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Friday, October 2, 2009

Why Chinese Joint Ventures Fail

Great article from the Wall Street Journal - Danone Pulls Out of Disputed China Venture

What was unusual about this one was how public it was.

Key Points from the article:
  • Founder of Wahaha won in Chinese Court by playing on the Nationalism angle, while Danone won internationally. Translation - rule of law is poor in China.

  • The founder of Wahaha sold Wawhaha products that were made in his own factories, while per the contract Danone owned 51% of Wawhaha. Translation - Rule of law is poor in China. I have heard so many stories of factories having two exits for products, one for those made legally, and another for those made illegally. Or of two shifts being run. One during the day for products produced under a licensing agreement, and the other for products made outside the contract. Which brings up the issue when is a fake a fake, when it's made in the same factory? Another story was a company made a device in China, the manufacturer then when directly to department stores and took away their market. After that their are many products they refuse to make in China due to the potential of this happening again.

  • From the article about pitfalls of Joint Ventures - Partners have stolen corporate secrets, cheated and otherwise sabotaged a venture, while legal avenues have had little effect on disputes over operations.

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