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Presently, universal interactions affect businesses differently thus causing extensive results. Nevertheless, companies need to investigate and focus on aspects, which may give them openings in enhancing market control.
Certainly, culture is such an attribute in business. It is important in enterprise administration together with merchandise marketing. Culture determines views, behaviors, judgment of persons on business outputs and operations. Thus, it remains crucial for western businesses venturing into other countries, particularly those with fully diverse cultures.
An article by Barboza David under World Business in “The New York Times” will gain usage in exploring this business feature. As reported by Barboza (2007) French company Groupe Danone, which makes animal and drink products expanded into the Chinese marketplace.
It attained this through a common venture with a local firm named Wahaha, which operates in a similar industry. Apparently, the JV was failing because of certain quarrels. The disagreements emerged from issues surrounding creation, operation, anticipations, and commerce culture of the association as regards to conducting production in China (Barboza, 2007). Unquestionably, this resulted into Danone failing to establish in the Chinese market strongly.
Summary of findings and Analysis of the Situation
The initial predicament for the failure of the JV entailed its ownership alignment and administration. Further, legal issues as regards to brand name check also emerged. Again, there were problems concerning the company administrative formation.
Apparently, circumstances surrounding “Danone and Wahaha” JV ownership and leadership misunderstandings originated from western culture in business (Barboza, 2007). While bargaining the JV accord, Wahaha gained 49% part. “Danone and Peregrine” equally shared the remaining part (Barboza, 2007).
Effectively, Wahaha assumed full control of the company under the headship of Mr. Zong. Danone later acquired Peregrine accumulating greater part of the venture than Wahaha. Thus, Danone hypothetically assumed leadership of the venture. Wahaha concluded that, the action amounts to purchase by Danone. Consequently, Wahaha argued that, mistrust and rivalry had intruded the association (Barboza, 2007).
Trademark control also emerged as a debatable matter in the joint venture. Wahaha then a “state owned company” entered the association with the determination of reassigning the label to the new venture (Barboza, 2007). Resolving the issue generated legal actions intending to manipulate the Chinese legal techniques. Danone employed western legal tricks and standards in seeking justice, an action that further strained the alliance (Barboza, 2007).
While drafting the agreement, Wahaha gained control of every day activities since they had first capacity to manage the venture. Danone participated in the JV as “board of directors” (Barboza, 2007). Danone employed their western ways of empowering others in this venture without comprehension on its likely consequences.
Frustrations emerged as Wahaha felt overburdened with the JV operations noting Danone would still draw massive profits with negligible contribution (Barboza, 2007). Conversely, Danone noted that, it knew extremely little as regards to the JV.
Prevention of the Problems
Perhaps, it was possible to prevent the unprecedented occurrences within the JV. Danone would have resisted the predicaments by acknowledging their unfamiliarity with the Chinese enterprise operations.
Thus, they ought to consider adapting to Chinese business culture with time as opposed to implementing their western culture (Campbell, Netzer, & Center for International Legal Studies, 2009). Significant areas where they would have learnt to operate in line with the Chinese commerce culture entails unrestricted relations, Chinese legal systems, company procedure diversity, linkages creation.
Furthermore, they would attain these by employing and consulting Chinese business experts with accumulated knowledge of enterprising, justice systems and public affairs. Danone would have prevented leadership problems by ensuring thorough discussions and concurrence on the JV structure outlining handling of upcoming issues including takeover and exit (Campbell et al., 2009).
They would have engaged in features that escalate establishment and improvement of confidence and reciprocated value. Greater attention may have been necessary in understanding the JV as regards to individual company contributions, responsibilities, and implementations of benefits sharing. Danone would have ensured that both had full responsibility for the brand name.
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Further, Danone may have considered forming an alternative trademark thus showing value it attached to the JV (Campbell et al., 2009).. This would have improved its expectations and assurances in the venture and Wahaha. Danone would have fully participated in the management and leadership provision in the JV thus avoiding its passive role. Apparently, Danone would have designed its exit tactics from the start through putting stipulations on methods of appraising brands (Campbell et al., 2009).
Evidently, culture remains a strong feature of business that requires consideration by companies going into fresh markets. Danone, a company from the west began its operations China whose culture is unique. Danone entered a JV with Wahaha but it experienced problems in the association due to cultural diversity. Danone trusted Wahaha to supervise the operations of their association, while it played an inactive role.
Later, it realized flaws as regards to dealings in company operations thus attempt to overcome the Chinese justice system through Western tactics. However, common techniques of avoiding predicaments business associations are through agreements by both partners. Further, western firms launching businesses in other countries should consider utilizing business experts and consultants in those fresh markets.
Barboza, D. (2007). Rancor Level Rises in Rift over Danone China Venture. Retrieved From:
Campbell, D., Netzer, A. & Center for International Legal Studies. (2009). International Joint Ventures, Volume 30, Part 1. New York, NY: Kluwer Law International.