Key conflicts between Wahaha & Danon
The main causes of conflict seem to derive from different attitudes towards key issues in the formation and operation of the joint venture, suggesting major differences in business culture and expectations as to how business should and is being conducted. The first and main problem described in the case study revolves around the ownership structure and the control over the JV. It seems that the Chinese Wahaha expectations were that their 49% of the JV meant full control, as the other 51% were split half-half between Danone and Peregrine through the Singapore registered Jinjia. Danone later took over Peregrne’s part essentially gaining the 51% of the JV and theoretically gaining effective control of the JV. This was not received well by the Chinese partner and later by the Chinese public which interpreted the move as a takeover, resulting in a JV based on distrust and hostility between the partners.
Another source of conflict was due to the management structure agreed upon. Effective control of daily operations was handed to Zong and Wahaha, as the local China experts, while the only involvement Danone had was through the board of directors. It seemed Danone was attempting to empower the local partner and was not fully aware of the potential implications. This led to dissatisfaction on both sides, as Danone felt it knows very little in actual JV operations while Zong was feeling that Danone has left him to do all the hard work, only expecting to rip off the benefits of his efforts with little to no contribution