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Blue Ridge Spain

In: Business and Management

Submitted By SUM1BYX7
Words 574
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Blue Ridge Spain is a joint venture between an American fast food chain and a Spanish agricultural company, Terralumen. Terralumen contributed to most of Delta’s success in foreign markets. After many years of a successful JV, the European managing director of Blue Ridge, Yannis Costas, found out that Delta wanted to end the partnership. Cultural value orientation conflicts between parent companies of different nationalities led the way for the dissolution of the JV. In an American-Spanish JV board meeting, the Spanish representative pushed to dissolve the JV to show his dissapproval of the way the meeting was being conducted. He had more of a problem with relationships rather that contractual related issues. The Delta/Tellalumen relationship deteriorated because Delta wanted to grow through acquisitions, instead of JV’s, while Terralumen felt their goals were too agressive. Delta pushed the issue, Terralumen agreed to half and shattered the relationship. They fail to devote attention to critical international business cultural issues. Costas, is of Greek nationality. According to Hofstede, Greece is high on power distance and uncertainty avoidance. In Greece, people respect and prefer senior managers over younger inexperienced managers. Costas has put a lot of effort into the JV, identifies with his work and genuinily wants to help Blue Ridge. He has a good relationship with the Spaniards who value his ability to establish interpersonal relationships. Decisions are made on subjective feelings and with consensus. Costas values solid interpersonal relationships and trust which he and Francisco Alvarez built over the years in trying to foster a successful JV. Costas was often employed to solve conflicts and mend damaged relationships. He also questioned the ethics of his company’s strategy to secretly achieve the upper hand in buyout negotiations. Alvarez, representing Terralumen, is from Spain. He shares many similar cultural characteristics with Costas, including patience and mutual respect. Costas and Alvarez have come to establish a friendship and cooperation throughout the joint venture Sodergran could have adjusted his approach with controllable forces and helped the JV deal with the exorbitant royalties and fees the company desired to collect right from the start. Squeezing from restaurants in early stages of expansions could have a costly effect on local managers as they attempted to build their business and compete against better positioned Spanish restaurants. Delta Foods should not proceed with the dissolution plan because the approach with Terralumen would result in loss of local expertise, understanding of Spanish culture, political networks, contacts for acquiring food license and property and ability to find local managerial talent. That would impede Delta from effectively functioning in Spain. If Delta ventures out on its own, a partial dissolution may make sense while retaining some ties with Terralumen and operating as a Blue Ridge Franchise, receiving royalties from Terralumen and re-forecasting a more realistic growth plan based in the Spanish market. Regardless, with an overburdened plan and without gradual implementation, the company will not suceed.

Individualism: Long term orientation of Spain and short term orientation of US underlie the issues in the case. Spain’s power distance score of 57 indicates that people accept a hieracrhy order where everyone has a place and needs no further explianation. Source: The Hofstede Centre

Ball, G. M. (2013). International Business. New York: McGraw-Hill.

Corruption Perceptions Index 2013 . (n.d.). Retrieved May 24, 2014, from Transparency International:

McNett, J. M. (2002). Blue Ridge Spain. Ontario, Canada: Ivey Publishing.

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