...Danone’s entry mode in China Basically, Danone chose joint venture as their entry mode at the early stage of entering Chinese market. More specifically, in 1996, they began a joint venture with the other two companies: Hangzhou Wahaha Group Corparation (Wahaha Group) and a Hong Kong corporation called Bai Fu Qin (Baifu), and formed five new subsidiaries in China. However, it should be noted that Danone and Baifu did not directly invest in the JV, but established Jin jia Investment, a new corporation in Singapore instead with Danone as their controlling shareholder. In this case, Wahaha Group held 49 percent of the entire shares of JV while Jinjia owned the remaining 51 percent. The reasons why Danone decided to form a joint venture rather than a wholly owned subsidiary or other formats can generally be associated with the considerable benefits they may gain from it. Firstly, as a French company who has just entered the Chinese market for no more than 10 years since 1980s at that time, Danone’s knowledge about domestic market was still limited and may face a challenge if they run their business solely. Therefore, it is essential for them to learn from their partner in terms of related market knowledges, such as the competitive conditions, culture, political and business systems in China. Secondly, the partnership enabled Danone to share related costs and risks of developing a new product or process, in turn, led to the increase in their profit margin. It can be generally seen...
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...Introduction: In 1996, Danone, a multinational foreign company entered into a joint-venture contract with a local Chinese beverage company named Wahaha in order to better access to Chinese market. The form of the joint venture was a great success at the beginning stage, with both parties gained substantial benefits from the relationship. However, in 2001, conflict arise when Wahaha Group created a series of Non-joint venture companies that sold the same product as the joint venture and use the Wahaha trademark. Since then, a long time dispute continued around the ownership of the “Wahaha” trademark, the rationality of the existence of non-joint ventures and the non-compete issue. Several lawsuits were carried but all ended in Wahaha’s favor. Eventually, Danone relinquish the claims and secede from the joint venture by selling its 51 percent share to the business’s Chinese partners. Main body With a global standing and desire for international expansion, Danone entered the Chinese market in the late 1980s. Compared with many developed countries where markets almost reach saturation, China has a promising market with cheap labor which provide a good opportunity for Danone to further develop. At early stage, Danone entered China through forming a joint venture with the local enterprise Wahaha. There are three main reasons for why Danone use the joint venture mode instead of using other modes to enter China. First, Danone can benefit a lot from Wahaha’s knowledge of local Chinese...
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...Danone’s Wrangle With Wahaha Isabella Tennant – 300276839 Danone began in Spain as a small yoghurt stand. It was successful, becoming the first industrial manufacturer of yoghurt. The Danone business kept expanding globally, having a presence in all continents. Danone began to sell many different products early on. In 1997 the Danone group decided to focus only on three worldwide business lines. These were Fresh Dairy Products, Beverages, Biscuits and Cereal Products. This focus meant that Danone’s human and financial resources were freed up allowing for swift expansion into new markets in many continents, such as Asia. Danone faced challenges while operating in China due to a lack of market knowledge, such as the challenges with Robust. Robust, the second largest company in the Chinese beverage industry was purchased by Danone in 2009. Once purchased, Danone decided to manage Robust directly instead of using the original management. The new management was not familiar with the Chinese Beverage Market and Robust struggled, resulting in its milk and tea products almost disappearing from the markets. Wahaha was a company established by Zong Qinghou in 1987 that sold a nutritional drink for kids. A joint venture was formed in 1996 between Danone Group and Wahaha Group. The structure of the joint venture (JV) consisted of three participants: Hangzhou Wahaha Food Group, Danone Group and Bai Fu Qin (Baifu). The Wahaha Group owned 49% of the shares. Whereas, the Danone Group...
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...between Danone and Wahaha (2007-2009) On the 30th of September 2009 an almost 12 year relationship between French multinational enterprise Danone and Chinese Wahaha group ended by Danone withdrawing from the IJV (International Joint Venture) for monetary settlement. This report analysis the negotiation journey of the dispute and tries to classify the different negotiation steps based on the challenges of negotiating business deals in China. As a tool IRENEs framework on “Who/ How/ What” is used. Based on the analysis of the negotiation and the review of the cultural differences between western oriented and Chinese businesses suggestions will be made what could have been done differently by Danone. Overview of the Situation between Danone and Wahaha early 2007 The multinational Danone Group SA based in Paris in France is one of the biggest players on the global dairy product and bottled water markets. They are active on all five continents and the net sales in 2007 was more than 12 billion €. The Hangzouh Wahaha Group Co., Ltd. is a company that has grown from a small business, selling drinks to school children to become one of the most important and largest Chinese bottled-water companies already in 2007. Although it is difficult to find detailed financial figures on Wahaha it can clearly be stated that in 2007 the Group was much smaller than Danone. At that time Wahaha contributed approximately 6% of Danone’s profits. Wahaha was successfully developed...
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...tupac Hip-hop music is generally considered to have been pioneered in New York's South Bronx in 1973 by Jamaican-born Kool DJ Herc. At a Halloween dance party thrown by his younger sister, Herc used an innovative turntable technique to stretch a song's drum break by playing the break portion of two identical records consecutively. The popularity of the extended break lent its name to "breakdancing"--a style specific to hip-hop culture, which was facilitated by extended drumbreaks played by DJs at New York dance parties. By the mid-1970s, New York's hip-hop scene was dominated by seminal turntablists DJ Grandmaster Flash, Afrika Bambaataa, and Herc. The rappers of Sugarhill Gang produced hip-hop's first commercially successful hit, "Rapper's Delight," in 1979'. The local popularity of the rhythmic music served by DJs at dance parties and clubs, combined with an increase in "b-boys"--breakdancers--and graffiti artists and the growing importance of MCs, created a distinctive culture known as hip-hop. For the most part, hip-hop culture was defined and embraced by young, urban, working-class African-Americans. Hip-hop music originated from a combination of traditionally African-American forms of music--including jazz, soul, gospel, and reggae. It was created by working-class African-Americans, who, like Herc, took advantage of available tools--vinyl records and turntables--to invent a new form of music that both expressed and shaped the culture of black New York City youth in the...
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...A ‘failed’ Joint Venture between Danone and Wahaha French’s Danone and China’s Wahaha had been a very successful joint venture in China. Danone’s capital, expertise & technology know-how, combined with Wahaha’s huge local presence in the market had seen the company soared in the food & beverage industry. It was until then when Danone accused its partner, Zong, founder of Wahaha of illegally selling Wahaha brand products using a distributor not selected by the joint venture agreement. Danone also filed for arbitration (appoint an official body to settle the dispute) to resolve the trademark dispute. Despite holding on to the majority stake of 51% in the Wahaha brand, Danone did not take any action until now because it needed the Wahaha brand as much as it needed Zong. Zong and his management were the driving force for Wahaha and Danone’s efforts in sending its own executives were futile. The dispute highlighted a key issue which many foreign investors have long grappled in China due to the lack of respect and understanding of legal agreements in the country. In China where informal institutions play a larger role than formal institutions, Danone had used the wrong approach to resolve the dispute and had lost the support of the people in China. Was joint venture appropriate for Danone to enter China? Joint venture allows Danone which is a multi-national company based in France to tap into the lucrative market in China. At the time of the joint venture, China is...
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...C O M M E N TA RY A Tale of Two Companies The Danone-Wahaha partnership once seemed ideal, but the companies’ relationship has deteriorated. What lessons can be learned from the dispute? Jingzhou Tao and Edward Hillier T he Danone-Wahaha dispute is a story of the relationship between two very different entities against a backdrop of incredible change. The dispute reveals many questions that China faces as it integrates into the world economy, such as what to do when rule of law leads to an unpopular result or harms a valued Chinese company. The players Group Danone SA, a Paris-based multinational corporation (MNC), is a giant in the global dairy product and bottled water markets. The MNC employs roughly 90,000 staff across five continents. Though it is a beverage giant in China, the Hangzhou Wahaha Group Co., Ltd. is much smaller than Danone. Since its founding in the late 1980s, the company has grown from three people selling drinks to school children to become the largest Chinese bottled-water company today. This growth is mainly the result of the drive and talent of founder Zong Qinghou, who expanded the company by satisfying Chinese consumer demand and aligning his business strategy with government policy. Danone and Wahaha formed their first joint venture (JV) in China in 1996. Over the years, the number of JVs grew from 5 to 39, and annual sales rose from a few hun44 May–June 2008 chinabusinessreview.com dred million renminbi to more than ¥14 billion...
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...Group is one of them. Danone is a French food and beverage conglomerate and signed an agreement with the Hangzhou Wahaha Group in 1996, a Chinese beverage company, to set up a series of joint ventures in China. The partnership was established to market products under the Wahaha brand name. Ultimately, the agreement resulted into thirty-nine joint ventures. Those joint ventures were hugely profitable as the Wahaha brand became a household name in China. In spite of these successes, the relationship started to deteriorate. After years of court battles, Danone finally pulled out of the JV and ended this partnership with Wahaha. Based on the case study, this essay will firstly analyze Danone’s market entry mode and limitations of this mode. Subsequently, this essay will discuss contributions of both Wahaha and Danone in this relationship. Finally, this essay will present reasons for the Danone-Wahaha dispute and lessons derived from this dispute. Danone’s market entry mode Danone entered the Chinese market selling consumer drink products, including fruit juice, dairy products and bottled water, all with Chinese joint venture partners who were market leading brands in China. A joint venture is a special type of strategic alliance, which requires establishing a firm jointly owned by two or more otherwise independent firms (Hill, Wee and Udayasankar, 2012). Danone and Wahaha in this case are the two strategic partners to establish joint ventures together. Danone chose to create joint...
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...Danone v. Wahaha: Lessons for Joint Ventures in China Steven M. Dickinson Harris Moure PLLC www.harrismoure.com Danone Group and its partner, Wahaha Group Company, are shareholders in a joint venture company that is the largest beverage company in China. A recent dispute between the partners now threatens to wreck the joint venture. What lessons can be learned from this dispute for investors considering new joint ventures in China? Disputes such as this are not inevitable in China. They can be avoided by following certain basic rules. Many of the most important rules were violated in this case. As a result, the problems that have arisen were almost certain to occur. I. The Facts A. Formation of the Joint Venture Company The Wahaha Joint Venture (“JV”) was formed in February, 1996. At the start, there were three participants in the JV. (1) Hangzhou Wahaha Food Group Co. Ltd. (“Wahaha Group”), led by its chairman Mr. Zong Qinghou. (2) Danone Group, a French corporation (“Danone”). (3) Bai Fu Qin Ltd., a Hong Kong corporation (“Baifu”). Danone and Baifu did not invest directly in the JV. Instead, Danone and Baifu formed Jin Jia Investment Co. Ltd., a Singapore corporation (“Jinjia”). Upon the formation of the JV, Wahaha Group owned 49% of the shares of the JV and Jinjia owned 51% of the shares of the JV. This structure led to immediate misunderstandings between the participants. From the Wahaha Group’s point of view, the division of ownership was 49% Wahaha Group, 25...
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...further their interest internationally without taxing their resources b having a partner who is compatible to work on the project albeit in short term or long term project. Joint venture allows companies to pool their resources together and benefit each of the companies in reaching their potential. Apart from that, joint venture also allows company to complement each other short coming with what they do best. This is evidently shown when discussing Daicel Evonik Ltd where Daicel Chemical Industries Ltd and Huels AG complement each other in term market knowledge and technological capabilities know-how among them. But then, joint venture does have limitation where culture plays an important barrier to achieve success. In Danone Co. Ltd and Wahaha Co. Ltd which will be discussed further, the dissolution of ventureship between these two companies can be attribute to communication particularly in conflict management. Thus, managing cultural differences is important especial in term of managing conflict among the partners. Conflicts are parts of life and may appear in any organization. They particularly often occur in hybrid organizations whose parents coming from different cultures, different countries with different ways of thinking and doing things. Knowing how to management conflict with proactive approach (minimize conflicts to happen) and reactive approach (resolve conflicts) is crucial for firms to be successful in joint venture relationship. Introduction on joint venture...
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...Case Analysis: Cola Wars in China: The Future Is Here Prepared by Kulthida Vongtrakool MAN 787: Business Policy & Strategy Spring 2015 Prepared for: Professor Rimi Zakaria Date of Submission: March 19, 2015 1. Resources, capabilities, and core competencies Resources: Tangible resources and intangible resources are the factors that Wahaha incorporated to achieve the competitive advantage over the two giants, Coca-Cola and Pepsi. For tangible assets, the company had high volume in capital gain with billions in revenue and profits not including the land and building. Wahaha had more than 42 subsidiaries across the nation in 2002 with many production lines. It also had a valuable marketing team including R&D as well as a technology adopted from Danone group for bottling production. Moreover, its distribution system was ahead of the two competitors. For intangible resources, the firm used its name as a reputation that had sustained profit in the market for many years. Wahaha had been participating in many CSR programs so that it had become well-known among the Chinese. The firm’s founder had a strong drive to push the firm to adopt knowledge by learning over time in order to understand the market. In addition, the firm trademark was the idea of making drinks to make children happy. Capabilities: Firstly, the firm had focused knowledge that was accomplished by the market studying for an in-depth level of understanding and obtaining knowledge of a market. Wahaha’s...
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...focusing on three core categories: fresh dairy products, biscuits (in which it ranks second worldwide) and beverages (in which it ranks first worldwide). Founded in 1966, Danone has followed an active expansion strategy throughout the world since the 1990s. In less than 40 years, Danone has become a giant of the food industry, owning many famous international brands such as Danone, LU, Evian, and more. Since the end of the 1980s, Danone began to develop the production and business in China extensively by investing in building factories. Now, the main business of Danone in China concerns yogurt, biscuits and beverages. Danone has 70 factories in China, including Danone Biscuits (in Shanghai, Suzhou and Jiangmen), Robust (in Guangzhou), Wahaha (in Hang Zhou), and Health (in Shenzhen). The products are not only sold in China, but also exported to different countries. Four brands under Danone Danone: the leading brand worldwide for fresh dairy products; Danone represents almost 20 percent of the international market. Danone is present in 40 countries worldwide. Evian: the best selling mineral water brand, with 1.5 billion bottles sold every year. Present in 125 countries across five continents. Lu: the second brand worldwide, the first Biscuits brand of Groupe DANONE, which represents almost the half of the...
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...Brand Image in Cola Drinks CASE:Future Cola of Wahaha Group Co.Ltd,China Sun, Jianfei 2010 Laurea Leppävaara Laurea University of Applied Sciences Laurea Leppävaara Brand Image in Cola Drinks CASE: Future Cola of Wahaha Group Co.Ltd,China Jianfei Sun Degree Programme in Business Management Thesis April, 2010 Laurea University of Applied Sciences Laurea Leppävaara Degree Programme in Business Management International Business-to-Business Marketing Abstract Jianfei Sun Brand Image in Cola Drinks; Case: Futre Cola of Wahaha Group Co.Ltd, China Year 2010 Pages 45 In Chinese beverage market, there are three mainly cola brands, Coca cola, Pepsi and Future Cola, these three brand share almost 90% cola market, so that competition is omnipresent ,not only in the consumer market, but also very intensive in business to business market. Business-to-business brand building involves various aspects, for example, attributes of products and services, brand image, brand position, and B2B brand management, Wahaha Co., Ltd as a case company need to build brand image and find a solution on how to be a stronger brand in order to attract more potential customer. The theoretical context of this thesis lies in marketing management. The theoretical emphasis and framework is however in brand management: brand concepts, brand building and brand image. As the study is made in B2B environment the difference between B2B and consumer markets will be specified. The quantitative research...
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...go into the final goods sold under Danone Groupe brand names. These companies have a presence in the industry already, make packaging materials, and/or produce raw dairy products. In the case study, Danone formed an affiliation with Wahaha Group to get a better foothold in the expanding Chinese market. Cultural: In Spain and Italy Danone established relationships with local suppliers. In Eastern Europe Danone took over local suppliers to exploit growing demand for fresh dairy products. Fewer Chinese citizens have refrigerators to hold fresh dairy products. Administrative Danone rarely sends executives (or resources) to their joint ventures, but allows them to be autonomous. Danone and Wahaha (Chinese) joint venture Danone has been accused of trying to become a monopoly in the Chinese market. Human Resources The Danone Way Programme: Embodies Danone’s commitment to combining business success and attention to people and the community Human resource policies represent a dual commitment to success and social progress Partnerships and joint ventures allow Danone to access new markets and capitalize on consumer trends. Partnership with subsidiary Stonyfield to create Dannon Oikos Greek Yogurt. Acquiring local businesses and its joint ventures with Wahaha Group gained Danone entrance into the Chinese market. Organization Structure: Danone tailored its strategic plan to meet the needs of the local...
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...MNC Structure Ken Shall MA405 Multinational Management Grantham University Professor : Angela Au 6/05/2012 A Multinational Company In business today, the boundaries of the world have seemed to almost disappear. More and more companies have a much broader reach and expanding globally is almost the norm. Many years ago, few companies were able to sell products to other parts of the world, let alone conduct business operations in other countries. Then we began to see some of the world’s largest companies begin to expand globally, not only in sales, but in operations, creating a physical presence in many foreign countries. In the early 1980’s, Honda opened up operations and began building cars in Ohio. This was a real twist, and probably a brilliant move, as it was when many Americans began to realize global expansion yet we wanted to keep jobs here and buy what was built in America. Today, with the help of the World Wide Web and Social Marketing, even a fairly small business can not only sell in other countries, but also have a physical presence there. An example of a US business expanding globally is Le Gourmet Gift Basket Inc. As early as 2004, it had 510 franchise locations including 25 outside the United States. (Le Gourmet Gift Basket Inc) Forming a Multinational Company There are two primary ways that a multinational organization is created - organically or inorganically. The Le Gourmet Gift Baskets example above is a great example of organic growth...
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