Wyoff and China-Luquan: Negotiating a Joint Venture(a)

4531 Words Feb 7th, 2011 19 Pages
WYOFF AND CHINA-LUQUAN: NEGOTIATING A JOINT VENTURE(A)

Introduction & Situation Analysis

Joint ventures (JV) are a popular method of foreign market entry because they theoretically provide a way to join complementary skills and know-how, as well as a way for the foreign firm to gain an insider’s perspective on the foreign market. Since China began its market opening in 1978, joint ventures have been the most commonly used form of foreign direct investment (FDI), with about 70% of FDI in China in the 1980s and 1990s taking the form of joint ventures (Qui, 2005, p. 47). The Chinese company, as well as the foreign investor, has since 1978 been drawn to the joint venture form. Walsh, Wang & Xin (1999) note that from the Chinese
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If Wyoff wants to avoid a repetition of the failed negotiations on the Caxtalene JV, Kwang and the other members of Wyoff’s negotiating team must find a way to reach mutually acceptable solutions on the product slate, product marketing, management structure, and staffing issues.
Problem Analysis
Lessons from the 2001-2002 Caxtalene Negotiations The 2001-2002 failed Caxtalene joint venture negotiations between CLQ and Wyoff provide important lessons on how to avoid failure in the current negotiations over the proposed AD/CE JV at CLQ’s Rizhao complex. In the Caxtalene negotiations there were critical substantive differences which prevented the parties from even reaching a preliminary agreement on ownership structure. Wyoff and CLQ were at polar opposites on both the equity split and the terms of technology transfer, with Wyoff demanding 80% and CLQ not prepared to go over 50%, Wyoff anxious to limit any substantive technology transfer and wanted to charge a substantial licensing fee for any technology that was transferred and CLQ expecting a free transfer of technology as part of the JV agreement. There were legitimate and rational reasons each side took the position it did on these initial issues. Based on their study of other Sino-American deals, Wyoff felt that a major