Danones Wrangle With Wahaha Case Study

Unformatted text preview: Brief Integrative Case 2.2 Danone's Wrangle with Wahaha In 1996, Danone Group and Wahaha Group combined forces in a joint venture (JV) to form the largest beverage company in China. Last year, a longstanding trademark dispute between the JV members, embedded within a broader clash of national and organizational cultures, came to a head. Valuable lessons can be learned from this dispute for investors considering joint ventures in China. I The Wahaha Joint Venture was established in 1996 by Hangzhou Wahaha Food Group Co. Ltd., Danone Group, and Bai Fu Qin Ltd. In 1997, Danone bought the interests of Bai Fu Qin and gained legal control of the JV with 51 percent of shares. While members of the JV are entitled to use the JV's Wahaha trademark, in 2000, the Wahaha Group developed companies outside of the JV that sold products similar to those of the JV and used the JV's trademark. The Danone Group objected and sought to purchase those non-JV companies. 2 In April 2007, Danone offered RMB4 billion to acquire 51 percent of the shares of Wahaha's five non-JV companies. Wahaha Group rejected the offer. Subsequently, Danone filed more than 30 lawsuits against Wahaha for violating the contract and illegally using the JV's Wahaha trademark in countries such as France, Italy, the U.S., and China. 3 Background Danone traces its routes to Europe in the early 20th century. In 1919, Isaac Carasso opened a small yogurt stand in Spain. He named it "Danone," meaning "Little Daniel," after his son. Carasso was aware of new methods of milk fermentation conducted at the Pasteur Institute in Paris. He decided to merge these new techniques with traditional practices for making yogurt. The first industrial manufacturer of yogurt was started. 4 Following his success in Europe, Carasso immigrated to the U.S. to expand his market. He changed the Danone name to Dannon Milk products, Inc., and founded the first American yogurt company in 1942 in New York. Distribution began on a small scale. When Dannon introduced the "fruit on the bottom" line in 1947, sales soared. The following year, he sold his company's interest and returned to Spain to manage his family's original business. 5 By 1950, Dannon had expanded to other U.S. states in the Northeast. It also broadened the line by introducing low-fat yogurt that targeted the health-conscious consumer. Sales continued to rise. Dannon expanded across the country throughout the 1960s and 1970s. In 1979, 238 Dannon became the first company to sell perishable dairy products coast to coast in the U.S. 6 In 1967, Danone merged with leading French fresh cheese producer Gervais to become Gervais Danone. In 1973, Gervais Danone merged with Boussois-SouchonNeuvesel (BSN), a company which had also acquired the Alsacian brewer Kronenbourg and Evian mineral water.? In 1987, Gervais Danone acquired European biscuit manufacturer General Biscuit, owners of the LU brand, and in 1989, it bought out the European biscuit operations of Nabisco. In 1994, BSN changed its name to Groupe Danone, adopting the name of the Group's best known international brand. Under its current CEG, Franck Riboud, the company has pursued its focus on the three product groups: dairy, beverages, and cereals. 8 Today, Danone is a Fortune 500 company with a mission to produce healthy, nutritious, and affordable food and beverage products for as many people as possible. panone's Global Growth Danone, with 160 plants and around 80,000 employees, has a presence in all five continents and over 120 countries. In 2008, Danone recorded € 15.2 billion in sales. Danone enjoys leading positions in healthy food: 9 • • • • No. No. No. No. 1 worldwide in fresh dairy products 2 worldwide in bottled water 2 worldwide in baby nutrition 1 in Europe in medical nutrition Its portfolio of brands and products includes Activia, a probiotic dairy product line; Danette, a brand of cream desserts; Nutricia, an infant product line; Danonino, a brand of yogurts; and Evian, a brand of bottled water. 10 Listed on Euronext Paris, Danone is also ranked among the main indexes of social responsibility: Dow Jones Sustainability Index Stoxx and World, ASPI Eurozone (Advanced Sustainable Performance Indices), and Ethibel Sustainabiljty index.!! Danone has rankyfknumber 60 in top 100 inter;;ational brands according ifj- Interbrand 2009 Best Global Brand valuation, with the brand value of $5.96 billion. 12 In 2008, Danone recorded an organic growth rate of 8.4 percent. With its operating margin increasing for the 14th year running, the group further strengthened its global standing. The group's performance is the result of a balanced strategy that builds on international expansion, a growing commitment to innovation, and strengthening Brief Integrative Case 2.2 Danone's Wrangle with Wahaha health-oriented brands. Danone invests heavily in research and development-€208 million in 2008. One hundred percent of projects currently in the pipeline focus on health and nutrition. 13 With a total of roughly 18 billion liters of bottled water marketed in 2008, Danone is the world's second largest producer (its global market share is approximately 11 percent). Danone owns the world's brand of packaged water, Aqua, which recorded sales of 6 billion liters. With Evian and Volvic, Danone also owns two of the five worldwide brands of bottled water. 14 Its revenue from water products amounted to € billion in 2008: Europe 2.9 accounted for 47 percent of this total, Asia 31 percent, and the rest of the world 22 percent. At constant structure and exchange rates, the proportion of sales in emerging countries rose in 2008 to 52 percent. IS In the mid-1990s, Danone did 80 percent of its business in Western Europe. Until 1996, the company was present in about a dozen markets including pasta, confectionery, biscuits, ready-to-serve meals, and beer. The company realized that it is difficult to achieve simultaneous growth in all these markets. Therefore, they decided to concentrate on the few markets that showed the most growth potential and were consistent with Danone's focus on health. Starting in 1997, the Group decided to focus on three business lines worldwide (Fresh Dairy Products, Beverages, as well as Biscuits and Cereal Products), and the rest of the business lines were divested. This freed the company's financial and human resources and allowed for quick expansion into new markets in Asia, Africa, Eastern Europe, and Latin America. In less than 10 years, the contribution of emerging markets to sales rose from zero to 40 percent while that of Western Europe went below 50 percent. 16 The 2007 year marked the end of a lO-year refocusing strategy period during which the Group's activities were refocused in the area of health. That year, the Group sold nearly all of its Biscuits and Cereal Products business to the Kraft Foods group, while adding Baby Nutrition and Medical Nutrition to its portfolio by acquiring Numico. Danone is now centered on 4 business lines: 1. Fresh Dairy Products, representing approximately 57 percent of consolidated sales for 2008 2. Waters, representing approximately 19 percent of consolidated sales for 2008 3. Baby Nutrition, representing approximately 18 percent of consolidated sales for 2008 4. Medical Nutrition, representing approximately 6 percent of consolidated sales for 2008 Danone Strategy in China Danone entered the Chinese market in the late 1980s. Since then, it has invested heavily in China, building factories and expanding production. Today, Danone has 239 70 factories in China, including Danone Biscuits, Robust, Wahaha, and Health. Danone sells primarily yogurt, biscuits, and beverages in China. 17 Danone's Asia-Pacific division employs 23,000 people in the Asia-Pacific area, which is almost 30 percent of Danone's total employees. Of Danone's Asian sales, 57 percent were in China. Danone's Wahaha was China's largest beverage company. Two billion liters of Wahaha were sold in 2004, making it the market leader in China with a 30 percent market share. 18 In Asia, in 2007, Danone Group was the market leader with a 20 percent share of a 34-billion liter market. In comparison, rivals CocaCola and Nestle had a 7 percent and 2 percent share, respectively. Evian, its global brand, was sold alongside of local brands such as China's Wahaha. In the past 20 years, Danone has purchased shares of many of the top beverage companies in China: 51 percent of shares of the companies owned by Wahaha Group, 98 percent of Robust Group, 50 percent of Shanghai Maling Aquarius Co., Ltd., 54.2 percent of Shenzhen Yili Mineral Water Company, 22.18 percent of China Huiyuan Group, 50 percent of Mengniu, and 20.01 percent of Bright dairy. These companies, leaders in their industry, all own trademarks that are well-known in China. 19 However, while expanding into the Chinese market, Danone faced challenges due to lack of market knowledge. In 2000, Danone purchased Robust, the then-secondlargest company in the Chinese beverage industry. Sales of Robust had reached RMB2 billion in 1999. After the purchase, Danone dismissed the original management and managed Robust directly. Because its new management was not familiar with the Chinese beverage market, Robust struggled. Its tea and milk products almost disappeared from the market. During 2005-2006, the company lost RMB150 million. 2o Wahaha Company The Wahaha company was established in 1987 by a retired teacher, Mr. Zong Qinghou. In 1989, the enterprise opened its first plant, Wahaha Nutritional Food Factory, to produce "Wahaha Oral Liquid for Children," a nutritional drink for kids. The name Wahaha was meant to evoke a laughing child, combining the character for baby (wa) with the sound of laughter. 21 After its launch, Wahaha won a rapid public acceptance. By 1991, the company's sales revenue grew beyond 100 million renrninbi (¥).22 In 1991, with the support of the Hangzhou local district government, Wahaha Nutritional Food Factory merged with Hangzhou Canning Food Factory, a stateowned enterprise, to form the Hangzhou Wahaha Group Corporation. After mergers with three more companies, Wahaha became the biggest corporation of its districtY Since 1997, Wahaha has set up new many subsidiaries. It was aided by state and local government since its 240 Part 2 The Role of Culture production-distribution network. Its Wahaha R&D center and Analysis Center provide guarantees for high product quality?? continuous expansion helped create new jobs and its increased profits led to more tax revenues. In 1996, the Hangzhou Wahaha Group Corporation began a joint venture with Danone Group and formed five new subsidiaries, which attracted a $45 million foreign investment and then added another $26.2 million investment. With the investment funds, Wahaha brought worldclass advanced production lines from Germany, America, Italy, Japan, and Canada into its sites. The terms of the Danone-Wahahajoint venture allowed Wahaha to retain all managerial and operating rights as well as the brand name Wahaha. In the next eight years, the company established 40 subsidiaries in China, and in 1998 launched its own brand, "Future Cola," to compete against Coke and Pepsi. 24 In 2000, the company produced 2.24 million tons of beverages with sales revenue of $5.4 billion. The production accounted for 15 percent of the Chinese output of beverages. The group became the biggest company in the beverage industry of China with total assets of $4.4 billion. 25 In 2007, it produced 6.89 million tons of beverage with a sales revenue of $25.8 billion. Today, Hangzhou Wahaha Group Co., Ltd., is still the leading beverage producer in China and has more than 100 subsidiary companies with total assets of $17.8 billion. The company product category contains more than 100 varieties, such as milk drinks, drinking water, carbonated drinks, tea drinks, canned food, and health care products. 26 According to a report on the "Top 10 Beverage Companies" released by the China Beverage Industry Association, Wahaha contributed 55.57 percent to the Association Top lO's overall production, 65.84 percent to its revenue, and 73.16 percent to its profit tax. According to Zong Qinghou, the president of Wahaha: "As China becomes the world's largest food and beverage market, we'll be a major player in the global market." Wahaha implements a strategy of "local production and local distribution" and has built an excellent Figure 1 Danone-Wahaha Joint Venture Conflict The Wahaha joint venture (JV) was formed in 1996 with three participants: Hangzhou Wahaha Food Group (Wahaha Group); Danone Group, a French corporation (Danone); and Bai Fu Qin, a Hong Kong corporation (Baifu). Danone and Baifu did not invest directly in the JV Instead, Danone and Baifu formed Jin Jia Investment, a Singapore corporation (Jinjia). Upon the formation of the JV, Wahaha Group owned 49 percent of the shares of the JV and Jinjia owned 51 percent of the shares of the JV This structure led to immediate misunderstandings between the participants. From Wahaha Group's point of view-with the division of ownership at 49 percent Wahaha Group, 25.5 percent Danone, and 25.5 percent Baifu-it was the majority shareholder in the JV Since Wahaha Group felt it controlled the JV, it was relatively unconcerned when it transferred its trademark to the JV 28 In 1998, Danone bought out the interest of Baifu in Jinjia, becoming 100 percent owner of Jinjia and effectively the 51 percent owner of the JV This gave it legal control over the JV because of its right to elect the board of directors. For the first time, the Wahaha Group and Zong realized two things: (1) They had given complete control over their trademark to the JV; (2) A foreign company was now in control of the JV From a legal standpoint, this result was implied by the structure of the JV from the very beginning. However, it is clear from public statements that the Wahaha Group did not understand the implications when they entered into the venture. The Danone "takeover" in 1998 therefore produced significant resentment on the part of Wahaha Group. Rightly or not, Wahaha felt that Danone misled them from the very beginning. 29 Hierarchy ofthe Initial Wahaha JointVenture Structure of Initial Wahaha Joint Venture30 The Wahaha Joint Venture I Wahaha Group (led by Chairman 20ng Qinghou) 40% I I Jin Jia Investment - Co. Ltd. 0;ji 51% r I IDanone Group 50% II '" .1.:'[:.111 Source: Danone website. I Bai Fu Qin Ltd 50% I Brief Integrative Case 2.2 Danone's Wrangle with Wahaha When the IV was formed, Wahaha Group was a stateowned enterprise owned by the Hangzhou city government. After formation of the IV, it was converted into a private corporation, effectively controlled by Zong. This set the stage for Wahaha Group's decision to take back control of the trademark it felt had been unfairly transferred to Danone. Zong and his eIIJPloyees now viewed the transferred trademark as their--p&sonal property.3l Wheh the IV was formed, Wahaha Group obtained an appraisal of its trademark valuing it at RMB 100 million (US$13.2 million). The trademark was its sole contribution to the IV, while Iinjia contributed RMB500 million (US$66.1 million) in cash. Wahaha Group also agreed not to use the trademark for any independent business activity or allow it to be used by any other entity. However, the trademark transfer was rejected by China's Trademark Office. It took the position that, as the well-known mark of a state-owned enterprise, the trademark belonged to the state and Wahaha Group did not have the right to transfer it to a private company?2 Rather than terminate the IV, the shareholders (now Danone and Wahaha Group) decided to work around the approval issue by entering into an exclusive license agreement for the trademark in 1999. Since the license agreement was intended to be the functional equivalent of a sale of the trademark, they were concerned the Trademark Office would refuse to register the license. Therefore, they only registered an abbreviated license. This was accepted by the Trademark Office, which never saw the full license. As a result, Wahaha Group never transferred ownership of the Wahaha trademark to the IV, just the exclusive license. Thus, Wahaha Group never complied with its basic obligation for capitalization of the IV. It does not appear that any of the IV documents were revised to deal with this changed situation. 33 Although Danone was the majority shareholder and maintained a majority interest on the board of directors, day-to-day management of the IV was delegated entirely to Zong. He filled management positions with his family members and employees of the Wahaha Group. Under Zong's management, the IV became the largest Chinese bottled water and beverage company.34 Beginning in 2000, the Wahaha Group created a series of companies that sold the same products as the IV and used the Wahaha trademark. The non-IV companies appear to have been owned in part by Wahaha Group and in part by an offshore British Virgin Islands company controlled by Zong's daughter and wife. Neither Danone nor Wahaha group receives any benefits from the profits of these non-IV companies. According to press reports in China, products from the non-IV companies and the IV were sold by the same sales staff working for the same sales company, all ultimately managed by Zong. 35 In 2005, Danone realized the situation and insisted it be given a 51 percent ownership interest in the non-IV 241 companies. Wahaha Group and Zong, who by this time was one of the richest men in China, refused. 36 Details of the Dispute In April 2006, Wahaha was informed by its lO-year IV partner Danone that it had breached the contract by establishing nonjoint ventures, which had infringed upon the interests of Danone. Danone proposed to purchase 51 percent of shares of Wahaha's nonjoint ventures?? The move was opposed by Wahaha. In May 2007, Danone formally initiated a proceeding, claiming that Wahaha's establishment of nonjoint ventures as well as the illegal use of "Wahaha" trademark had seriously violated the noncompete clause. The two parties carried on 10 lawsuits in and out of China, and all the ruled cases between Wahaha and Danone have ended in Wahaha's favor?8 On February 3, 2009, a California court in the United States dismissed Danone's accusation against the wife and daughter of Zong Qinghou and ruled that the dispute between Danone and Wahaha should be settled in China. In addition, Danone's lawsuits against Wahaha were rejected by courts in Italy and France; and a series of lawsuits brought by Danone in China against Zong Qinghou and Wahaha's nonjoint ventures all ended in failure. 39 The rationality of the existence of the nonjoint ventures, the ownership of the "Wahaha" trademark, and the noncompete clause issue were the key points of the Danone-Wahaha dispute. 4o In 1996, Wahaha offered a list of 10 subsidiaries to Danone, which after evaluation selected four. Iinja Investments Pte Ltd. (a Singaporebased joint venture between Danone Asia Pte Ltd. and Hong Kong Peregrine Investment, of which Danone is the controlling shareholder), Hangzhou Wahaha Group Co., Ltd., and Zhejiang Wahaha Industrial Holdings Ltd. jointly invested to form five joint venture enterprises, with shareholdings of 51 percent, 39 percent, and 10 percent, respectively. In 1998, Hong Kong Peregrine sold its stake in Jinja Investments to Danone, which makes Danone the sole shareholder of Jinja Investments, giving it the control of over 51 percent of the joint ventures. Wahaha and Danone cooperated on the basis of joint venture enterprises, rather than the complete acquisition of Wahaha by Danone. As a result, Wahaha was always independent, and its nonjoint ventures have existed and developed since 1996. Relevant transactions of Wahaha's nonjoint ventures and joint ventures were disclosed fully and frankly by the auditing reports of PricewaterhouseCoopers, an accounting firm appointed by Danone. Meanwhile, during the ll-year cooperation, Danone assigned a Finance Director to locate in the headquarters of Wahaha Group to audit the latter's financial information. 4l Danone and Wahaha had signed in succession three relevant agreements concerning the ownership of the "Wahaha" brand name. In 1997, the two parties signed a trademark transfer agreement, with an intention to transfer 242 Part 2 The Role of Culture the "Wahaha" trademark to the joint ventures. The move, however, was not approved by the State Trademark Office. 42 For this reason, the two parties signed in 1999 the trademark licensing contract. According to law, the same subject cannot be synchronously transferred and licensed the use to others by the same host. Therefore, the signing and fulfillment of the trademark licensing contract showed that the two parties had agreed to the invalidation of the transfer agreement. The "Wahaha" brand should belong to the Wahaha Group, while the joint ventures only have right of use. 43 In October 2005, the two parties signed the No. I amendment agreement to the trademark licensing contract, in which it confirmed Party A (Hangzhou Wahaha Group Co., Ltd.) as owner of the trademark. In addition, the second provision of the amendment agreement clearly stated that the several Wahaha subsidiaries listed in the fifth annex of the licensing contract as well as other Wahaha subsidiaries (referred to as "licensed Wahaha enterprises") established by Party A or its affiliates following the signing of the licensing contract also have right granted by one party to use the trademark. The "licensed Wahaha enterprises" involved in the amendment agreement refer to the nonjoint ventures. 44 According to related files, Wahaha owns the ownership of the "Wahaha" trademark, while its nonjoint ventures have the right to use the trademark. 45 The Wahaha brand is among the most famous in China. It ranked No. 16 among domestic brands and is worth $2.2 billion, according to a recent report by Shanghai research firm Hurun Report. Wahaha doesn't publicly disclose financial figures. 46 Ventures and Acquisitions Several years ago, as Wahaha sought to expand its market, Wahaha suggested adding online new production lines by increasing investment, while Danone requested Wahaha outsource to product processing suppliers for its joint ventures. Wahaha saw the shortcomings in using product processing suppliers, so it set up nonjoint ventures to meet production needs. Wahaha believed that the existence and operation of the nonjoint ventures did not adversely affect the interest of Danone. 47 During the 11 years that followed 1996, Danone invested less than RMB 1.4 billion in Wahaha's joint ventures, but received a profit of RMB3.554 billion as of 2007. On the other hand, Danone acquired several strong competitors of Wahaha including Robust, Huiyuan, and Shanghai Maling Aquariust. Wahaha saw Robust as its biggest rival. Wahaha was disappointed that Danone failed to hold up its end of the bargain of ''jointly exploring markets in and out of China" listed in the IV contract. 48 Through influence of the Chinese and French governments, Danone and Wahaha reached a peaceful settlement in late 2007. However, Danone's proposal to sell its shares in the joint ventures to Wahaha for RMB50 billion (finally reduced to approximately RMB20 billion) was rejected by Wahaha. 49 After the negotiations were suspended, the two parties again turned to legal action. As of April 2009, all the ruled cases both in China and abroad have ruled against Danone. 50 Conflict Resolution In late September 2009, France's Groupe Danone SA agreed to accept a cash settlement to relinquish claims to the name Wahaha. In a joint statement issued September 30, 2009, Danone announced a settlement with China's Hangzhou Wahaha Group Co. by saying its 51 percent share in joint ventures that make soft drinks and related products will be sold to the businesses' Chinese partners. "The completion of this settlement will put an end to all legal proceedings related to the disputes between the two parties," the statement saidY The feud over control of the Wahaha empire offered a glimpse into the breakup of a major Asian-foreign joint venture. Danone's strategy to publicly confront its partner and Wahaha's strategy to respond with its own accusations marked a break with prevailing business practice in China, where problems have usually been settled with face-saving, private negotiations. 52 Analysts said the case served to reinforce how difficult it is to operate a partnership in China. "That's a key lesson: To build a [brand] business in China you need to build from the ground up," said Ionathan Chajet, China managing director for consultancy Interbrand. 53 Foreign firms such as Procter & Gamble, Starbucks, and General Motors have operated wholly or in part through joint ventures in China. But executives involved say the expectations of foreign and local parties can conflict in a IV, for instance, when an international company is striving for efficiencies and profits that match its global goals while the local partner-sometimes an arm of the Chinese government-strives to maximize employment or improve technology. At other times, partners have stolen corporate secrets or cheated and otherwise sabotaged a venture, while legal avenues have had little effect on disputes over operations. 54 Danone, which reported the Wahaha business generated about 10 percent of its global revenue in 2006 but has since adjusted how it accounted for Wahaha,s,(lid it expects no impact on iti1jncome statement from the settlement. In China, it wilIfbe left with a much smaller footprint and is essentially starting over. 55 Danone's CEO Franck Riboud stated: "Danone has a long-standing commitment to China, where it has been present since 1987, and we are keen to accelerate the success of our Chinese activities." China is Danone's fourth-largest market after France, Spain, and the U.S., contributing about € Ibn, or 8 percent, of Danone's revenues. 56 ...
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...A ‘failed’ Joint Venture between Danone and Wahaha French’s Danone and China’s Wahaha had been a very successful joint venture in China. Danone’s capital, expertise & technology know-how, combined with Wahaha’s huge local presence in the market had seen the company soared in the food & beverage industry. It was until then when Danone accused its partner, Zong, founder of Wahaha of illegally selling Wahaha brand products using a distributor not selected by the joint venture agreement. Danone also filed for arbitration (appoint an official body to settle the dispute) to resolve the trademark dispute. Despite holding on to the majority stake of 51% in the Wahaha brand, Danone did not take any action until now because it needed the Wahaha brand as much as it needed Zong. Zong and his management were the driving force for Wahaha and Danone’s efforts in sending its own executives were futile. The dispute highlighted a key issue which many foreign investors have long grappled in China due to the lack of respect and understanding of legal agreements in the country. In China where informal institutions play a larger role than formal institutions, Danone had used the wrong approach to resolve the dispute and had lost the support of the people in China. Was joint venture appropriate for Danone to enter China? Joint venture allows Danone which is a multi-national company based in France to tap into the lucrative market in China. At the time of the joint venture, China......

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Entry Strategies for Mnes in China: the Case of Danone and Dhl

...Balkan states back then to have healing properties. It was newly introduced to Spain and prescribed to patients. The brand later expanded to France with the promotion of health benefits. In 1967 it merged with the leading French cheese producer Gervais and in 1972 with Boussois-Souchon-Neuvesel (BSN), becoming BSN-Gervais Danone, which was renamed 1994 to Danone (Danone History 2012). Headquartered in Paris, France, Danone, as of 2013, has 103,643 employees, a revenue of 21.298bn€, an operating income of 2.809bn€, with 67% of sales outside of Europe and 7% directly in China (Danone annual report 2013). Clearly Danone is a MNE that pursues growth in international markets and in 1996 it created a joint venture with the Hangzhou Wahaha Group, called Wahaha Mikado Joint Venture Company. Deutsche Post AG is currently the world’s biggest courier company in the world with 424.351 employees, a revenue of 52.82bn€, an operation income of 2.393bn€ and today its DHL Express division operates in 220 countries with 2.7 million customers per day (DP Annual Report 2013). The DHL division was founded in 1969 to service international deliveries and in 1986 a joint venture with Sinotrans was formed, which is today known as DHL-Sinotrans. 4.8. Motives of Entering China In China the macro environment exhibits very similar tendencies to the problems mentioned earlier, showing, that it still holds the characteristics of an emerging economy with a weak institutional framework. The......

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Danone vs. Wahaha

...between Danone and Wahaha (2007-2009) On the 30th of September 2009 an almost 12 year relationship between French multinational enterprise Danone and Chinese Wahaha group ended by Danone withdrawing from the IJV (International Joint Venture) for monetary settlement. This report analysis the negotiation journey of the dispute and tries to classify the different negotiation steps based on the challenges of negotiating business deals in China. As a tool IRENEs framework on “Who/ How/ What” is used. Based on the analysis of the negotiation and the review of the cultural differences between western oriented and Chinese businesses suggestions will be made what could have been done differently by Danone. Overview of the Situation between Danone and Wahaha early 2007 The multinational Danone Group SA based in Paris in France is one of the biggest players on the global dairy product and bottled water markets. They are active on all five continents and the net sales in 2007 was more than 12 billion €. The Hangzouh Wahaha Group Co., Ltd. is a company that has grown from a small business, selling drinks to school children to become one of the most important and largest Chinese bottled-water companies already in 2007. Although it is difficult to find detailed financial figures on Wahaha it can clearly be stated that in 2007 the Group was much smaller than Danone. At that time Wahaha contributed approximately 6% of Danone’s profits. Wahaha was successfully......

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Wahaha

...STRATEGIC ALTERNATIVES FOR SUN LIFE FINANCIAL Table of Contents     I.      Introduction II.     Current Strategy III.        Strategy Options IV.       Select Strategy V.    Resources Requirements VI.       Compare with another organization VII.      Positioning Techniques A.    Strengths B.    Weaknesses C.    Opportunities D.    Threats VIII.     Implementation Timetable & targets   I.      Introduction Trade and commerce has developed increasingly in the recent years. Competition has become more intense and the need for flexibility has become indispensable. At some point, there are some elements of operations that appear to be constant and unyielding: the need for dynamism. This idea points to the need of a company to have a culture of innovation. The changes in the external environment inevitably demands for not only a continuing drive towards innovation, but also a sustainable one. This is apparent in the case of Sun Life Financial, a leading player in the insurance domain in the global market. Currently, it covers millions of customers all over the world. However, it recognizes the need to constantly improve and take on steps to expand their market share and take control of the global insurance domain. This paper shall look into the current strategy of Sun Life Financial and consider the strategic alternatives which it could acquire to ensure that it sustains its development. II.    Current Strategy Sun Life Financial’s current strategy is......

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Danone&Wahaha

...Danone’s entry mode in 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......

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Jhkh

...Systems Provide Language Training Provide Cultural Training Increase Flexibility and Cooperation 220 220 220 221 221 Managing Cross-Cultural IMegotiations Types of Negotiation The Negotiation Process Cultural Differences Affecting Negotiations 223 223 224 225 Table of Contents Negotiation Tactics Negotiating for Mutual Benefit Bargaining Behaviors xxi 228 229 231 The World of International Management—Revisited Summary of Key Points 234 235 Key Terms Review and Oiscussion Questions 235 236 Internet Exercise: Working Effectively at Toyota In the International Spotlight: China 236 237 Brief Integrative Gase 2.1: Coca-Cola in India 238 Brief Integrative Gase 2.2: Danone's Wrangle with Wahaha In-Depth Integrative Gase 2.1a: Euro Disneyland 244 250 In-Depth Integrative Gase 2.1b: Beyond Tokyo: Disney s Expansion in Asia 260 In-Depth Integrative Gase 2.2: Walmart's Global Strategies 264 International Strategie Management 8 Part Three Strategy Formulation and Implementation 274 The World of International Management: Big Pharma Goes Global Strategie Management The Growing Need for Strategie Management Benefits of Strategie Planning Approaches to Formulating and Implementing Strategy Global and Regional Strategies 274 277 278 279 279 283 The Basic Steps in Formulating Strategy Environmental Scanning Internal Resource Analysis Goal Setting for Strategy......

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Wrangles

...6.0 INTERNATIONAL TRADE FINANCE Learning Objectives: At the end of the subject coverage learners should be able to: • Explain the ways in which international trade is undertaken, settled and financed; • Identify the types of customers engaged in international trade and their needs; • Explain the features and benefits of services provided by banks and other financial institutions in facilitating international trade; • Explain international payment systems and regulations that are in place and the procedures adopted. CONTENTS 1. Introduction to International Trade Finance • The meaning of international trade. • Major parties in international trade. • Reasons for international trade. • Advantages of international trade. • International trade barriers. • The role of banks and financial institutions in international trade. 2. The Foreign Exchange Market • The meaning of foreign exchange market. • Participants in the foreign exchange market. • Functions of foreign exchange market. • The mechanism of foreign exchange transfer. • Relationship between foreign exchange market and money market. • Systems and procedures for inter bank foreign exchange trading. 3. Exchange Rates • Definition of exchange rate. ...

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International Business

...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 to create......

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Danone and Wahaha

...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......

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