are permitted to work alongside men as . A) lawyers B) architects C) engineers D) doctors Answer: D Diff: 2 Page Ref: 91 Chapter: 3 Skill: Concept AACSB: Multicultural and Diversity 3) All of the following statements about women in Saudi Arabia are true EXCEPT that they are . A) allowed to earn a college degree B) restricted from owning businesses C) allowed to buy designer clothing D) restricted from driving cars Answer: B Diff: 3 Page Ref: 91-92 Chapter: 3 Skill: Concept AACSB: Multicultural and Diversity 4) What is the primary reason that high-end department stores operate in Saudi Arabia given the country's dress restrictions? A) Dress restrictions only apply to certain regions of Saudi Arabia. B) Women wear designer clothes for public functions when abayas are not required. C) Wealthy men and women in Saudi Arabia are interested in the latest fashion trends. D) Saudi Arabia draws travelers from Europe who want the latest designer...
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...Brand Strategy What can a brand do to stay profitable during a recession? Here are some realistic possibilities: • Add a lower-price item with fewer features to your product line. You might even launch it under a different brand name. Most companies should produce a line of products at different price points. • Add some additional value to the offer, such as free shipping or installation. • Maintain the current price but advertise heavily as to why customers should pay more for this brand. Procter & Gamble (P&G) uses this strategy with Tide, instead of cutting the price. • Change the brand’s image through a new campaign. Dove introduced its “Real Beauty” campaign in China in 2011 based on the notion that most women have real beauty—and Dove can help them realize it. • Innovate something new. Apple introduced its iPhone just before the Great Recession and caused Nokia’s market share to decline from 50 percent to 10 percent in five years. • Shift to win the low price position but maintain the brand value and promise. Insurance provider Geico sells auto insurance mainly online and, as a well-known brand, owns the low-cost position. Top Twelve Branding Keys For 2012 by Derrick Daye The 12th year of the 21st century is close upon us, bringing not just a new slate, but also a sense of significance: the very number 12 commands a lot of attention, in different ways. For product brands it’s a unit of trade – 12 units to a dozen, said to be cheaper than other...
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...This page intentionally left blank Lut12575_fm_i-xxvi.indd Page i 2/10/11 2:28 PM user-f494 /203/MHBR222/Lut12575_disk1of1/0078112575/Lut12575_pagefiles International Management Culture, Strategy, and Behavior Eighth Edition Fred Luthans University of Nebraska–Lincoln Jonathan P. Doh Villanova University Lut12575_fm_i-xxvi.indd Page ii 2/11/11 2:35 PM user-f494 /203/MHBR222/Lut12575_disk1of1/0078112575/Lut12575_pagefiles INTERNATIONAL MANAGEMENT: CULTURE, STRATEGY, AND BEHAVIOR, EIGHTH EDITION Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Previous editions © 2009, 2006, and 2003. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on recycled, acid-free paper containing 10% postconsumer waste. 1 2 3 4 5 6 7 8 9 0 QDB/QDB 1 0 9 8 7 6 5 4 3 2 1 ISBN 978-0-07-811257-7 MHID 0-07-811257-5 Vice President & Editor-in-Chief: Brent Gordon Vice President, EDP/Central Publishing...
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