Study guide Essay
When and how did Danone expand into the Chinese market? What problems did Danone Group encounter while operating in China? From the case, Danone expand into Chinese market in the late 1980s. However, Danone faced challenges in China due to lack of market knowledge. In 2000, Danone purchased Robust, the then-second largest company in the Chinese beverage industry.
Sales of Robust had reached RMB2 million in 1999. After the purchase, Danone dismissed the original management and managed Robust directly. Because its new management was not familiar with the Chinese beverage market, Robust struggled. Its tea and milk products almost disappeared from the market. So, during 2005 to 2006, the company lost RMB150 million. 2. How was the Danone and Wahaha JV formed? What was its structure? Why did Danone decide to form a joint venture rather than establish a 100 percent owned subsidiary? In 1996, Danone Group, Bai Fu Qin and Wahaha Group combined forces in a joint venture.
Danone bought the interests of Bai Fu Qin and gained legal control of the joint venture with 51% of shares. While, members of the JV are entitled to use Wahaha’s trademark. Because of Danone lack of knowledge about Chinese market, through the joint venture, the company can make better market decisions and created the largest beverage company in China. 3. What was the problem of Danone Wahaha joint venture that triggered the conflict between the companies? What were the differences in Danone’s and Wahaha’s understanding of their own respective roles and responsibilities in this venture? What aspects of national and organizational culture affected this perspective?
The problem is wahaha used it trademark to open subsidiaries companies in other countries, however, Danone believes the Wahaha trademark belongs to the joint venture company and Wahaha is illegal to use the trademark for its own purposes. The difference between Danone and Wahaha for understanding the role in joint venture are, Danone believe he own’s 51% of the shares so he has the control right over Wahaha’s decisions. However, Wahaha believes he can open new businesses under its own trademark and don’t need any other company’s approval.
Therefore, the national culture affect Wahaha didn’t understand what means joint venture. So it affected the organizational culture between Danone and Wahaha. 4. Was Danone successful in proving its claims in court? How was the conflict between the two companies resolved? What were the key lessons for Danone about doing business in China? No, Danone filled more than 30 lawsuits against Wahaha for violating the contract and illegally using the JV’s Wahaha trademark in other countries. However, most of those lawsuit are stand on Wahaha’s favor. So, in 2009, Danone agreed to end the cooperate relationship between the two company. The key lessons from this case is Danone need to understand business culture and market before entering Chinese market.
To form a joint venture with a Chinese company is a good choice to make better market and business decisions. However, to get on well with the Chinese company is not easy since there is always a gap between understandings. 5. Did Danone follow the advice regarding JVs in China listed in the list just above? Which aspects did it follow and which did it not? No, Danone didn’t following the advices. Danone has expected the 51% of ownership can get effective control and it didn’t formed a JV on a strong and certain legal basis. Also, it expected to use technical to assert or gain control in a JV instead of using understanding and cooperate relationships. And their agreement didn’t form on a day-to-day management basis.