Beijing Jeep Case Analysis

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In 1983 American Motors Corporation (AMC) signed a twenty-year agreement with Beijing Auto Works (BAW) to form Beijing Jeep Corporation (BJC) - an equity joint venture. AMC were the pioneers in Chinese brand new auto market, and, therefore, the process of creation of BJC was lengthy and arduous. Due to China’s commercial isolation neither BAW nor AMC had a clear understanding of either side’s business practices. For example, the Chinese unfamiliarity with the inflation factor concept had created problems in the negotiations over the prices for auto parts. Interestingly enough, “the 1979 Law employed the use of terms, such as "profits”, which had no meaning in the context of Chinese domestic law, which is based on socialistic principles.” (https://www.law.upenn.edu/journals/jil/articles/volume14/issue1/Potter14U.Pa.J.Int'lBus.L.1(1993).pdf, 2012) Consequently, the negotiations between AMC and BAW had a great impact on formation and subsequent modifications of the Chinese 1979 Joint Venture Law.

Moreover, both AMC and BAW experienced political as well as perceptual barriers. First of all, some of the AMC’s management considered Chinese auto market to be highly unstable and risky. Where as, BAW employees shared a belief that the relationships with a capitalist country were potentially destructive. The differences could also be observed in BAW’s and AMC’s perceptions of government's role in their business operations. From the table below, according to McKinsey Global Survey, 28% of the US respondents believe that such government actions as passing laws has always positive effects on their company’s economic value, in China the percentage of those who agree is almost twice higher (58%). When it comes to providing infrastructure, 75% of Chinese think that the action will only most likely have a positive effect, where as the US respondents strongly believe that this action always affects positively on the economic value of their companies. Last but not least, 67% of...
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