Danone and Wahaha

Topics: Nicolas Sarkozy, Joint venture, China Pages: 2 (836 words) Published: July 22, 2012
The main issue concerned in the French Danane Groupe and China’s Wahaha Group joint venture agreement in the 2007-2009 period, centres on the different attitude towards Wahaha’s non joint-venture subsidiaries. This dispute highlights the lack of cooperative strategic management and effective communication, the lack of sound institutionally provided legal structure to support joint venture contracts and perhaps ultimately the lack of cultural fusion. Based on research into organisational behaviour one can already see that the Danone Group’s preference for internalising Wahaha’s CSAs and assets into their FSAs to leverage their competitive advantage clashes against Wahaha Group’s founder and CEO Zong Qinghou’s vision for the brand (Sunny et al. 2012; Peng et al. 2012). From the article on the comparative ownership advantage framework (Sunny et al. 2012); despite being able to deliver profits, successful alliances require clarity provided by stable formal institutional providence and an establishment of trust via agreement on a mutual informal institution, which in this case, the Chinese way of business would be the most prominent. This would have eliminated the ambiguity towards the ownership structure viewed from both sides identified as the source of the dispute by Steven M. Dickinson. Furthermore, Dickinson argues that Wahaha’s perspective during the contract formation saw their 49% share meaning full control since the other 51% was split between Danone and Peregrine. But from a legal standpoint the 51% share says otherwise. When Danone later took over Peregrine, this was viewed by Chinese public as a takeover manoeuvre, developing distrust and hostility in the partnership. Misunderstandings lead to dispute concerning the ‘master contract’ and the trademark rights on which the joint venture was founded. The resulting legal disputes overstepped into the public arena and, as reported by Waldmeir and Tucker (2009), into a cross-border political dispute involving...

References: Dickinson, S. M., n.d., ‘Danone v. Wahaha: Lessons for Joint Ventures in China’, Harris Moure PLLC, [online] n.d., available at <http://www.chinalawblog.com/DanoneWahahaLessons.pdf>, [Accessed 14 July 2012].
Barboza, D. 2009, ‘Danone Exits China Venture After Years of Legal Dispute’, New York Times, [online] 30 September, available at <http://www.nytimes.com/2009/10/01/business/global/01danone.html>
Peng, M. W., 2012. GLOBAL, 2nd Ed., Mason, USA, South-Western College Pub.
Sunny, L. S., Peng, M. W., Ren, B., Yan, D. 2012, ‘A comparative ownership advantage framework for cross-border M&As: The rise of Chinese and Indian MNEs’, Journal of World Business, [online], Available at: <http://www.utdallas.edu/~mikepeng/documents/Peng12JWB_SunRenYan_47_4-16.pdf>, [Accessed 14 July 2012]
Waldmeir, P. and Tucker, S. 2009, ‘Danone to quit joint venture with Wahaha’, Financial Times, [online] 30 September, available at <http://www.ft.com/cms/s/0/849e7eda-ad87-11de-bb8a-00144feabdc0.html#axzz20ereaqms>, [Accessed 14 July 2012].
Wordpress, 2007, ‘Peering Into The Interior: The story behind the Wahaha Danone JV dispute’, Wordpress, [online] 17 April, available at <http://venture160.wordpress.com/2007/04/17/the-story-behind-the-wahaha-danone-jv-dispute/> [Accessed 14 July 2012].
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