Delta Food Corporation, the new owner of the Blue Ridge, considered joint venture as a poor way of developing a new market, and had set unrealistic sales target for joint venture in Spain, as Delta wanted to increase its expected return from Spain as it wanted to expand its operations in Germany and France
Because of cultural differences,Delta and Terralumen were not able to work together to achieve their common goals and objectives.
The managing director of the Blue Ridge was asked to develop dissolution strategy with Terralume’s profitable partner, as per the direction of the company’s new owners.
Problem Causes
The Blue Ridge and Terraluman's joint venture to form Blue Ridge Spain has come to a halt due to cultural differences. Spaniards believe in personal relationships more, while Americans believe in immediate results.
Spaniards’ communication style is subjective while Americans follow objective approach
Terralumen was irritated with Sodergran because of his aggressive negotiation style. Sodergran thought he lacked inspiration and he was more concerned about sales growth in comparison tothe long term relationship between the two companies. He did not see any potential in Blue Ridge Spain. On the other hand Terralumen was not in favor of Sodergran and Dryden, as they consider their motive to be just making money.
The major organizational issue was the company’s tolerance for unethical standards as Drydren strategy was to let Terralumen default on its debt so that they can force buyout.
Managing team does not include representatives from other countries, like: Spain.
Delta’s new strategy was to open 30 stores per year, which was three times greater than the actual pace in 1998’s agreement.
Solution
Dissolution strategy with Terralumen should not be encouraged as growth chart for Spain is higher than Germany and France. Spain would also be a promising ground for the fast food chain if Dryden and Sondergran become flexible enough to only foresee the same growth from Germany and France.
Another reason is if the company chooses dissolution they need to pay fair market value in Spain in dollar. According to Dryden’s plan, they will default on bank loan in Spain, which cause negative impact on all the other partnerships that Delta has entered or is planning on to enter in future.
Delta’s management should arrange workshop or give other cultural trainings to Delta’s staff in order to make them understand about the cultural differences.
Delta Corporation should choose its employees with care, and the top management employees should have previous experience regarding the field of operations.
Management team should be made, which should include representative from the country in which Delta operates. Joint venture between the Blue Ridge and Terrlumen would never be in trouble if the associated culturesare represented appropriately.
Opening 30 stores would require additional average of $18 million per year, so the company should also consider uncontrollable economic forces when planning for expansion........................
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