The focus of this Worldview explores Joint Venture Challenge

The focus of this Worldview explores “Joint Venture Challenges: Danone and Wahaha in China.” The French multinational Group Danone SA entered China in the 1990s via a joint venture with the local company Wahaha. Danone remained the majority owner in the relationship, which ultimately expanded to a network of 39 different joint ventures between these two partners, but Danone had limited involvement in day-to-day activities of the ventures. The ventures grew impressively, generating annual revenues of $2 billion after the initial 10 years of existence. Yet this partnership also evidenced challenges that ultimately created a very negative relationship between the partners, created a very public level of acrimony, and impacted Danone’s efforts to compete in the large and growing Chinese market. This excellent example of some of the challenges of forming and running successful international joint ventures provides a very valuable foundation for classroom discussion. A vigorous discussion can ensue by asking questions such as, “Why do you think the problems arose between Danone and Zong?,” “What are the implications of the actions that each partner took after their agreement collapsed in 2007? What could the companies have done to better manage their disagreements,” and “What might Danone have done to either avoid or reduce the problems that occurred over the live of the JVs?”

Solution

Why do you think the problems arose between Danone and Zong?

The first element was a administrative error and the legal omissions that were raised about the merger between Dahone and Wahaha, to the point that, in the wake of a discovery made in 2005 about the existence of \"mirror\" companies parallel, and subsequent arbitration claims, is known to the Wahaha brand had not been successfully transferred to Dahone.

Then that, It cames the lack of transparency on the part of Mr. Zong, who owned and directed \"mirror\" companies that traded similar to those of the alliance Dahone-Wahaha products behind the backs of Dahone, becoming such a discovery in mid-2005, and representing a financial damage to Dahone. Eventually, Dahone acquired these companies but the merge was disputed for the trademark ownership issue.

What are the implications of the actions that each partner took after that their agreement collapsed in 2007?
The implications are straightforward. If it is assumed beforehand goodwill, Wahaha committed serious errors and negligence in the management of the joint venture. Administrative procedures and permits were omitted for the successful transfer of the brand.

And if malice is assumed, opacity in the operations of mirrors companies was serious unethical conduct to the detriment of Dahone.

What could the companies have done to better manage their disagreements?
The merger should have been done more carefully, in an orderly and systematic, ensuring that all paperwork with the Chinese authorities (usually many) were met in full.
They rushed the paperwork and several mergers were made at a time without proper thoroughness, years after the problems surfaced.

He also missed a lot of ethics by Mr. Zong, he took advantage of his prestige and appreciation from the public and became a lack of transparency on their part in an epic against foreign giant short of a national hero, a young man started bottles sold in schools to become a great entrepreneur.

What might Danone have done to either avoid or reduce the problems that occurred over the live of the JVs?

That was perhaps a mistake of Dahone, invested little to improve their public image in the media and the Chinese public, which turned against them in the middle of the dispute, which arose called to boycott those who joined the workers themselves.